[front cover]
[Cover graphics of acorn, column, graduation cap, and interlocked hands]
Annual Report
October 31, 1998
Galaxy Equity Funds
Galaxy Funds
Galaxy Asset Allocation Fund
Galaxy Equity Income Fund
Galaxy Growth and Income Fund
Galaxy Strategic Equity Fund
Galaxy Equity Value Fund
Galaxy Equity Growth Fund
Galaxy International Equity Fund
Galaxy Small Cap Value Fund
Galaxy Small Company Equity Fund
[Galaxy Funds Logo]
<PAGE>
- ----------
CHAIRMAN'S
MESSAGE
- ----------
Dear Shareholder:
Enclosed is the performance report for the Galaxy Equity Funds, which
covers the fiscal year ended October 31, 1998. This report includes a Market
Overview that discusses the key economic and market trends affecting your
investments over this time, as well as individual Portfolio Reviews that
describe the strategies Fleet Investment Advisors Inc. used in this environment.
In the pages that follow, you will find separate financial statements and
financial highlights for each Fund and a list of Fund investments as of October
31, 1998.
Stock prices continued to earn strong returns in the past year -- despite a
correction of nearly 20% -- as U.S. economic growth remained positive, inflation
fell, and interest rates declined. Stock prices were quite volatile, however,
due to economic problems abroad that suggested slower U.S. growth ahead. The
Galaxy Equity Funds benefited in this climate, by focusing on quality
investments with good value. Given the economic uncertainty that still exists,
Fleet Investment Advisors Inc. thinks that attention to quality and value will
continue to serve shareholders in the months ahead.
Although the recent stock correction was the first decline of more than 10%
since 1991, stocks have corrected 10% or more a total of 22 times since 1925. In
every case, the market recovered and advanced to new highs. While past
performance is no guarantee of future results, it may be comforting to know
history is on your side.
By riding out short-term fluctuations, you can take advantage of the
inflation-beating growth that stocks offer over time. If you'd put $100 per
month in stocks mirroring the Standard & Poor's 500 Index from January 1970
through June 1998, for example, you would have accumulated savings worth more
than $500,000 -- even though the Index had nine corrections of 10% or more
during that time.
Besides taking a long-term view, you can offset the added risk from stocks
with bonds and money market securities -- whose returns tend to be more stable.
Because these investments have also experienced significant changes in recent
months, this may be a good time to restore your portfolio to its original asset
allocations.
Dollar-cost-averaging can also reduce risk. By investing the same amount of
money at regular intervals, through good times and bad, you can often buy more
of an investment at lower prices and less of an investment at higher prices.
Your investment professional can help you make the most of dollar-cost averaging
and portfolio rebalancing. Dollar-cost averaging involves continuous investments
in securities regardless of price. You should consider your financial ability to
continue to purchase shares during periods of high and low prices.
Should you have any questions about the material in this report, please
contact the Galaxy Information Center at 1-877-BUY-GALAXY (1-877-289-4252) or
visit our Investment Specialists located at Fleet branches.
Sincerely,
/s/ Dwight E. Vicks, Jr.
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
[start sidebar]
Mutual Funds:
[bullet] are not bank deposits
[bullet] are not FDIC insured
[bullet] are not obligations of Fleet Bank
[bullet] are not guaranteed by Fleet Bank
[bullet] are subject to investment risk including possible loss of principal
amount invested
[end sidebar]
<PAGE>
[start sidebar]
"During the fourth quarter of 1997, the gross domestic product ("GDP"), which
measures the production of U.S. goods and services, grew at an annual rate of
3.7%. Despite a tight labor market, which put upward pressure on wages,
inflation fell to an annual rate of 1.7% by the end of the year -- helped by
gains in productivity and competitive pricing."
[end sidebar]
- ---------------
MARKET OVERVIEW
- ---------------
EQUITY MARKET OVERVIEW
By Fleet Investment Advisors Inc.
Stock prices advanced strongly in the fiscal year ended October 31, 1998.
Despite a correction of nearly 20% in August and September, the Standard and
Poor's 500 Index ("S&P 500") earned a return of 21.95% for the reporting period
- -- about double its historic 12-month average. Stocks of larger companies
accounted for most of the gain, as deepening economic concerns favored stocks
with strong earnings records and good liquidity. Stocks of smaller firms, as
represented by the Russell 2000 Index ("Russell 2000"), lost ground during the
period, posting a total return of -11.84%. Economic trouble overseas left
foreign stocks with moderate gains, earning the Morgan Stanley Europe, Australia
and Far East ("EAFE") Index a total return of 9.95%.
Economic Storm Clouds Gather
When the reporting period started in the final months of 1997, the annual
rate of inflation was about 2.2%. During the fourth quarter of 1997, the gross
domestic product ("GDP"), which measures the production of U.S. goods and
services, grew at an annual rate of 3.7%. Despite a tight labor market, which
put upward pressure on wages, inflation fell to an annual rate of 1.7% by the
end of the year -- helped by gains in productivity and competitive pricing.
During this time the economic troubles in Asia's emerging markets that had
surfaced earlier in the year continued to deepen. While investors worried that
reduced trade with Asia might slow U.S. growth, they became less concerned about
inflation. Bond yields fell in this environment, and stock prices rose modestly.
With a steep drop in energy prices, inflation fell to an annual rate of
1.4% in the first quarter of 1998. As Asia's problems worsened, investors looked
for the Federal Reserve (the "Fed") to cut interest rates. This, plus a "flight
to quality" that raised demand
Performance At-A-Glance
Average Annual Returns as of October 31, 1998
Trust Shares
[start bar charts]
Asset Allocation Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year 14.05%
3 Years 17.19%
5 Years 14.32%
Life of Fund 12.64%
</TABLE>
Equity Income Fund
Inception Date 12/14/90
<TABLE>
<S> <C>
1 Year 15.67%
3 Years 19.66%
5 Years 16.73%
Life of Fund 15.32%
</TABLE>
Growth and Income Fund
Inception Date 12/14/92
<TABLE>
<S> <C>
1 Year 10.10%
3 Years 20.15%
5 Years 17.66%
Life of Fund 16.49%
</TABLE>
Equity Value Fund
Inception Date 9/1/88
<TABLE>
<S> <C>
1 Year 10.27%
3 Years 20.46%
5 Years 17.37%
10 Years 14.42%
</TABLE>
Strategic Equity Fund*
Inception Date 3/4/98
<TABLE>
<S> <C>
Life of Fund -3.62%
</TABLE>
Equity Growth Fund
Inception Date 12/14/90
<TABLE>
<S> <C>
1 Year 15.17%
3 Years 22.59%
5 Years 19.28%
Life of Fund 17.12%
</TABLE>
Small Cap Value Fund
Inception Date 12/14/92
<TABLE>
<S> <C>
1 Year -12.07%
3 Years 16.63%
5 Years 14.45%
Life of Fund 14.37%
</TABLE>
Small Company Equity Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year -26.00%
3 Years 3.33%
5 Years 8.26%
Life of Fund 9.38%
</TABLE>
International Equity Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year 14.32%
3 Years 14.12%
5 Years 10.11%
Life of Fund 10.47%
</TABLE>
*Total return from inception.
[end bar charts]
1
<PAGE>
- ---------------
MARKET OVERVIEW
- ---------------
[start sidebar]
"Stock prices firmed in September 1998, with bargain hunting by investors and
hope that the Fed would cut interest rates to keep the U.S. economy out of
recession. On September 29, 1998, the Fed trimmed short-term rates by 25 basis
points -- the first cut since January 1996."
[end sidebar]
for U.S. securities, pushed bond yields to all-time lows. A flood of cash from
Asia, combined with lower import prices, drove stock prices higher and helped
boost the GDP annual growth rate to 5.5%. While it soon became clear that growth
was too strong for the Fed to cut interest rates, the low levels of inflation
and news of a federal budget surplus argued against an increase in rates.
Stocks continued to advance in the second quarter, though more modestly
than before, as Japan entered a recession and growth in U.S. earnings slowed.
Although indices representing large-cap stocks broke new highs, benchmarks for
small-cap stocks began to fall. Overseas, Asian markets gave up most of the
gains earned during a rebound in the first quarter, while stocks in Europe
continued to rally.
Investor psychology changed dramatically in the third quarter of 1998.
Although GDP grew at an annual rate of 3.9% in the U.S., economic problems in
Asia deepened and the Russian economy stumbled -- threatening default on Russian
debt. As investors fled other emerging markets, economies in Latin America began
to suffer. Meanwhile, second-quarter earnings announcements by U.S. firms showed
that the reduction in exports overseas was taking its toll. By the end of
August, the S&P 500 had fallen 19% from its high on July 17, 1998.
Stock prices firmed in September 1998, with bargain hunting by investors
and hope that the Fed would cut interest rates to keep the U.S. economy out of
recession. On September 29, 1998, the Fed trimmed short-term rates by 25 basis
points -- the first cut since January 1996. However, by that time, financial
firms holding large amounts of emerging-market debt were floundering. As
investors became increasingly concerned about credit quality, demand for
corporate bonds and even issues of U.S. government agencies evaporated. To
prevent a potential credit crunch, the Fed cut rates another 25 basis points on
October 15, 1998. With investors hoping that the worst of the world economic
crisis had passed, stocks rallied strongly at home and abroad.
Performance At-A-Glance
Average Annual Returns as of October 31, 1998.
Retail A Shares*
[start bar charts]
Asset Allocation Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year 9.58%
3 Years 15.49%
5 Years 13.26%
Life of Fund 11.87%
</TABLE>
Equity Income Fund
Inception Date 12/14/90
<TABLE>
<S> <C>
1 Year 10.93%
3 Years 17.63%
5 Years 15.41%
Life of Fund 14.49%
</TABLE>
Growth and Income Fund
Inception Date 2/12/93
<TABLE>
<S> <C>
1 Year 5.82%
3 Years 18.30%
5 Years 16.43%
Life of Fund 15.91%
</TABLE>
Equity Value Fund
Inception Date 9/1/88
<TABLE>
<S> <C>
1 Year 5.76%
3 Years 18.49%
5 Years 16.10%
10 Years 13.80%
</TABLE>
Strategic Equity Fund**
Inception Date 3/4/98
<TABLE>
<S> <C>
Life of Fund -7.37%
</TABLE>
Equity Growth Fund
Inception Date 12/14/90
<TABLE>
<S> <C>
1 Year 10.43%
3 Years 20.55%
5 Years 17.96%
Life of Fund 16.29%
</TABLE>
Small Cap Value Fund
Inception Date 2/12/93
<TABLE>
<S> <C>
1 Year -15.79%
3 Years 14.70%
5 Years 13.20%
Life of Fund 13.71%
</TABLE>
Small Company Equity Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year -29.04%
3 Years 1.57%
5 Years 7.02%
Life of Fund 8.45%
</TABLE>
International Equity Fund
Inception Date 12/30/91
<TABLE>
<S> <C>
1 Year 9.39%
3 Years 12.01%
5 Years 8.75%
Life of Fund 9.47%
</TABLE>
*Return figures have been restated to include the
effect of the maximum 3.75% front-end sales charge
which became effective on December 1, 1995.
**Total return from inception
[end bar charts]
2
<PAGE>
- ---------------
MARKET OVERVIEW
- ---------------
[start sidebar]
"As investors became more concerned with the quality of their holdings, we
increased the Funds' focus on stocks with reliable earnings, strong credit
ratings, and good liquidity."
[end sidebar]
During the year, large company stocks again dominated market rallies, with
market leadership narrowing to the very largest companies. As a result, stock
funds that were more broadly diversified, including the Galaxy Equity Funds,
significantly underperformed this market benchmark.
Focus on Quality
As investors became more concerned with the quality of their holdings, we
increased the Funds' focus on stocks with reliable earnings, strong credit
ratings, and good liquidity. With stock prices historically high versus company
earnings, we also favored issues that represented good value.
In many cases these emphases led us to increase weightings in "defensive"
stocks whose earnings could still grow if economic conditions deteriorated. In
the Funds that focused on U.S. stocks, we also gave greater attention to
companies with domestically focused sales.
Further Volatility Likely
We believe that further earnings disappointments and cuts in interest rates
are likely in the months ahead. U.S. trade, manufacturing and employment are in
decline, as well as consumer confidence. Although lower interest rates in the
U.S. may help economies to stabilize abroad, the problems overseas may remain
deep enough to slow U.S. GDP growth to an annual rate of 1% in the first half of
1999.
While the October market rebound could mean stocks have resumed their
advance, investors may have overreacted to a few positive economic signs. If
earnings do slow in coming months, stock prices could quickly weaken. We plan,
therefore, to remain defensive in choosing Fund investments -- emphasizing
quality and value where we can.
Performance At-A-Glance
Average Annual Returns as of October 31, 1998.
Retail B Shares*
[start bar charts]
Asset Allocation Fund
Inception Date 3/4/96
<TABLE>
<S> <C>
One year returns before contingent
deferred sales charge deducted. 13.14%
One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of
period. 8.14%
Life of fund returns before contingent
deferred sales charge deducted. 15.12%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. 14.22%
</TABLE>
Growth and Income Fund
Inception Date 3/4/96
<TABLE>
<S> <C>
One year returns before contingent
deferred sales charge deducted. 9.09%
One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of
period. 4.52%
Life of fund returns before contingent
deferred sales charge deducted. 16.60%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. 15.72%
</TABLE>
Equity Value Fund
Inception Date 3/4/96
<TABLE>
<S> <C>
One year returns before contingent
deferred sales charge deducted. 9.07%
One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of
period. 4.57%
Life of fund returns before contingent
deferred sales charge deducted. 17.22%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. 16.35%
</TABLE>
Strategic Equity Fund**
Inception Date 3/4/98
<TABLE>
<S> <C>
Life of fund returns before contingent
deferred sales charge deducted. -4.76%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. -9.52%
</TABLE>
Equity Growth Fund
Inception Date 3/4/96
<TABLE>
<S> <C>
One year returns before contingent
deferred sales charge deducted. 13.98%
One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at the end of
period. 9.15%
Life of fund returns before contingent
deferred sales charge deducted. 19.58%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. 18.73%
</TABLE>
Small Company Equity Fund
Inception Date 3/4/96
<TABLE>
<S> <C>
One year returns before contingent
deferred sales charge deducted. -26.72%
One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of
period. -29.95%
Life of fund returns before contingent
deferred sales charge deducted. -0.03%
Life of fund returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period. -0.91%
</TABLE>
[end bar charts]
* Retail B Shares are subject to a 5.00% contingent deferred sales charge if
shares are redeemed within the first year. The charge decreases to 4.00%,
3.00%, 3.00%, 2.00% and 1.00% for redemptions made during the second through
sixth years, respectively. Retail B Shares automatically convert to Retail A
Shares after six years.
** Total return from inception.
3
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
GALAXY ASSET
ALLOCATION FUND
By Don Jones
Portfolio Manager
[photo: Don Jones]
For most of the fiscal year ended October 31, 1998, prices for stocks
remained expensive versus historic standards. To buffer the Galaxy Asset
Allocation Fund against a stock correction, and take advantage of falling
interest rates, we kept about 40% of Fund assets in bonds. Within the bond
portfolio, we increased the portion of high-grade corporate issues -- which were
available at attractive prices and yields. These strategies, along with strong
returns from the stock portfolio, helped the Fund outpace its peers.
During the reporting period the Fund's Trust Shares earned a total return
of 14.05%. For the same period, its Retail A Shares returned 13.85%, before
deducting the maximum 3.75% front-end sales charge, and its Retail B Shares
returned 13.14%, before deducting the maximum 5.00% contingent deferred sales
charge. (Please see the chart on page 2 for total returns after deducting the
front-end sales charge and the chart on page 3 for total returns after deducting
the contingent deferred sales charge.)
Galaxy Asset
Allocation Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
U.S. Government & Agency
Obligations and Net Other
Assets & Liabilities 29%
Corporate Notes
& Bonds 18%
Common & Convertible
Preferred Stocks 51%
Asset-Backed and
Mortgage-Backed
Securities 2%
[end pie chart]
These returns compare with a return of 9.07% for the average flexible fund
tracked by Lipper Analytical Services Inc. ("Lipper"). During the same time, the
S&P 500, which tracks the performance of stocks only, returned 21.95%.
Investment Strategies
Having raised the Fund's cash reserves in the third quarter of 1997, we
were able to take advantage of new investment opportunities that arose during
brief market weakness at the end of the year. As stocks rebounded in the first
months of 1998, the Fund enjoyed strong performances from holdings in drug firms
and other large companies -- which offset disappointing returns from energy and
selected technology shares. We used new cash that came into the Fund to add
positions in drug, banking, technology, and transportation firms.
During this time we added high-grade corporate bond issues whose prices and
yields had become more attractive with the prospect of slower growth. We further
enhanced the Fund's yield with asset-backed and mortgage-backed securities.
In the second quarter of 1998, the Fund again earned strong returns from
its drug stocks, along with certain technology issues. This offset disappointing
returns from energy holdings and other technology shares. We continued to use
cash to increase drug and technology stocks at this time. We also added more
corporate bonds, asset-backed securities and mortgage-backed securities.
When stock prices corrected in the third quarter of 1998, the Fund
benefited from an
[start mountain chart]
Galaxy Asset Allocation Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Asset Galaxy Asset Galaxy Asset
Allocation Allocation Allocation
Fund - Fund - Fund -
S&P 500 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
12/30/91 10,000 9,625 10,000
1992 10,295 9,899 10,285
1993 11,830 11,124 11,558
1994 12,284 10,900 11,335
1995 15,528 13,452 14,019 10,000
1996 19,270 15,728 16,429 10,271
1997 25,458 18,911 19,785 12,454
10/31/98 31,061 21,530 22,564 14,243
</TABLE>
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception on
3/4/96 for Retail B Shares. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. Performance figures
for Retail B Shares reflect the deduction of the maximum 5.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1998. The S&P
500 is an unmanaged index in which investors cannot invest. Results for the
index do not reflect the investment management fees and other expenses
incurred by the Fund.
[end mountain chart]
4
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
overweighting in the better-performing consumer staples sector and an
underweighting in the lesser-performing energy and cyclical groups. As stock
prices fell, we used some of the Fund's cash reserves to add new names to the
portfolio and increase existing positions that offered good value. In October,
with investors focused on bonds with strong credit quality, we increased
investments in Treasury securities and issues of U.S. government agencies --
reducing corporate bonds from 60% of the bond portfolio to 50%.
Looking Ahead
The strong rebound in stocks leaves prices historically high again --
making the market ripe for further volatility. If the U.S. economic picture
starts to brighten, we may use periods of weakness to add cyclical issues to the
stock portfolio. With economies still weak overseas, we will probably continue
emphasizing companies that focus on domestic sales. If U.S. growth becomes more
certain, we would probably also trade Treasury bonds for corporate issues to
give the Fund greater yield.
Don Jones became manager of the Galaxy Asset Allocation Fund in April 1995.
He has managed investment portfolios for Fleet Investment Advisors Inc., and
its predecessors, since 1988.
GALAXY EQUITY INCOME FUND
By Ed Klisiewicz
Portfolio Manager
[photo: Ed Klisiewicz]
Stocks with strong dividends performed well in the fiscal year ended
October 31, 1998, as bond yields fell and investors looked for safe havens from
market volatility. The Galaxy Equity Income Fund also benefited during this time
from an emphasis on high-quality companies with reliable earnings. With strong
gains from many of its investments, the Fund far outpaced other funds in its
class.
During the reporting period, the Fund's Trust Shares had a total return of
15.67%. Over the same time, Retail A Shares had a total return of 15.23%, before
deducting the maximum 3.75% front-end sales charge. (Please see the chart on
page 2 for total returns after deducting the front-end sales charge.) Those
returns compare to a return of 9.49% for the average equity income fund tracked
by Lipper. Over the same time the S&P 500 had a total return of 21.95%.
Attention to Earnings
At the end of 1997, with interest rates and bond yields in decline, the
Fund enjoyed strong returns from holdings in interest-sensitive issues,
especially utility shares. We used temporary market weakness to deploy cash
reserves into selected shares of telephone companies, banks, and real estate
investment trusts ("REITs"). Because investors were concerned about the effect
of Asia's economic woes on U.S. earnings, we focused on high-quality companies
with reliable earnings and minimal Asian exposure.
Our focus on earnings served the Fund well early in 1998, as investors
became more concerned about U.S. growth. While returns from energy stocks were
disappointing, the Fund benefited from strong performances by financial and
consumer staples firms -- some of which were subject to merger speculation.
[start mountain chart]
Galaxy Equity Income Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Galaxy
Equity Income Fund - Equity Income Fund -
S&P 500 Retail A Shares Trust Shares
<S> <C> <C> <C>
12/14/90 10,000 9,625 10,000
1991 12,358 11,127 11,561
1992 13,589 12,207 12,683
1993 15,615 13,654 14,186
1994 16,215 14,055 14,615
1995 20,497 17,179 17,948
1996 25,437 20,445 21,475
1997 33,605 25,204 26,585
10/31/98 41,001 29,044 30,751
</TABLE>
*Since inception on 12/14/90. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The S&P 500 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.
[end mountain chart]
5
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
Galaxy Equity
Income Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
U.S. Government & Agency Obligations
& Net Other Assets & Liabilities 16%
Consumer Cyclical 8%
Consumer Staples 21%
Utilities 10%
Capital Goods & Construction 5%
Energy 11%
Finance 18%
Technology 8%
Other Common Stocks 3%
[end pie chart]
During this time we used cash and profits from sales of stocks that became
overvalued to increase positions in telephone companies and high-yielding REITs.
Overweighted positions in drug and financial stocks continued to benefit
the Fund in the second quarter of 1998. An underweighted position in basic
materials stocks hit hard by the trouble in Asia also helped. During the quarter
we trimmed investments in technology stocks and added shares of telephone,
financial, auto and gas firms.
As stock prices plunged in the third quarter, issues with strong dividends
held up relatively well -- especially shares of quality companies with good
earnings. When prices became more attractive, we introduced a new position in
the energy sector -- which offered good potential with a firming in oil prices.
In October, we put additional cash to work in existing positions, especially
shares of financial firms. When the period ended, cash represented about 15% of
the Fund's portfolio, up from 13% when the period started.
New Opportunities
Higher-dividend stocks could continue to perform well in the months ahead.
Having rebounded strongly in recent weeks, stock prices are again quite high and
vulnerable to new market weakness. This, plus continued economic uncertainty,
may keep investors interested in higher-dividend shares. The sector could also
benefit from further cuts in interest rates, which would make bond yields less
appealing.
In this environment we plan to watch for additional investment
opportunities. Many financial stocks remain attractive as fear of loan defaults
by foreign economies keeps investors away from the sector. As before we will
likely focus on quality companies with reliable earnings -- diversifying the
portfolio across a broad range of industry groups.
Ed Klisiewicz has been portfolio manager of the Galaxy Equity Income Fund since
its inception in December of 1990. He has managed portfolios for Fleet
Investment Advisors Inc., and its predecessors, since 1970.
GALAXY GROWTH AND INCOME FUND
By Greg Miller
Portfolio Manager
As stock prices fluctuated in the fiscal year ended October 31, 1998, we
took profits in shares that had performed well and bought shares with greater
price potential -- in accord with our value-oriented investment style. This
helped the Galaxy Growth and Income Fund perform well against other funds with
similar investment objectives. However, growth stocks continued to outperform
value stocks and stocks of the largest companies continued to dominate the
market's advance. The Fund significantly underperformed its market benchmark,
the S&P 500 -- which includes many large, growth-oriented companies. We believe
that the Fund's emphasis on value will serve it well in the months ahead.
During the reporting period, the Fund's Trust Shares had a total return of
10.10%, and Retail A Shares earned 9.93%, before deducting the maximum 3.75%
front-end sales charge. Over the same time, Retail B Shares earned 9.09%, before
deducting the maximum 5.00% contingent deferred sales charge. (Please see the
chart on page 2 for total
[start mountain chart]
Galaxy Growth and Income Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Galaxy Galaxy
Growth and Growth and Growth and
Income Fund - Income Fund - Income Fund -
S&P 500 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
1992 10,000 9,625 10,000
1993 10,890 10,457 10,880
1994 11,548 11,410 11,908
1995 14,601 13,522 14,147 10,000
1996 18,120 16,261 17,085 10,183
1997 23,938 21,156 21,390 13,393
10/31/98 29,207 23,256 24,536 14,747
</TABLE>
* Since inception on 12/14/92 for Trust Shares and 2/12/93 for Retail A Shares.
Since inception on 3/4/96 for Retail B Shares. Performance figures for
Retail A Shares include the effect of the maximum 3.75% front-end sales
charge. Performance figures for Retail B Shares reflect the deduction of
the maximum 5.00% contingent deferred sales charge as if shares were
redeemed on October 31, 1998. The S&P 500 is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the
investment management fees and other expenses incurred by the Fund.
[end mountain chart]
6
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
[photo: Greg Miller]
returns after deducting the front-end sales charge and the chart on page 3 for
total returns after deducting the contingent deferred sales charge.)
For the same period, the average growth and income fund tracked by Lipper
had a return of 9.89%, and the S&P 500 had a return of 21.95%.
Buying on Weakness
In October 1997, when the period started, we used profits from earlier
sales in the portfolio to buy shares that temporary market weakness had made
more attractive -- including shares of banks. These additions and other holdings
in the financial sector performed well as interest rates fell in November and
December of that year.
During additional market weakness between December 1997 and January 1998,
we added to technology shares and introduced a position in a packaging firm. We
also traded drug shares for shares of a health maintenance organization that we
felt had better value. With strong flows of new cash in February and March, we
added a position in a biotech firm and increased the Fund's retail holdings.
During this time we further reduced investments in drug stocks, as well as
stocks of financial and energy firms that we felt had less chance for growth.
Galaxy Growth and Income Fund
Distribution of Total Net Assets as of October 31, 1998
[start pie chart]
Other Preferred & Common Stocks 19%
US Agency Obligation & Net Other Assets & Liabilities 6%
Consumer Staples 21%
Technology 14%
Energy 8%
Finance 13%
Utilities 8%
Consumer Cyclical 11%
[end pie chart]
Because of their potential for strong returns over time, we had sizable
weightings in stocks of basic materials, oil services, and capital goods firms.
These issues performed poorly in the second and third quarters of 1998, as
investors became more concerned about the U.S. economy, which dampened the
Fund's performance during that time. Given their long-term potential, however,
we added to those positions on market weakness. As prices became more attractive
in October, we also increased positions in banking, retail, and other energy
firms. Throughout this time we continued to trim shares that looked less
attractive according to our valuation research.
Stock Selection Increasingly Important
We believe the Fund is well positioned for the year ahead. If a slowing
economy reduces corporate profits, as we expect, stock selection should become
increasingly important. Today, growth potential for stocks in the Fund is far
stronger, on average, than prospective growth for stocks in the S&P 500.
Meanwhile, the average price-to-earnings ratio for Fund holdings is far lower
than that of its market benchmark. If stock market leadership continues the
broadening it began in October, we think stocks that represent such value could
start to outperform other issues.
Greg Miller has managed the Galaxy Growth and Income Fund since July of 1998.
He has managed equity portfolios since 1988.
GALAXY EQUITY VALUE FUND
By G. Jay Evans, CFA
Portfolio Manager
As the stock market responded to large swings in sentiment over the past
year, volatility increased and investors favored large-capitalization stocks.
During the first half of the year, the Galaxy Equity Value Fund benefited from
strong consumer confidence that boosted returns from holdings in the auto,
apparel, home-building and retail
[start mountain chart]
Galaxy Equity Value Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Equity Galaxy Equity Galaxy Equity
Value Fund - Value Fund - Value Fund -
S&P 500 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
1987 10,000 9,625 10,000
1988 10,731 10,019 10,410
1989 13,552 11,441 11,887
1990 12,537 10,362 10,766
1991 16,737 13,517 14,045
1992 18,404 14,282 14,839
1993 21,148 17,307 17,982
1994 21,960 18,167 18,889
1995 27,760 21,948 22,915 10,000
1996 34,450 26,663 27,968 10,380
1997 45,512 33,233 36,321 13,592
10/31/98 55,529 37,935 40,049 14,962
</TABLE>
* Since inception on 9/1/88 for Trust and Retail A Shares. Since inception on
3/4/96 for Retail B Shares. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. Performance figures
for Retail B Shares reflect the deduction of the maximum 5.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1998. The
S&P 500 is an unmanaged index in which investors cannot invest. Results for
the index do not reflect the investment management fees and other expenses
incurred by the Fund.
[end mountain chart]
7
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
[photo: G. Jay Evans]
sectors. As investors became more concerned about foreign economic problems in
the summer of 1998, the Fund was hit with heavy selling in consumer cyclical and
financial issues. Once the Fed came to the rescue with rate cuts in the fall,
many of these holdings rebounded strongly -- helping the Fund earn returns for
the reporting period that compared favorably with funds that have similar
investment objectives.
For the fiscal year ended October 31, 1998, Trust Shares of the Galaxy
Equity Value Fund earned a total return of 10.27%. For the same period, Retail A
Shares returned 9.88%, before deducting the maximum 3.75% front-end sales
charge, and Retail B Shares returned 9.07%, before deducting the maximum 5.00%
contingent deferred sales charge. (Please see the chart on page 2 for total
returns after deducting the front-end sales charge and the chart on page 3 for
total returns after deducting the contingent deferred sales charge.)
Galaxy Equity Value Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
Finance 20%
US Agency Obligation & Net Other Assets & Liabilities 1%
Energy 4%
Technology 20%
Consumer Staples 14%
Utilities 8%
Capital Goods & Construction 6%
Consumer Cyclical 25%
Transportation 2%
[end pie chart]
For the same 12-month period, the average growth and income fund tracked by
Lipper earned a return of 9.89%, while the S&P 500 returned 21.95%.
Roller-Coaster Ride
From the end of 1997 through the second quarter of 1998, the Fund's
consumer cyclical stocks benefited from strong consumer confidence that was
buoyed by higher wages, greater job security, low mortgage rates, and soaring
stock prices. The Fund's technology issues also performed well, as they
recovered from earlier disappointments in earnings. An underweighting in the
lesser-performing energy and consumer staples sectors provided further benefit
along with strong performances by individual health and financial issues.
In the third quarter of 1998, as consumer confidence began to ebb,
investors shed consumer cyclical stocks for shares in the consumer staples area
- -- where the Fund was underweighted. With emerging economies threatening to
default on their debt, the Fund's financial shares also suffered. Technology
shares were hard hit as well. As the Fed cut interest rates, and economies
abroad seemed to stabilize, the Fund's technology stocks rebounded strongly,
along with many consumer shares. This helped Fund returns regain much of the
ground lost during the summer.
Promise of Value
Increased market volatility and sharp sell-offs often precede changes in
market leadership. Over the last four years, and into the recent market decline,
large growth stocks have outperformed lower-priced value issues. Many of these
growth issues now sell at unsupportable price/earnings premiums, while value
issues have become real bargains. At the same time, the Fed's signal that it
intends to keep our economy healthy by cutting interest rates represents a
significant change in the direction of monetary policy that, in the past, has
led to extended periods of strength for value-styled portfolios.
Many challenges and concerns are reflected in the current valuation
disparities. The next news item that has not been priced into the market could
resolve some of these concerns. In the months ahead, we expect stock prices to
be volatile with quick rotation among different market sectors. Such an
environment should provide continued opportunities for our valuation system to
identify undervalued stocks that can add to Fund returns.
G. Jay Evans has managed the Galaxy Equity Value Fund since April 1992. He has
managed value-oriented portfolios for Fleet Investment Advisors Inc., and its
predecessors, since 1981.
8
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
[photo: Peter B. Hathaway]
GALAXY STRATEGIC EQUITY FUND
By Peter B. Hathaway, CFA
Portfolio Manager
The Galaxy Strategic Equity Fund seeks to provide a core equity investment
for investors who desire growth with below-market risk, reasonable income, and a
value-oriented investment style. To achieve these objectives, we select growth
stocks from a universe of 300 to 400 large- and mid-sized companies similar to
those in the S&P 500 (and monitored by Fleet Investment Advisors equity
analysts). Two-year forecasts of potential returns for each stock, which
consider the stock's price and future earnings potential, suggest shares that
the Fund might buy and sell. This process may lead to stock, industry, or sector
concentration and does not discriminate between growth and value stocks or
between stocks of medium- and large-sized firms.
From the Fund's inception on March 4, 1998, through the end of the
reporting period on October 31, 1998, Trust Shares earned a total return of
- -3.62%. For the same period, Retail A Shares returned -3.75%, before deducting
the maximum 3.75% front-end sales charge, and Retail B Shares returned -4.76%,
before deducting the maximum 5.00% contingent deferred sales charge. (Please see
the chart on page 2 for total returns after deducting the front-end sales charge
and the chart on page 3 for returns after deducting the contingent deferred
sales charge.) Over the same time, the S&P 500 returned 5.77%.
Galaxy Strategic Equity Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
U.S. Agency Obligation & Net Other Assets & Liabilities 5%
Other Common Stocks 6%
Basic Materials 8%
Capital Goods & Construction 8%
Finance 11%
Energy 12%
Consumer Staples 13%
Consumer Cyclical 14%
Technology 23%
[end pie chart]
Focus on Growth and Medium-sized Firms
For two years the stocks of large companies have dominated the market,
providing the major portion of returns for the S&P 500 -- returns that have far
outpaced earnings growth. Since its inception, we have focused investments for
the Fund on stocks with the highest one- to two-year return potential. This has
led us to emphasize growth stocks that have better earnings visibility in a
slowing economy and stocks of medium-sized firms that are more reasonably valued
versus their growth potential. Because large-company shares dominated the
market until August 1998, the Fund underperformed up to that time. Once market
leadership broadened late in the summer, the Fund benefited from its emphasis on
medium-sized stocks with strong growth potential.
When the reporting period ended, Fund assets were equally divided between
large-cap stocks and mid-cap stocks, versus a 60/40 split for the S&P 500.
Stocks of growth companies comprised 60% of the portfolio, with value stocks
representing the remainder. Throughout the period we emphasized health care,
specialty retail, and technology stocks -- as well as shares of oil service and
exploration firms. Because of their high valu-
[start mountain chart]
Galaxy Strategic Equity Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Strategic Galaxy Strategic Galaxy Strategic
Equity Fund - Equity Fund - Equity Fund -
S&P 500 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
3/4/98 10,000 9,625 10,000 10,000
10/31/98 10,577 9,263 9,638 9,048
</TABLE>
* Since inception on 3/4/98 for Trust, Retail A Shares and Retail B Shares.
Performance figures for Retail A Shares include the effect of the maximum
3.75% front-end sales charge. Performance figures for Retail B Shares reflect
the deduction of the maximum 5.00% contingent deferred sales charge as if
shares were redeemed on October 31, 1998. The S&P 500 is an unmanaged index in
which investors cannot invest. Results for the index do not reflect the
investment management fees and other expenses incurred by the Fund.
[end mountain chart]
9
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
ations, or below-average return potential, consumer staples stocks were
underweighted in the portfolio. Shares of basic materials, finance, and
utilities firms were also underweighted -- along with technology shares with
price-to-earnings ratios that seemed excessive.
Holdings Attractive in Expensive Market
The strong recovery of stock prices at the end of the reporting period has
renewed concerns that stock prices are overvalued. In this climate, the Fund's
emphasis on growth and reasonable valuations should contribute positively to
future returns. The average long-term estimate of earnings growth for stocks in
the Fund exceeds that of stocks in the S&P 500 by 3%. Meanwhile, the Fund's
price-to-earnings ratio for 1998 earnings is 18 versus 23 for the S&P 500.
Peter Hathaway has managed the Galaxy Strategic Equity Fund since its inception
in March 1998. He has worked for Fleet Investment Advisors Inc., or its
predecessors, since 1964 and has managed investments since 1974.
GALAXY EQUITY GROWTH FUND
[photo: Bob Armknecht]
By Bob Armknecht
Portfolio Manager
As investors endured foreign economic crises, uncertainty about interest
rates, and increased stock market rotation in the past year, we used strategies
that had served the Galaxy Equity Growth Fund in prior periods. These include:
1) focusing on stocks of large domestic firms with reliable earnings; 2)
emphasizing sectors with strong potential for earnings growth due to
demographic, technological, or economic trends; and 3) trading stocks that had
reached their potential for shares with greater promise.
These strategies helped the Fund outperform the average growth fund tracked
by Lipper. For the fiscal year ended October 31, 1998, the Fund's Trust Shares
earned a total return of 15.17%. Over the same time, Retail A Shares earned
14.73%, before deducting the 3.75% maximum front-end sales charge, and Retail B
Shares earned 13.98%, before deducting the 5.00% maximum contingent deferred
sales charge. (Please see the chart on page 2 for total returns after deducting
the front-end sales charge and the chart on page 3 for total returns after
deducting the contingent deferred sales charge.) During this period the average
return for growth funds tracked by Lipper was 9.62% and the S&P 500 earned a
return of 21.95%.
Portfolio Strategy
In the past year our attention to growth potential led to sizable
investments in health care, technology, communications, and energy stocks. In
the first half of the reporting period, the Fund earned good returns from its
strong position in drug firms, as well as from holdings in the retail and
financial sectors. These returns helped offset disappointing performances by the
Fund's energy and technology stocks. With large inflows of cash that came into
the Fund, we increased shares of retail, basic materials, and financial firms
- -- along with energy stocks, whose prices had become quite attractive.
[start mountain chart]
Galaxy Equity Growth Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Equity Galaxy Equity Galaxy Equity
Growth Fund - Growth Fund - Growth Fund -
S&P 500 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
1990 10,000 9,625 10,000
1991 12,358 11,683 12,139
1992 13,589 12,747 13,244
1993 15,615 13,840 14,380
1994 16,215 14,494 15,070
1995 20,497 18,051 18,849 10,000
1996 23,319 21,753 22,813 10,295
1997 30,807 28,629 30,151 13,717
10/31/98 37,588 32,847 34,726 15,790
</TABLE>
* Since inception on 12/14/90 for Trust and Retail A Shares. Since inception on
3/4/96 for Retail B Shares. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. Performance figures
for Retail B Shares reflect the deduction of the maximum 5.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1998. The S&P
500 is an unmanaged index in which investors cannot invest. Results for the
index do not reflect the investment management fees and other expenses
incurred by the Fund.
[end mountain chart]
10
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
Galaxy Equity Growth Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
US Agency Obligation & Net Other Assets & Liabilities 4%
Capital Goods & Construction 10%
Finance 13%
Energy 8%
Consumer Cyclical 13%
Consumer Staples 23%
Technology 23%
Convertible Preferred & Other Common Stocks 6%
[end pie chart]
Energy and technology stocks continued to disappoint in the second quarter
of 1998. With oil prices in a sharp decline, we sold some of the Fund's energy
shares, as well as certain financial and airlines stocks. With the proceeds from
these sales, and further inflows of cash, we increased shares of retail firms
and gave greater attention to communications stocks in the technology sector.
In the final months of the period, the Fund benefited from a rebound in
energy and technology shares, as well as further outperformance by its
overweighted position in drug stocks. The Fund also benefited from an
underweighting in financial stocks, which lagged for the quarter. With stock
prices more attractive than they had been for some time, we took advantage of
many opportunities to enhance the quality of holdings in the portfolio and add
to existing positions -- giving particular emphasis to financial, basic
materials and capital good shares.
A Bumpy Landing
While the Fed may achieve another "soft landing" for the economy, the ride
may be somewhat bumpier than before. Despite the recent rebound in stock prices,
rising wages and a slowdown in global economies may still squeeze U.S. profits.
Further cuts in interest rates should help sustain U.S. growth and give stock
prices further room to rise. Such an advance could be accompanied by further
volatility, however.
We believe the Galaxy Equity Growth Fund could perform well in this
climate, since companies with strong growth potential tend to be less sensitive
to economic change. As market fluctuations occur, we plan to look for more
opportunities to give the portfolio even better growth potential -- using the
same themes that have served the Fund in the past year.
Bob Armknecht has been managing the Galaxy Equity Growth Fund since its
inception in December 1990. He has managed equity portfolios for Fleet
Investment Advisors Inc. since 1988.
GALAXY SMALL CAP VALUE FUND
By Peter Larson
Portfolio Manager
With investors nervous about future earnings, stocks of small companies
significantly underperformed other stocks in the fiscal year ended October 31,
1998. When stocks plunged in the third quarter of 1998, small cap stocks were
hit especially hard. At the same time, stocks representing good value continued
to underperform stocks of growth-oriented firms. By continuing to enhance the
quality of investments in the Galaxy Small Cap Value Fund, and maintaining cash
reserves that we could deploy in new investment opportunities, we helped the
Fund make the best of this difficult environment.
During the reporting period the Fund's Trust Shares earned a total return
of -12.07%. Over the same time, Retail A Shares earned -12.52%, before deducting
the maximum 3.75% front-end sales charge. (Please see the chart on page 2 for
total returns after deducting the front-end sales charge.) These returns compare
to -13.73% earned by the average small company growth fund tracked by Lipper and
- -11.84% earned by the Russell 2000.
Searching for Value
Early in the period, at the end of 1997, stocks of small firms representing
good value
[start mountain chart]
Galaxy Small Cap Value Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Small Cap Galaxy Small Cap
Value Fund - Value Fund -
Russell 2000 Retail A Shares Trust Shares
<S> <C> <C> <C>
1992 10,000 9,625 10,000
1993 10,890 10,789 11,212
1994 11,548 10,967 11,420
1995 14,601 13,299 13,878
1996 17,025 16,593 17,378
1997 22,018 23,824 25,038
10/31/98 19,412 20,842 22,017
</TABLE>
* Since inception on 12/14/92 for Trust Shares and 2/12/93 for Retail A Shares.
Performance figures for Retail A Shares include the effect of the maximum
3.75% front-end sales charge. The Russell 2000 is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the investment
management fees and other expenses incurred by the Fund.
[end mountain chart]
11
<PAGE>
- -----------------
PORTFOLIO REVIEWS
- -----------------
[photo: Peter Larson]
outperformed the rest of the sector. At this point the Fund benefited from
investments in insurance and banking stocks -- which gained from falling
interest rates and industry consolidation, respectively. In our search for
value, we sold certain shares that performed well for shares of technology firms
and REITs that we felt had better potential.
Corporate mergers continued to benefit the Fund in the first months of 1998
- -- particularly in the finance and technology sectors -- and insurance stocks
made further contributions. The strong performance in these areas offset
disappointing returns from energy stocks hurt by falling oil prices. Feeling
energy stocks represented some of the better values in an increasingly expensive
market, we increased holdings there, while taking profits in bank stocks.
In the second quarter of 1998, with the collapse of technology shares tied
to Asia, small company stocks began to slide. Although there were substantial
price declines in holdings of other firms with earnings disappointments --
especially technology and energy shares -- the Fund continued to benefit from
stocks involved in mergers. During this time we took selected advantage of new
opportunities that arose from weaker prices to add a range of attractively
priced issues to the portfolio.
Galaxy Small Cap Value Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
Basic Materials 5%
Other Common Stocks 6%
Capital Goods & Construction 12%
Consumer Staples 12%
Finance 13%
Consumer Cyclical 18%
Technology 18%
US Agency Obligation, Corporate Bond & Net Other Assets & Liabilities 16%
[end pie chart]
With investors focused on liquidity in the third quarter, stocks of the
smallest companies were hit hardest in the market correction. While the Fund
invests heavily in these issues, it benefited from its emphasis on quality
companies, strong cash reserves, and a brief rebound in value-oriented shares
when stocks rallied in October. In this environment, we used cash to add to
holdings whose prices had become especially attractive. Because new cash came
into the Fund, the reserves remained sizable as the period closed.
Small Company Stocks Historically Cheap
Stocks of small companies may face further turmoil in coming months,
especially if investors remain concerned about earnings. Because small company
stocks have become historically cheap versus large company shares, however, they
could outperform in a rally. We plan to continue to look for new opportunities
that represent good value, while maintaining a quality, diversified portfolio.
Peter Larson has managed the Galaxy Small Cap Value Fund, and its
predecessor, since 1992. He has managed small company portfolios since 1981.
GALAXY SMALL COMPANY EQUITY FUND
By Steve Barbaro
Portfolio Manager
As investors abandoned small company stocks in the fiscal year ended
October 31, 1998, stocks of the smallest firms had the greatest losses. This was
particularly true during the stock market correction in the third quarter, when
investors were deeply concerned about liquidity. Although the Galaxy Small
Company Equity Fund enjoyed solid returns from many of its investments
[start mountain chart]
Galaxy Small Company Equity Fund
Growth of $10,000 investment*
<TABLE>
<CAPTION>
Galaxy Small Company Galaxy Small Company Galaxy Small Company
Equity Fund - Equity Fund - Equity Fund -
Russell 2000 Retail A Shares Trust Shares Retail B Shares
<S> <C> <C> <C> <C>
1991 10,000 9,625 10,000
1992 10,650 8,460 8,790
1993 14,101 11,944 12,410
1994 14,058 11,937 12,413
1995 16,638 15,997 16,723 10,000
1996 19,400 19,832 20,862 11,040
1997 25,090 23,616 24,937 13,237
10/31/98 22,076 17,414 18,452 9,760
</TABLE>
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception on
3/4/96 for Retail B Shares. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. Performance figures
for Retail B Shares reflect the deduction of the maximum 5.00% contingent
deferred sales charge as if shares were redeemed on October 31, 1998. The
Russell 2000 is an unmanaged index in which investors cannot invest. Results
for the index do not reflect the investment management fees and other expenses
incurred by the Fund.
[end mountain chart]
12
<PAGE>
- ---------------
MARKET OVERVIEW
- ---------------
[photo: Steve Barbaro]
over this time, its heavy weighting in stocks with the smallest market
capitalizations caused it to significantly underperform its market benchmarks.
During the reporting period, the Fund's Trust Shares had a total return of
- -26.00%. For the same period, Retail A Shares earned -26.26%, before deducting
the maximum 3.75% sales charge, and Retail B Shares earned -26.72%, before
deducting the maximum 5.00% contingent deferred sales charge. (Please see the
chart on page 2 for total returns after deducting the front-end sales charge and
the chart on page 3 for total returns after deducting the contingent deferred
sales charge.)
These returns compare with the average return of -13.73% for small company
growth funds tracked by Lipper, and a return of -11.84% for the Russell 2000.
Galaxy Small Company Equity Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
Capital Goods & Construction 9%
Other Common Stocks, US Agency Obligation & Net Other Assets & Liabilities 11%
Consumer Staples 20%
Consumer Cyclical 23%
Technology 37%
[end pie chart]
Opportunities in Market Weakness
When the period began at the end of 1997, small cap stocks were hurt by
profit taking in energy and technology shares. While the Fund was overweighted
in energy issues, it was underweighted in technology shares. As prices became
more attractive, we added stocks of better-quality companies with more visible
earnings.
Many of these shares came from the technology sector, which rebounded at
the start of 1998. With falling oil prices further depressing returns from
energy stocks, we reduced the Fund's position in that group. We used the
proceeds from those and other sales to increase the Fund's technology holdings
and to add shares of health care and consumer firms.
Although technology and health care stocks underperformed in the months
that followed, the Fund benefited from a rebound in energy issues and strong
performances by its auto stocks. As we found attractive prices, we continued to
build Fund positions in technology, health care, and consumer firms -- while
also adding shares of capital goods and transportation companies.
In the second quarter of 1998, the Fund enjoyed healthy returns from
individual consumer stocks -- which helped offset an underweighting in that
strongly performing sector. As before, we added shares of technology, health
care, capital goods, and transportation firms, while also rebuilding some of the
Fund's energy positions. To finance these purchases we took profits in
technology and airlines stocks that we felt were overpriced. When stocks of
small companies plunged in the third quarter of 1998, we looked for
opportunities to enhance the quality and size of companies in the portfolio.
Cheap Prices Could Help Sector Outperform
As small company stocks rebounded in October, the Fund enjoyed strong
returns from many investments that we'd bought at very attractive prices.
Leading the advance were the Fund's technology and consumer shares. The size of
this bounce may signal that the small cap sector has bottomed. With an easing in
the Fed's monetary policy and greater economic stability overseas, investors may
now be willing to accept the added risk that stocks of small companies carry.
Because small cap stocks are cheaper relative to large cap stocks than they
have been in several decades, small cap stocks could outperform in the coming
year. In this environment we plan to continue searching for shares of
high-quality firms with strong growth potential and reasonable valuations.
Steve Barbaro has managed the Galaxy Small Company Equity Fund since its
inception in December 1991. He has managed small company portfolios for Fleet
Investment Advisors Inc., and its predecessors, since 1977.
13
<PAGE>
- ---------------
MARKET OVERVIEW
- ---------------
GALAXY INTERNATIONAL EQUITY FUND
By Thomas M. O'Neill, Chief Investment Officer, Fleet Investment Advisors
Inc. and Oechsle International Advisors, LLC Sub-Advisor
[photo: Thomas M. O'Neill]
For the fiscal year ended October 31, 1998, the Galaxy International Equity
Fund earned returns far stronger than those of its market benchmark and other
funds with similar investment objectives. This was largely the result of an
underweighting in the poorly performing Asian markets, an overweighting in the
better-performing European markets, and a strong selection of individual
investments.
During the reporting period the Fund's Trust Shares earned a total return
of 14.32%. Over the same time, Retail A Shares earned 13.64%, before deducting
the maximum 3.75% front-end sales charge. (Please see the chart on page 2 for
total returns after deducting the front-end sales charge.)
Those returns compare with 4.07% for the average international fund tracked
by Lipper, and 9.95% for the EAFE Index.
Reduced Asian Exposure Remains Helpful
When the reporting period began in November 1997, Asian stocks represented
about 27% of the Fund's equity portfolio and about 33% of the EAFE Index. This
left the Fund overweighted in Europe and underweighted in Asia -- a strategy
that we maintained throughout the period. As the economies of Southeast Asia and
Japan deteriorated in the final months of 1997, we further reduced investments
in the region -- along with shares of European firms that have significant
business relations with Asia. In Japan, we gave greater attention to stocks in
more defensive sectors. We remained defensively positioned in Europe during this
time and throughout the rest of the reporting period.
In the first half of 1998 the Fund earned strong returns from overweighted
positions in France, Italy, Spain and the Netherlands. An underweighted position
in the better-performing German market detracted from returns, along with
overweighted positions in the lesser-performing markets of Australia, Mexico and
Brazil. Returns continued to be driven, however, by the Fund's overweighting in
European stocks, strong performances by individual holdings in Europe and an
underweighting in Asia.
As economic problems spread to Russia and Latin America in the second half
of the year, the Fund's country weightings remained beneficial. Individual stock
selection and a general underweighting in financial issues also helped Fund
returns. We used the worldwide weakness in stock prices that
Galaxy International Equity Fund
Growth of $10,000 investment*
[start mountain chart]
<TABLE>
<CAPTION>
Morgan Stanley Europe, Galaxy International Galaxy International
Australia & Far East Equity Fund - Equity Fund -
Index Retail A Shares Trust Shares
<S> <C> <C> <C>
1991 10,000 9,625 10,000
1992 8,680 9,297 9,660
1993 11,970 11,748 12,207
1994 13,134 12,795 13,294
1995 13,125 12,713 13,291
1996 14,499 14,093 14,820
1997 15,212 16,332 17,280
10/31/98 16,704 18,559 19,755
</TABLE>
* Since inception on 12/30/91. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The Morgan Stanley
Capital International Europe, Australia & Far East (EAFE) Index is an
unmanaged index in which investors cannot invest. Results for the index do not
reflect the investment management fees and other expenses incurred by the
Fund.
[end mountain chart]
14
<PAGE>
- ---------------
MARKET OVERVIEW
- ---------------
Galaxy International Equity Fund
Distribution of Total Net Assets
as of October 31, 1998
[start pie chart]
Australia 2%
US Agency Obligation & Net Other Assets & Liabilities 3%
North, Central & South America 4%
Far East 16%
United Kingdom 22%
Europe 53%
[end pie chart]
occurred during this time to make selective additions to existing positions and
establish new positions in several stocks that we believed to be oversold --
including shares from Hong Kong and Japan.
Staying On the Defensive
We expect volatility in world stock markets to continue into 1999. Economic
fundamentals are shaky in many regions and corporate earnings remain vulnerable
to disappointments. While investors were cheered by a decline in U.S. interest
rates, and a strengthening in the Japanese yen against the U.S. dollar, many
businesses abroad still expecting their earnings to slow. In this climate we
plan to keep the Fund's portfolio somewhat defensive -- with sizable holdings in
the food, drug, publishing and telecommunications sectors -- and look for new
investment opportunities that further market volatility may bring.
Thomas M. O'Neill is Chief Investment Officer of Fleet Investment Advisors Inc.
Oeschle International Advisors, LLC serves as sub-advisor for the Fund. Oeschle
International Advisors, LLC is a firm dedicated to international investing and
has approximately $12.2 billion in assets under management.
- --------------------------------------------------------------------------------
Investment returns and principal values will vary with market conditions so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The Investment Advisor and Administrator are presently waiving
fees and/or reimbursing expenses and may revise or discontinue such practice at
any time. Without such waivers and/or reimbursements, performance would be
lower. Past performance is no guarantee of future results. Unless otherwise
indicated, total return figures in this report include changes in share price,
the effect of sales charges, where applicable, and reinvestment of dividends and
capital gains distributions, if any.
15
<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.
[start sidebar]
"A well-balanced asset allocation plan may help to control your risk while
pursuing your goals."
[end sidebar]
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 within the same share class.
QUARTERLY MAGAZINE
Service also means giving you the practical information you need, in language
you can understand, to make smart investment decisions. The quarterly magazine,
Galaxy Observer, brings news, strategies and simple, straight-forward
explanations of investment basics and terminology.
CONSOLIDATED STATEMENTS
Timely, comprehensive mutual fund account statements offer detailed information
on your individual account. If you have a Fleet One, Fleet Gold, or a Fleet
Private Banking Account, your Galaxy Fund information can be added to these
statements.
24-HOUR ACCESS TO REGISTERED REPRESENTATIVES
24 hours a day, seven days a week, 365 days a year, we are ready and available
to help. Our toll-free telephone lines offer round-the-clock access to Fund
information and service. Call 1-877-BUY-GALAXY (1-877-289-4252) for information
on initial purchases and current performance.
CUSTOMER SERVICE
Quality customer service is only a phone call away. Call 1-877-BUY-GALAXY
(1-877-289-4252) between 8 a.m. and 6 p.m. to arrange bank wires, or to make
telephone exchanges and redemptions.
Certain shareholder services may not be available to Trust 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.
16
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Asset Allocation Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
COMMON STOCKS - 50.28%
Consumer Staples - 12.89%
110,000 Becton Dickinson & Co. .................. $ 4,633,750
130,000 Bestfoods ............................... 7,085,000
90,000 Boston Scientific Corp.* ................ 4,899,375
200,000 Coca Cola Enterprises, Inc. ............. 7,212,500
50,000 Elan Corp. Plc, ADR* .................... 3,503,125
110,000 Forest Laboratories, Inc.* .............. 4,599,375
80,000 Genzyme Corp.* .......................... 3,365,000
100,000 Gillette Co. ............................ 4,493,750
100,000 Lilly (Eli) & Co. ....................... 8,093,750
60,000 Merck & Co., Inc. ....................... 8,115,000
130,000 PepsiCo, Inc. ........................... 4,387,500
80,000 Pfizer, Inc. ............................ 8,585,000
50,000 Procter & Gamble Co. .................... 4,443,750
50,000 Warner-Lambert Co. ...................... 3,918,750
-------------
77,335,625
-------------
Technology - 9.10%
100,000 Altera Corp.* ........................... 4,162,500
90,000 Automatic Data Processing, Inc. ......... 7,003,125
150,000 Cisco Systems, Inc.* .................... 9,450,000
120,000 Compaq Computer Corp. ................... 3,795,000
90,000 EMC Corp.* .............................. 5,793,750
90,000 Hewlett-Packard Co. ..................... 5,416,875
80,000 Intel Corp. ............................. 7,135,000
75,000 Lucent Technologies, Inc. ............... 6,014,062
60,000 Xerox Corp. ............................. 5,812,500
-------------
54,582,812
-------------
Finance - 8.89%
75,000 American International Group, Inc. ...... 6,393,750
39,999 Associates First Capital Corp. .......... 2,819,930
70,000 BankBoston Corp. ........................ 2,576,875
35,000 Chase Manhattan Corp. ................... 1,988,437
150,000 Citigroup, Inc. ......................... 7,059,375
130,000 Fannie Mae .............................. 9,205,625
90,000 First Union Corp. ....................... 5,220,000
120,000 Hartford Financial
Services Group, Inc. .................... 6,375,000
120,000 Norwest Corp. ........................... 4,462,500
50,000 SunAmerica, Inc. ........................ 3,525,000
100,000 Washington Mutual, Inc. ................. 3,743,750
-------------
53,370,242
-------------
Capital Goods and Construction - 4.89%
150,000 Boeing Co. .............................. 5,625,000
115,000 Deere & Co. ............................. 4,068,125
80,000 General Electric Co. .................... 7,000,000
70,000 Textron, Inc. ........................... 5,206,250
100,000 Thermo Electron Corp.* .................. 1,993,750
35,000 United Technologies Corp. ............... 3,333,750
100,000 US Filter Corp.* ........................ 2,118,750
-------------
29,345,625
-------------
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
Energy - 4.27%
35,000 Baker Hughes, Inc. ...................... $ 772,188
70,000 Enron Corp. ............................. 3,692,500
160,000 Halliburton Co. ......................... 5,750,000
70,000 Mobil Corp. ............................. 5,298,125
100,000 Noble Affiliates, Inc. .................. 3,275,000
130,000 Schlumberger, Ltd. ...................... 6,825,000
-------------
25,612,813
-------------
Consumer Cyclical - 4.25%
110,000 CVS Corp. ............................... 5,025,625
40,000 Dayton Hudson Corp. ..................... 1,695,000
212,000 Home Depot, Inc. ........................ 9,222,000
70,000 McDonald's Corp. ........................ 4,681,250
100,000 Walgreen Co. ............................ 4,868,750
-------------
25,492,625
-------------
Utilities - 3.22%
120,000 Frontier Corp. .......................... 3,607,500
180,000 MCI WorldCom, Inc.* ..................... 9,945,000
125,000 SBC Communications, Inc. ................ 5,789,063
-------------
19,341,563
-------------
Transportation - 2.01%
80,000 AMR Corp.* .............................. 5,360,000
80,000 Burlington Northern Santa Fe Corp. ...... 2,470,000
200,000 Southwest Airlines Co. .................. 4,237,500
-------------
12,067,500
-------------
Basic Materials - 0.76%
160,000 Sonoco Products Co. ..................... 4,540,000
-------------
Total Common Stocks...................... 301,688,805
(Cost $222,824,993) -------------
Par Value
---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 29.43%
U.S. Treasury Bonds - 8.72%
$ 1,500,000 7.63%, 02/15/07 ......................... $ 1,633,875
12,850,000 7.50%, 11/15/16 ......................... 16,020,866
1,000,000 8.13%, 08/15/19 ......................... 1,337,770
750,000 8.50%, 02/15/20 ......................... 1,041,945
6,200,000 7.88%, 02/15/21 ......................... 8,174,142
500,000 8.13%, 08/15/21 ......................... 677,315
3,500,000 7.25%, 08/15/22 ......................... 4,361,035
3,250,000 7.63%, 11/15/22 ......................... 4,216,940
2,850,000 7.13%, 02/15/23 ......................... 3,519,408
8,400,000 6.50%, 11/15/26 ......................... 9,794,400
1,325,000 6.38%, 08/15/27 ......................... 1,529,646
-------------
52,307,342
-------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Asset Allocation Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
U.S. Treasury Notes - 7.29%
$ 3,650,000 5.50%, 03/31/00 ......................... $ 3,707,597
1,000,000 5.63%, 04/30/00 ......................... 1,019,120
1,750,000 5.38%, 06/30/00 ......................... 1,781,973
3,000,000 5.75%, 10/31/00 ......................... 3,084,000
3,550,000 6.38%, 09/30/01 ......................... 3,746,280
1,000,000 5.50%, 02/28/03 ......................... 1,044,840
11,360,000 5.75%, 04/30/03 ......................... 12,002,862
500,000 7.25%, 05/15/04 ......................... 568,005
3,000,000 7.25%, 08/15/04 ......................... 3,419,100
2,500,000 7.50%, 02/15/05 ......................... 2,904,900
8,175,000 6.50%, 10/15/06 ......................... 9,176,110
1,200,000 5.63%, 05/15/08 ......................... 1,293,096
-------------
43,747,883
-------------
Federal Home Loan
Mortgage Corporation - 10.80%
61,869,000 5.42%, 11/02/98 (B) ..................... 61,841,056
1,000,000 7.74%, 06/01/04 ......................... 1,017,720
1,000,000 7.05%, 06/08/05 ......................... 1,034,650
861,792 7.00%, 01/01/27 ......................... 878,752
-------------
64,772,178
-------------
Federal National
Mortgage Association - 1.86%
1,000,000 6.74%, 09/19/01 ......................... 1,055,390
1,000,000 6.49%, 01/19/06 ......................... 1,029,280
841,510 6.00%, 01/01/09 ......................... 848,604
881,338 6.00%, 04/01/11 ......................... 885,462
2,075,000 7.00%, 03/25/13 ......................... 2,117,148
2,363,056 6.00%, 08/01/13 ......................... 2,372,650
2,000,000 8.18%, 04/15/24 ......................... 2,029,340
273,887 6.50%, 01/01/26 ......................... 276,111
565,088 6.50%, 11/01/27 ......................... 569,501
-------------
11,183,486
-------------
Government National
Mortgage Association - 0.76%
572,301 9.00%, 12/15/17 ......................... 612,716
761,441 7.50%, 01/15/26 ......................... 784,041
2,080,599 7.00%, 07/15/28 ......................... 2,130,013
1,000,000 7.50%, 10/15/28 ......................... 1,029,680
-------------
4,556,450
-------------
Total U.S. Government
and Agency Obligations................... 176,567,339
(Cost $170,285,401) -------------
CORPORATE NOTES AND BONDS - 17.85%
1,000,000 Abbott Laboratories
6.40%, 12/01/06.......................... 1,073,750
2,500,000 American Express Credit Corp.
6.13%, 06/15/00.......................... 2,550,000
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
CORPORATE NOTES AND BONDS - (continued)
$ 1,000,000 American Express Co.
Senior Bond
6.75%, 06/23/04.......................... $ 1,076,250
200,000 American Telephone & Telegraph Corp.
7.00%, 05/15/05.......................... 218,000
1,000,000 Arizona Public Service Co.
First Mortgage
7.63%, 06/15/99.......................... 1,015,000
1,000,000 Associates Corp. of North America
Senior Note
5.25%, 03/30/00.......................... 998,750
1,000,000 Bank One Milwaukee, MTN
6.35%, 03/19/01.......................... 1,026,250
700,000 Becton Dickinson
6.70%, 08/01/28......................... 733,250
1,000,000 Borg-Warner Automotive, Inc.
Senior Note
7.00%, 11/01/06.......................... 1,058,750
200,000 Burlington Northern Santa Fe
6.88%, 02/15/16.......................... 202,250
1,000,000 Caterpillar Financial Services Corp.
Series F, MTN
6.40%, 04/16/01.......................... 1,033,750
1,700,000 Caterpillar Financial
Services Corp., MTN
6.00%, 05/23/02.......................... 1,755,250
1,200,000 CitiGroup, Senior MTN
8.63%, 11/01/04.......................... 1,233,000
1,000,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17.......................... 1,053,750
1,000,000 Commercial Credit Co.
5.75%, 07/15/00.......................... 1,010,000
1,400,000 Commercial Credit Co.
6.50%, 08/01/04.......................... 1,449,000
1,000,000 First Union Corp.
6.60%, 06/15/00.......................... 1,023,750
1,000,000 Ford Motor Credit Co.
8.38%, 01/15/00.......................... 1,036,250
2,000,000 Ford Motor Credit Co.
6.38%, 10/06/00.......................... 2,042,500
1,000,000 Ford Motor Credit Co.
Senior Note
6.50%, 02/28/02.......................... 1,028,750
3,000,000 G.E. Capital Corp., Series A, MTN
5.76%, 04/24/00.......................... 3,037,500
1,000,000 G.E. Capital Corp., Series A, MTN
5.92%, 04/03/01.......................... 1,022,500
500,000 G.E. Capital Corp., Series A, MTN
6.02%, 05/04/01.......................... 513,750
3,000,000 General Motors Acceptance Corp.
7.00%, 03/01/00.......................... 3,071,250
1,000,000 General Motors Acceptance Corp.
6.88%, 07/15/01.......................... 1,041,250
1,000,000 General Motors Acceptance Corp.
7.00%, 09/15/02.......................... 1,058,750
250,000 GTE Corp.
6.46%, 04/15/08.......................... 264,375
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Asset Allocation Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
CORPORATE NOTES AND BONDS - (continued)
$ 1,000,000 GTE North, Inc., Series D
6.90%, 11/01/08.......................... $ 1,101,250
3,000,000 Heinz (H.J.) Co., Euro Bond
5.75%, 02/03/03.......................... 3,074,700
750,000 Heinz (H.J.) Co.
6.88%, 01/15/03.......................... 807,188
1,000,000 Hershey Foods Corp.
6.70%, 10/01/05.......................... 1,082,500
1,300,000 Hershey Foods Corp.
7.20%, 08/15/27.......................... 1,464,125
1,000,000 Hertz Corp., Senior Note
7.00%, 04/15/01.......................... 1,038,750
2,000,000 Ingersoll-Rand, Senior Note
6.26%, 02/15/01.......................... 2,065,000
1,000,000 International Business
Machines Corp.
6.34%, 06/15/00.......................... 1,022,500
1,000,000 International Business
Machines Corp.
7.50%, 06/15/13.......................... 1,196,250
2,000,000 International Business
Machines Corp.
6.22%, 08/01/27.......................... 2,142,500
500,000 International Paper Co.
7.00%, 06/01/01.......................... 521,250
1,000,000 Keycorp Institutional Capital Corp.
Series A
6.63%, 06/15/29
Putable 06/01/99 (A)..................... 1,006,500
1,500,000 Lockheed Martin Corp.
6.85%, 05/15/01.......................... 1,563,750
1,500,000 Lucent Technologies, Inc.
7.25%, 07/15/06.......................... 1,678,125
500,000 May Department Stores Co.
6.88%, 11/01/05.......................... 536,250
2,025,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08.......................... 2,113,594
500,000 McDonald's Corp.
8.88%, 04/01/11.......................... 649,375
500,000 Mead Corp.
6.84%, 03/01/37.......................... 550,000
850,000 Merck & Co.
6.40%, 03/01/28.......................... 889,313
2,500,000 Minnesota Mining & Manufacturing
6.38%, 02/15/28.......................... 2,521,875
1,000,000 National City Bank of Kentucky
6.30%, 02/15/11.......................... 1,048,750
1,000,000 National Rural Utilities
Cooperative Finance Corp.
6.38%, 10/15/04.......................... 1,073,750
2,500,000 National Rural Utilities
Cooperative Finance Corp.
6.13%, 05/15/05.......................... 2,609,375
1,500,000 National Rural Utilities
Cooperative Finance Corp.
5.75%, 11/01/08.......................... 1,499,445
1,000,000 NationsBank Corp.
7.00%, 09/15/01.......................... 1,057,500
CORPORATE NOTES AND BONDS - (continued)
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
$ 2,500,000 NationsBank of North America
5.86%, 05/26/00.......................... $ 2,537,500
500,000 Northern Telecom, Ltd.
6.00%, 09/01/03.......................... 511,875
1,000,000 Paccar Financial Corp., Series H
MTN
6.42%, 05/15/00.......................... 1,022,500
1,000,000 Penney (J.C.) & Co.
6.95%, 04/01/00.......................... 1,030,000
1,000,000 Pennsylvania Power & Light Co.
6.88%, 02/01/03.......................... 1,076,250
2,975,000 PepsiCo, Inc., Series 1, MTN
6.80%, 05/15/00.......................... 3,067,969
1,000,000 PepsiCo, Inc.
5.75%, 01/01/03.......................... 1,030,000
1,620,000 PepsiCo, Inc.
5.75%, 01/15/08.......................... 1,650,375
1,590,000 Pitney Bowes Credit Corp.
6.63%, 06/01/02.......................... 1,677,450
1,800,000 Potomac Electric Power Co.
6.50%, 09/15/05.......................... 1,923,750
2,000,000 Potomac Electric Power Co.
6.25%, 10/15/07.......................... 2,152,500
325,000 Rite Aid Corp.
6.70%, 12/15/01.......................... 337,594
1,000,000 Service Corp. International
7.38%, 04/15/04.......................... 1,088,750
3,500,000 Sherwin-Williams Co.
6.50%, 02/01/02.......................... 3,666,250
1,900,000 Sherwin-Williams Co.
6.85%, 02/01/07.......................... 2,082,875
1,000,000 Southwest Airlines Co.
8.75%, 10/15/03.......................... 1,155,000
1,000,000 Suntrust Bank of Atlanta
7.25%, 09/15/06.......................... 1,078,750
300,000 Suntrust Bank of Central Florida, MTN
6.90%, 07/01/07.......................... 325,500
1,000,000 Sysco Corp.
7.25%, 04/15/07.......................... 1,121,250
1,250,000 Sysco Corp.
6.50%, 08/01/28.......................... 1,256,250
1,000,000 Texaco Capital, Inc.
8.50%, 02/15/03.......................... 1,137,500
500,000 Texas Utilities Electric Co.
7.38%, 11/01/99.......................... 511,250
2,000,000 United Telecommunications, Inc.
9.50%, 04/01/03.......................... 2,350,000
500,00 Virginia Electric & Power Co.
5.88%, 04/01/00.......................... 508,125
2,000,000 Wachovia Bank
6.30%, 03/15/01.......................... 2,052,500
2,000,000 Wal-Mart Stores
6.75%, 05/15/02.......................... 2,122,500
1,000,000 Xerox Corp.
9.75%, 03/15/00.......................... 1,062,500
600,000 Xerox Corp.
8.13%, 04/15/02.......................... 656,250
-------------
Total Corporate Notes and Bonds ......... 107,134,253
(Cost $103,071,707) -------------
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Asset Allocation Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 2.11%
$ 1,550,000 American Express Master Trust
Series 1998-1, Class A
5.90%, 04/15/04.......................... $ 1,596,500
1,000,000 Chase Manhattan Auto Owner Trust
Series 1998-C, Class A4
5.85%, 05/15/03.......................... 1,020,000
2,950,000 Chemical Master Credit Card
Trust 1, Class A
5.55%, 09/15/03.......................... 2,966,579
4,500,000 Discover Card Master Trust
Series 1998-4, Class A
5.75%, 10/16/03.......................... 4,545,000
161,656 Ford Credit Auto Owner Trust
Series 1996-A, Class A-3
6.50%, 11/15/99.......................... 161,756
454,899 NationsBank Auto Owner Trust
Series 1996-A, Class A-3
6.38%, 07/15/00.......................... 455,750
456,828 Premier Auto Trust
Series 1996-3, Class A-3
6.50%, 03/06/00.......................... 457,682
716,812 Prudential Home Mortgage Securities
Class 1996-7, Series A-1, CMO
6.75%, 06/25/11.......................... 719,722
710,878 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26.......................... 719,480
-------------
Total Asset-Backed and
Mortgage-Backed Securities .............. 12,642,469
(Cost $12,410,137) -------------
<CAPTION>
Value
Shares (Note 2)
--------- --------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK - 0.25%
30,000 Loral Space and
Communications, Ltd.,
Series C, 6.00% (A)...................... $ 1,511,250
-------------
Total Convertible Preferred Stock ....... 1,511,250
(Cost $1,627,725) -------------
Total Investments - 99.92%................................. 599,544,116
(Cost $510,219,963) -------------
Net Other Assets and Liabilities - 0.08%................... 496,189
-------------
Net Assets - 100%.......................................... $ 600,040,305
=============
- -----------------------------------------------
* Non-income producing security.
(A) Securities exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. These securities may only be
resold, in transactions exempt from registration, to qualified
institutional buyers. At October 31, 1998, these securities amounted
to $2,517,750, or 0.42% of net assets.
(B) Discount yield at time of purchase.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Income Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
COMMON STOCKS - 84.22%
Consumer Staples - 21.00%
195,000 Becton Dickinson & Co. .................. $ 8,214,375
150,000 Bestfoods ............................... 8,175,000
130,000 Gillette Co. ............................ 5,841,875
95,000 Lilly (Eli) & Co. ....................... 7,689,062
55,000 Merck & Co., Inc. ....................... 7,438,750
340,000 PepsiCo, Inc. ........................... 11,475,000
70,000 Pfizer, Inc. ............................ 7,511,875
70,000 Procter & Gamble Co. .................... 6,221,250
100,000 Warner-Lambert Co. ...................... 7,837,500
-------------
70,404,687
-------------
Finance - 17.82%
100,000 Associates First Capital Corp. .......... 7,050,000
150,000 BankBoston Corp. ........................ 5,521,875
125,000 Fannie Mae .............................. 8,851,563
120,000 First Union Corp. ....................... 6,960,000
175,000 Hartford Financial
Services Group, Inc. .................... 9,296,875
160,000 Highwoods Properties, Inc., REIT ........ 4,470,000
190,000 Norwest Corp. ........................... 7,065,625
120,000 Spieker Properties, Inc., REIT .......... 4,140,000
170,000 Washington Mutual, Inc. ................. 6,364,375
-------------
59,720,313
-------------
Energy - 10.81%
110,000 Consolidated Natural Gas Co. ............ 5,809,375
85,000 Exxon Corp. ............................. 6,056,250
170,000 Halliburton Co. ......................... 6,109,375
80,000 Mobil Corp. ............................. 6,055,000
125,000 Schlumberger Ltd. ....................... 6,562,500
95,000 Texaco, Inc. ............................ 5,634,687
-------------
36,227,187
-------------
Utilities - 10.05%
120,000 American Telephone
& Telegraph Corp. ....................... 7,470,000
195,000 Baltimore Gas & Electric Co. ............ 6,118,125
220,000 Frontier Corp. .......................... 6,613,750
163,000 SBC Communications, Inc. ................ 7,548,938
225,000 Washington Gas Light Co. ................ 5,948,437
-------------
33,699,250
-------------
Consumer Cyclical - 8.41%
180,000 Ford Motor Co. .......................... 9,765,000
130,000 McDonald's Corp. ........................ 8,693,750
200,000 Walgreen Co. ............................ 9,737,500
-------------
28,196,250
-------------
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
Technology - 7.51%
165,000 Automatic Data Processing, Inc. ......... $ 12,839,063
35,000 Intel Corp. ............................. 3,121,562
95,000 Xerox Corp. ............................. 9,203,125
-------------
25,163,750
-------------
Capital Goods and Construction - 5.47%
160,000 Boeing Co. .............................. 6,000,000
60,000 Caterpillar, Inc. ....................... 2,700,000
110,000 General Electric Co. .................... 9,625,000
-------------
18,325,000
-------------
Basic Materials - 2.37%
170,000 Weyerhauser Co. ......................... 7,958,125
-------------
Transportation - 0.78%
85,000 Burlington Northern
Santa Fe Corp............................ 2,624,375
-------------
Total Common Stocks...................... 282,318,937
Cost $209,856,280) -------------
Par Value
- ----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 15.64%
Federal Home Loan
Mortgage Corporation (A) - 14.40%
$48,284,000 5.42%, 11/02/98.......................... 48,276,731
-------------
U.S. Treasury Bond - 0.63%
1,700,000 7.50%, 11/15/16.......................... 2,119,492
-------------
U.S. Treasury Note - 0.61%
2,000,000 5.50%, 04/15/00.......................... 2,034,180
-------------
Total U.S. Government
and Agency Obligations................... 52,430,403
-------------
(Cost $51,939,512)
Total Investments - 99.86%................................. 334,749,340
(Cost $261,795,792) -------------
Net Other Assets and Liabilities - 0.14%................... 468,260
-------------
Net Assets - 100.00%....................................... $ 335,217,600
=============
</TABLE>
- ---------------------------------------
(A) Discount yield at time of purchase.
REIT Real Estate Investment Trust.
See Notes to Financial Statements.
21
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Growth and Income Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
COMMON STOCKS - 92.22%
Consumer Staples - 20.84%
172,700 American Home Products Corp. ............ $ 8,419,125
118,000 Anheuser-Busch Cos., Inc. ............... 7,013,625
180,300 Elan Corp. Plc, ADR* .................... 12,632,269
170,000 Forest Laboratories, Inc.* .............. 7,108,125
270,000 Genzyme Corp.* .......................... 11,356,875
155,000 Hannaford Brothers Co. .................. 6,790,937
475,000 Humana, Inc.* ........................... 8,995,313
130,000 International Flavors &
Fragances, Inc. ......................... 4,866,875
94,000 Johnson & Johnson ....................... 7,661,000
65,000 Merck & Co., Inc. ....................... 8,791,250
170,000 PepsiCo, Inc. ........................... 5,737,500
49,000 Pfizer, Inc. ............................ 5,258,312
145,000 Pharmacia & Upjohn, Inc. ................ 7,675,938
152,000 Stryker Corp. ........................... 6,374,500
-------------
108,681,644
-------------
Technology - 14.46%
148,283 AMP, Inc. ............................... 6,088,871
102,000 Avnet, Inc. ............................. 5,074,500
138,000 Cisco Systems, Inc. ..................... 8,694,000
198,000 Compaq Computer Corp. ................... 6,261,750
87,000 Computer Sciences Corp. ................. 4,589,250
226,000 Electronic Data Systems Corp. ........... 9,195,375
133,000 Harris Corp. ............................ 4,663,312
138,000 Hewlett-Packard Co. ..................... 8,305,875
62,000 International Business
Machines Corp. .......................... 9,203,125
122,000 Motorola, Inc. .......................... 6,344,000
109,000 Texas Instruments, Inc. ................. 6,969,188
-------------
75,389,246
-------------
Finance - 12.80%
160,000 Bank One Corp. .......................... 7,820,000
141,999 BankAmerica Corp. ....................... 8,156,068
96,000 Chase Manhattan Corp. ................... 5,454,000
74,000 Chubb Corp. ............................. 4,551,000
132,000 Citigroup, Inc. ......................... 6,212,250
110,000 Countrywide Credit Industries, Inc. ..... 4,750,625
32,000 General Re Corp. ........................ 7,030,000
110,000 Hartford Financial
Services Group, Inc. .................... 5,843,750
68,000 Lincoln National Corp. .................. 5,159,500
54,000 Morgan (J.P.) & Co., Inc. ............... 5,089,500
18,000 Wells Fargo & Co. ....................... 6,660,000
-------------
66,726,693
-------------
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
Consumer Cyclical - 11.05%
190,000 Circuit City Stores ..................... $ 6,875,625
392,000 Cooper Tire & Rubber Co. ................ 6,517,000
76,000 Eastman Kodak Co. ....................... 5,890,000
98,000 Ford Motor Co. .......................... 5,316,500
214,000 Lowe's Cos., Inc. ....................... 7,209,125
90,000 McDonald's Corp. ........................ 6,018,750
390,000 Office Depot, Inc.* ..................... 9,750,000
105,000 Penney (J.C.) Co., Inc. ................. 4,987,500
200,000 Sherwin-Williams Co. .................... 5,037,500
-------------
57,602,000
-------------
Utilities - 8.24%
106,000 American Telephone &
Telegraph Corp. ......................... 6,598,500
140,000 Century Telephone Enterprises, Inc. ..... 7,953,750
158,000 Entergy Corp. ........................... 4,542,500
122,000 GTE Corp. ............................... 7,159,875
182,000 MCI WorldCom, Inc.* ..................... 10,055,500
144,000 SBC Communications, Inc. ................ 6,669,000
-------------
42,979,125
-------------
Energy - 7.93%
135,000 Amoco Corp. ............................. 7,576,875
80,000 Atlantic Richfield Co. .................. 5,510,000
205,000 Halliburton Co. ......................... 7,367,187
150,000 Kerr-McGee Corp. ........................ 5,981,250
97,000 Mobil Corp. ............................. 7,341,687
144,400 Schlumberger, Ltd. ...................... 7,581,000
-------------
41,357,999
-------------
Basic Materials - 7.67%
38,100 Crown Cork & Seal, Inc. ................. 1,214,438
150,000 Goodrich (B.F.) Co. ..................... 5,400,000
176,000 Lubrizol Corp. .......................... 4,906,000
74,000 Minnesota Mining &
Manufacturing Co. ....................... 5,920,000
220,000 Morton International, Inc. .............. 5,472,500
245,000 Pall Corp. .............................. 6,186,250
140,000 Praxair, Inc. ........................... 5,635,000
170,000 Sigma Aldrich Corp. ..................... 5,254,062
-------------
39,988,250
-------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Growth and Income Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
Capital Goods and Construction - 6.47%
120,000 Boeing Co. .............................. $ 4,500,000
64,000 General Electric Co. .................... 5,600,000
61,000 Honeywell, Inc. ......................... 4,872,375
126,000 Hubbell, Inc., Class A .................. 5,024,250
300,000 US Filter Corp.* ........................ 6,356,250
163,125 Waste Management, Inc. .................. 7,361,016
-------------
33,713,891
-------------
Transportaion - 2.76%
68,000 British Airways Plc, ADR ................ 5,142,500
168,000 Burlington Northern Santa Fe Corp. ...... 5,187,000
85,000 Union Pacific Corp. ..................... 4,048,125
-------------
14,377,625
-------------
Total Common Stocks ..................... 480,816,473
(Cost $415,367,324) -------------
CONVERTIBLE PREFERRED STOCKS - 1.67%
135,000 Crown Cork & Seal Co., Inc., 4.50%....... 4,058,437
80,000 Loral Space and
Communications, Ltd.,
Series C, 6.00% (A) ..................... 4,030,000
12,000 Loral Space and
Communications, Ltd., 6.00% ............. 604,500
-------------
Total Convertible
Preferred Stocks......................... 8,692,937
(Cost $10,986,353) -------------
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (B) - 6.76%
Federal Home Loan
Mortgage Corporation - 6.76%
$35,247,000 5.42%, 11/02/98.......................... $ 35,241,693
-------------
Total U.S. Agency Obligation............. 35,241,693
(Cost $35,241,693) -------------
Total Investments - 100.65%................................ 524,751,103
(Cost $461,595,370) -------------
Net Other Assets and Liabilities - (0.65)%................. (3,365,269)
-------------
Net Assets - 100.00%....................................... $ 521,385,834
=============
</TABLE>
- ---------------------------------------------
* Non-income producing security.
(A) Securities exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. These securities may only be
resold, in transactions exempt from registration, to qualified
institutional buyers. At October 31, 1998, these securities amounted
to $4,030,000, or 0.77% of net assets.
(B) Discount yield at time of purchase.
ADR American Depositary Receipt
See Notes to Financial Statements.
23
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Value Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
COMMON STOCKS - 98.99%
Consumer Cyclical - 24.61%
145,500 Albertson's, Inc. ....................... $ 8,084,344
314,100 Brinker International, Inc.* ............ 7,597,294
479,600 Carnival Corp., Class A ................. 15,527,050
33,100 Chrysler Corp. .......................... 1,592,938
250,500 Fleetwood Enterprises, Inc. ............. 8,078,625
142,500 Gap, Inc. ............................... 8,567,813
100,700 General Motors Corp. .................... 6,350,393
154,300 Harley-Davidson, Inc. ................... 5,979,125
404,000 Jones Apparel Group, Inc.* .............. 6,969,000
299,900 Kaufman & Broad Home Corp. .............. 8,565,894
319,400 Lowe's Cos., Inc. ....................... 10,759,787
240,100 Mattel, Inc. ............................ 8,613,588
198,700 Office Depot, Inc.* ..................... 4,967,500
88,500 Pier 1 Imports, Inc. .................... 818,625
122,500 Ross Stores, Inc. ....................... 3,981,250
333,600 Shaw Industries, Inc. ................... 5,796,300
411,000 TJX Cos., Inc. .......................... 7,783,312
130,000 Tommy Hilfiger Corp.* ................... 6,036,875
-------------
126,069,713
-------------
Finance - 20.37%
211,490 Bank One Corp. .......................... 10,336,574
83,900 BankAmerica Corp. ....................... 4,819,006
96,000 BankBoston Corp. ........................ 3,534,000
120,000 Bear Stearns Cos., Inc. ................. 4,282,500
126,000 Chase Manhattan Corp. ................... 7,158,375
33,250 Citigroup, Inc. ......................... 1,564,828
138,300 Fannie Mae .............................. 9,793,368
163,700 First Union Corp. ....................... 9,494,600
150,000 Marsh & McLennan Cos., Inc. ............. 8,325,000
106,100 MBIA, Inc. .............................. 6,485,363
481,800 MBNA Corp. .............................. 10,991,062
118,400 Mellon Bank Corp. ....................... 7,118,800
130,500 Merrill Lynch & Co., Inc. ............... 7,732,125
239,850 SLM Holding Corp. ....................... 9,608,991
70,000 UNUM Corp. .............................. 3,110,625
-------------
104,355,217
-------------
<CAPTION>
Value
Shares (Note 2)
------ --------
Technology - 19.69%
242,900 Altera Corp.* ........................... $ 10,110,713
141,400 Applied Materials, Inc.* ................ 4,904,812
93,600 Boston Scientific Corp.* ................ 5,095,350
128,000 Cadence Design Systems, Inc.*............ 2,736,000
148,725 Cisco Systems, Inc.* .................... 9,369,675
438,021 Compaq Computer Corp. ................... 13,852,415
228,000 Computer Associates
International, Inc....................... 8,977,500
247,700 EMC Corp.* .............................. 15,945,688
43,700 Intel Corp. ............................. 3,897,494
23,300 International Business
Machines Corp............................ 3,458,594
362,300 Sterling Commerce, Inc.* ................ 12,771,075
177,300 Tellabs, Inc.* .......................... 9,751,500
-------------
100,870,816
-------------
Consumer Staples - 14.24%
277,200 Abbott Laboratories ..................... 13,011,075
180,000 American Home Products Corp. ............ 8,775,000
139,400 Becton Dickinson & Co. .................. 5,872,225
124,600 Biomet, Inc. ............................ 4,228,612
50,000 Bristol-Myers Squibb Co. ................ 5,528,125
318,900 HEALTHSOUTH Corp.* ...................... 3,866,663
40,000 Merck & Co., Inc. ....................... 5,410,000
243,700 Rexall Sundown, Inc.* ................... 4,371,368
111,000 Safeway, Inc.* .......................... 5,307,188
84,600 Schering-Plough Corp. ................... 8,703,225
106,500 Wellpoint Health Networks, Inc.* ........ 7,841,062
-------------
72,914,543
-------------
Utilities - 7.87%
137,200 American Telephone &
Telegraph Corp. ......................... 8,540,700
139,600 Bell Atlantic Corp. ..................... 7,416,250
55,900 FPL Group, Inc. ......................... 3,497,243
52,000 GTE Corp. ............................... 3,051,750
111,900 Public Service Enterprise
Group, Inc. ............................. 4,252,200
168,800 SBC Communications, Inc. ................ 7,817,550
100,000 US WEST Communications Group............. 5,737,500
-------------
40,313,193
-------------
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Value Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
Capital Goods and Construction - 6.38%
147,300 Clayton Homes, Inc. ..................... $ 2,273,944
151,600 Ingersoll-Rand Co. ...................... 7,655,800
45,400 Johnson Controls, Inc. .................. 2,553,750
96,200 Lockheed Martin Corp. ................... 10,714,275
73,000 Precision Castparts Corp. ............... 3,212,000
48,500 Sundstrand Corp. ........................ 2,276,468
41,900 United Technologies Corp. ............... 3,990,975
-------------
32,677,212
-------------
Energy - 4.32%
326,000 Coastal Corp. ........................... 11,491,500
120,000 Enron Corp. ............................. 6,330,000
100,100 Phillips Petroleum Co. .................. 4,329,325
-------------
22,150,825
-------------
Transportation - 1.51%
115,200 AMR Corp.* .............................. 7,718,400
-------------
Total Common Stocks ..................... 507,069,919
(Cost $423,047,194) -------------
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (A) - 1.12%
Federal Home Loan
Mortgage Corporation - 1.12%
$ 5,748,000 5.42%, 11/02/98 ......................... $ 5,747,135
-------------
Total U.S. Agency Obligation ............ 5,747,135
(Cost $5,747,135) -------------
Total Investments - 100.11%................................ 512,817,054
(Cost $428,794,329) -------------
Net Other Assets and Liabilities - (0.11)% ................ (552,944)
-------------
Net Assets - 100.00% ...................................... $ 512,264,110
=============
</TABLE>
- ----------------------------
* Non-income producing security.
(A) Discount yield at time of purchase.
See Notes to Financial Statements.
25
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Strategic Equity Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------ --------
<S> <C> <C>
COMMON STOCKS - 95.23%
Technology - 22.68%
20,000 Altera Corp.* ........................... $ 832,500
30,000 Applied Materials, Inc.* ................ 1,040,625
59,000 Diebold, Inc. ........................... 1,840,063
33,000 Electronic Data Systems Co. ............. 1,342,687
20,000 EMC Corp.* .............................. 1,287,500
24,000 Hewlett Packard Co. ..................... 1,444,500
9,000 International Business Machines Corp. ... 1,335,938
52,000 Molex, Inc., Class A .................... 1,699,750
12,000 Perkin Elmer Corp. ...................... 1,011,750
21,000 Tellabs, Inc.* .......................... 1,155,000
40,000 Teradyne, Inc.* ......................... 1,300,000
11,000 Xerox Corp. ............................. 1,065,625
-------------
15,355,938
-------------
Consumer Cyclical - 13.94%
30,000 Circuit City Stores ..................... 1,085,625
177,000 CompUSA Inc.* ........................... 2,455,875
75,000 Cooper Tire & Rubber Co. ................ 1,246,875
13,000 Eastman Kodak Co. ....................... 1,007,500
52,000 Office Depot, Inc.* ..................... 1,300,000
40,000 Pep Boys-Manny Moe & Jack ............... 625,000
50,000 Toys 'R' Us, Inc.* ...................... 978,125
35,000 Wendy's International, Inc. ............. 735,000
-------------
9,434,000
-------------
Consumer Staples - 12.94%
33,000 Elan Corp. Plc, ADR* .................... 2,312,062
15,000 Forest Laboratories, Inc.* .............. 627,188
30,000 Genzyme Corp.* .......................... 1,261,875
18,000 Hannaford Brothers Co. .................. 788,625
20,000 Kimberly Clark Corp. .................... 965,000
6,000 Merck & Co., Inc. ....................... 811,500
31,000 Stryker Corp.* .......................... 1,300,062
16,000 United Healthcare Corp.* ................ 697,000
-------------
8,763,312
-------------
Energy - 11.79%
52,000 Baker Hughes, Inc. ...................... 1,147,250
50,000 BJ Services Co.* ........................ 1,021,875
23,000 Burlington Resources, Inc. .............. 947,312
30,000 Cooper Cameron Corp.* ................... 1,042,500
30,000 Halliburton Co. ......................... 1,078,125
20,000 National Fuel Gas Co. ................... 945,000
26,000 Noble Affiliates, Inc. .................. 851,500
18,000 Schlumberger, Ltd. ...................... 945,000
-------------
7,978,562
-------------
<CAPTION>
Value
Shares (Note 2)
------ --------
Finance - 10.95%
30,000 Bank One Corp. .......................... $ 1,466,250
23,000 Chase Manhattan Corp. ................... 1,306,687
22,000 Hartford Financial Services Group, Inc. . 1,168,750
20,000 MBIA, Inc. .............................. 1,222,500
60,000 Washington Mutual, Inc. ................. 2,246,250
-------------
7,410,437
-------------
Capital Goods and Construction - 8.40%
50,000 Case Corp. .............................. 1,100,000
27,000 Hubbell, Inc., Class B .................. 1,076,625
30,000 Raychem Corp. ........................... 916,875
65,000 US Filter Corp.* ........................ 1,377,188
27,000 Waste Management, Inc. .................. 1,218,375
-------------
5,689,063
-------------
Basic Materials - 8.29%
60,000 Crown Cork & Seal Co., Inc. ............. 1,912,500
23,000 Goodrich (B.F.) Co. ..................... 828,000
12,000 Minnesota Mining & Manufacturing Co. .... 960,000
34,000 Pall Corp. .............................. 858,500
34,000 Sigma Aldrich Corp. ..................... 1,050,813
-------------
5,609,813
-------------
Transportation - 4.31%
45,000 Burlington Northern Santa Fe Corp. ...... 1,389,374
72,000 Southwest Airlines Co. .................. 1,525,500
-------------
2,914,874
-------------
Utilities - 1.93%
21,000 American Telephone & Telegraph Corp. .... 1,307,250
-------------
Total Common Stocks ..................... 64,463,249
(Cost $59,597,271) -------------
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Strategic Equity Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (A) - 5.88%
Federal Home Loan
Mortgage Corporation - 5.88%
$3,980,000 5.42%, 11/02/98 ......................... $ 3,979,401
-------------
Total U.S. Agency Obligation ............ 3,979,401
(Cost $3,979,401) -------------
Total Investments - 101.11% ............................... 68,442,650
(Cost $63,576,672) -------------
Net Other Assets and Liabilities - (1.11)% ................ (748,054)
-------------
Net Assets - 100.00% ...................................... $ 67,694,596
=============
</TABLE>
- ----------------------------
* Non-income producing security.
(A) Discount yield at time of purchase.
ADR American Depositary Receipt
See Notes to Financial Statements.
27
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Growth Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
COMMON STOCKS - 94.44%
Technology - 23.12%
540,000 Applied Materials, Inc.* ................ $ 18,731,250
350,000 Automatic Data Processing, Inc. ......... 27,234,375
325,000 Cisco Systems, Inc.* .................... 20,475,000
647,200 Compaq Computer Corp. ................... 20,467,700
151,500 Dell Computer Corp.* .................... 9,942,188
287,000 Edwards (J.D) & Co.* .................... 9,399,250
400,000 EMC Corp.* .............................. 25,750,000
100,000 International Business
Machines Corp. .......................... 14,843,750
30,000 KLA-Tencor Corp.* ....................... 1,106,250
143,900 Lucent Technologies, Inc. ............... 11,538,981
325,000 Maxim Integrated Products, Inc.* ........ 11,598,438
300,000 Network Associates, Inc.* ............... 12,750,000
250,000 Nokia Corp., Class A, ADR ............... 23,265,625
30,000 Novellus Systems, Inc.* ................. 1,164,375
300,000 Tellabs, Inc.* .......................... 16,500,000
345,000 Teradyne, Inc.* ......................... 11,212,500
175,000 Texas Instruments, Inc. ................. 11,189,062
225,000 Xerox Corp. ............................. 21,796,875
-------------
268,965,619
-------------
Consumer Staples - 22.96%
500,000 Abbott Laboratories ..................... 23,468,750
300,000 American Home Products Corp. ............ 14,625,000
370,800 Becton Dickinson & Co. .................. 15,619,950
250,000 Bestfoods ............................... 13,625,000
190,000 Bristol-Myers Squibb Co. ................ 21,006,875
312,000 Elan Corp. Plc, ADR* .................... 21,859,500
259,500 Guidant Corp. ........................... 19,851,750
200,000 Johnson & Johnson ....................... 16,300,000
300,000 Lilly (Eli) & Co. ....................... 24,281,250
185,000 Merck & Co., Inc. ....................... 25,021,250
325,000 PepsiCo, Inc. ........................... 10,968,750
200,000 Pfizer, Inc. ............................ 21,462,500
175,000 Procter & Gamble Co. .................... 15,553,125
300,000 Warner-Lambert Co. ...................... 23,512,500
-------------
267,156,200
-------------
Consumer Cyclical - 13.15%
649,200 Capstar Broadcasting
Corp., Class A* ......................... 11,279,850
302,400 Clear Channel
Communications, Inc.* ................... 13,778,100
500,000 CVS Corp. ............................... 22,843,750
300,000 Dayton Hudson Corp. ..................... 12,712,500
375,000 Disney (Walt) Co. ....................... 10,101,563
300,000 Ford Motor Co. .......................... 16,275,000
400,000 Home Depot, Inc. ........................ 17,400,000
200,000 McDonald's Corp. ........................ 13,375,000
400,000 Service Corp. International ............. 14,250,000
300,000 Sinclair Broadcast Group, Inc.* ......... 3,900,000
900,000 TJX Cos., Inc. .......................... 17,043,750
-------------
152,959,513
-------------
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Finance - 12.57%
225,000 American International Group, Inc. ...... $ 19,181,250
330,000 Associates First Capital Corp. .......... 23,265,000
250,000 Chase Manhattan Corp. ................... 14,203,125
500,000 Citigroup, Inc. ......................... 23,531,250
500,000 Cornerstone Properties, Inc., REIT ...... 7,750,000
330,000 Fannie Mae .............................. 23,368,125
255,000 Heller Financial, Inc. .................. 6,120,000
300,000 Norwest Corp. ........................... 11,156,250
250,000 SunAmerica, Inc. ........................ 17,625,000
-------------
146,200,000
-------------
Capital Goods and Construction - 9.68%
60,000 AES Corp.* .............................. 2,456,250
250,000 AlliedSignal, Inc. ...................... 9,734,375
250,000 Boeing Co. .............................. 9,375,000
137,500 Deere & Co. ............................. 4,864,062
275,000 General Electric Co. .................... 24,062,500
250,000 Republic Services, Inc., Class A* ....... 5,468,750
380,000 Tyco International Ltd. ................. 23,536,250
551,398 US Filter Corp.* ........................ 11,682,745
130,000 United Technologies Corp. ............... 12,382,500
200,000 Waste Management, Inc. .................. 9,025,000
-------------
112,587,432
-------------
Energy - 7.52%
347,500 Amoco Corp. ............................. 19,503,438
200,000 BJ Services Co.* ........................ 4,087,500
317,000 Cooper Cameron Corp.* ................... 11,015,750
400,000 Halliburton Co. ......................... 14,375,000
200,000 Mobil Corp. ............................. 15,137,500
200,000 Schlumberger Ltd. ....................... 10,500,000
350,000 Transocean Offshore, Inc. ............... 12,928,125
-------------
87,547,313
-------------
Utilities - 4.58%
500,000 MCI WorldCom, Inc.* ..................... 27,625,000
650,000 Nextel Communications, Inc.* ............ 11,781,250
300,000 SBC Communications, Inc. ................ 13,893,750
-------------
53,300,000
-------------
Basic Materials - 0.86%
175,000 duPont (E.I.) deNemours & Co. ........... 10,062,500
-------------
Total Common Stocks ..................... 1,098,778,577
(Cost $745,899,988) -------------
CONVERTIBLE PREFERRED STOCKS - 1.94%
140,000 AES Trust I, Series A ................... 8,680,000
275,000 Loral Space and
Communications, Ltd.,
Series C, 6.00% (A) ..................... 13,853,125
-------------
Total Convertible Preferred Stocks ...... 22,533,125
(Cost $20,750,000) -------------
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Growth Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (B) - 3.61%
Federal Home Loan
Mortgage Corporation - 3.61%
$41,969,000 5.42%, 11/02/98 ......................... $ 41,962,681
--------------
Total U.S. Agency Obligation ............ 41,962,681
(Cost $41,962,681) --------------
Total Investments - 99.99% ................................ 1,163,274,383
(Cost $808,612,669) --------------
Net Other Assets and Liabilities - 0.01% .................. 125,364
--------------
Net Assets - 100.00% ...................................... $1,163,399,747
==============
</TABLE>
- -----------------------------------
* Non-income producing security.
(A) Securities exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. These securities may only be
resold, in transactions exempt from registration, to qualified
institutional buyers. At October 31, 1998, these securities amounted
to $13,853,125 or 1.19% of net assets.
(B) Discount yield at time of purchase.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
See Notes to Financial Statements.
29
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Cap Value Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
COMMON STOCKS - 84.37%
Technology - 18.05%
65,200 Analogic Corp. .......................... $ 2,493,900
55,600 Analysts International Corp. ............ 976,475
124,400 BancTec, Inc.* .......................... 1,539,450
50,000 Bell & Howell Co.* ...................... 1,325,000
160,200 Benchmark Electronics, Inc.* ............ 3,774,712
289,668 Boole & Babbage, Inc.* .................. 7,712,411
69,050 Burr-Brown Corp.* ....................... 1,281,741
78,700 Chyron Corp.* ........................... 157,400
165,000 Clare (C.P.) Corp.* ..................... 825,000
192,500 Computer Task Group, Inc. ............... 5,895,312
78,100 Condor Technology Solutions, Inc.* ...... 1,034,825
15,000 Hadco Corp.* ............................ 472,500
148,400 Hypercom Corp.* ......................... 1,409,800
164,800 Infinium Software, Inc.* ................ 1,112,400
81,100 Instron Corp. ........................... 1,257,050
73,800 Keithley Instruments, Inc. .............. 401,288
56,400 K-Tron International, Inc.* ............. 965,850
37,200 Landmark Systems Corp.* ................. 334,800
149,200 MacNeal-Schwendler Corp.* ............... 848,575
126,100 MapInfo Corp.* .......................... 1,560,487
119,500 Mentor Graphics Corp.* .................. 963,469
107,800 Methode Electronics, Inc., Class A ...... 1,657,425
47,685 Micro Focus Group Plc,
Sponsored ADR* .......................... 906,015
53,500 Nashua Corp.* ........................... 819,219
25,100 ONIX Systems, Inc.* ..................... 156,875
108,380 Optek Technology, Inc.* ................. 1,883,103
64,500 Peerless Group, Inc.* ................... 435,375
38,900 Perceptron, Inc.* ....................... 221,244
44,100 Performance Technologies, Inc.* ......... 551,250
49,700 Pericom Semiconductor Corp.* ............ 260,925
52,400 Plannar Systems, Inc.* .................. 471,600
41,800 Segue Software, Inc.* ................... 796,812
115,100 Sybase, Inc.* ........................... 683,406
35,800 Tegal Corp.* ............................ 96,213
133,600 Teltrend, Inc.* ......................... 1,736,800
40,000 Total Control Products, Inc.* ........... 345,000
4,900 Ultratech Stepper, Inc.* ................ 88,200
289,000 Unitrode Corp.* ......................... 3,630,562
50,100 Viasoft, Inc.* .......................... 306,863
69,900 Wood's (T.B.), Inc. ..................... 974,231
-------------
52,363,563
-------------
Consumer Cyclical - 17.91%
43,650 ADVO, Inc.* ............................. 1,110,347
130,000 American Homestar Corp.* ................ 2,128,750
32,100 American Skiing Corp.* .................. 286,894
38,200 Applebee's International, Inc. .......... 778,325
50,000 ASI Solutions, Inc.* .................... 281,250
70,050 Bassett Furniture Industries, Inc. ...... 1,593,637
61,300 Beazer Homes USA, Inc.* ................. 1,084,244
116,400 Children's Comprehensive Services* ...... 1,484,100
22,600 CN Biosciences, Inc.* ................... 593,250
63,100 Cooker Restaurant Corp. ................. 382,544
22,500 Culp, Inc. .............................. 163,125
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Consumer Cyclical (continued)
104,600 Eagle Hardware & Garden, Inc.* .......... $ 2,431,950
33,000 Engle Homes, Inc. ....................... 424,875
73,000 Execustay Corp.* ........................ 638,750
44,500 Filene's Basement Corp.* ................ 84,828
42,314 Fresh Foods, Inc.* ...................... 359,669
116,800 Friendly Ice Cream Corp.* ............... 737,300
47,400 Galoob Toys, Inc.* ...................... 568,800
22,600 Happy Kids, Inc.* ....................... 223,175
53,000 Houghton Mifflin Co. .................... 2,067,000
106,000 Infousa, Inc., Class A* ................. 397,500
62,000 Infousa, Inc., Class B* ................. 317,750
110,000 Iterim Services, Inc.* .................. 2,337,500
122,400 ITI Technologies, Inc.* ................. 3,534,300
111,500 Jones Intercable, Inc., Class A* ........ 3,128,969
82,800 K2, Inc. ................................ 910,800
49,800 Kroll-O'Gara Co.* ....................... 1,226,325
85,200 Lamalie Associates, Inc.* ............... 660,300
46,500 Newmark Homes Corp.* .................... 377,813
94,405 O'Charley's, Inc.* ...................... 1,132,860
95,400 Protection One, Inc. .................... 1,073,250
162,700 R & B, Inc.* ............................ 1,403,287
89,300 Rival Co. ............................... 619,519
57,800 Rocky Shoes & Boots, Inc.* .............. 390,150
49,100 Ruby Tuesday, Inc. ...................... 828,563
83,500 Ryan's Family Steak Houses, Inc. ........ 897,625
12,799 SEI Investments Co. ..................... 1,060,717
35,600 Signature Eyewear, Inc.* ................ 164,650
65,500 Spaghetti Warehouse, Inc.* .............. 450,313
8,300 Star Buffet, Inc.* ...................... 55,506
88,200 TCA Cable TV, Inc. ...................... 2,442,037
78,100 The York Group, Inc. .................... 829,813
20,000 Toll Brothers, Inc.* .................... 463,750
90,700 Toro Co. ................................ 2,006,737
165,900 Unifirst Corp. .......................... 4,614,094
157,450 Unitog Co. .............................. 2,834,100
89,900 Worldtex, Inc.* ......................... 382,075
-------------
51,963,116
-------------
Finance - 13.13%
70,000 American Annuity Group, Inc. ............ 1,610,000
60,620 Amerus Life Holdings, Inc., Class A ..... 1,462,457
10,100 Annuity & Life Re (Holdings), Ltd.* ..... 236,088
61,800 Brandywine Realty Trust, REIT ........... 1,104,675
16,000 Colorado Business Bankshares* ........... 202,000
86,800 Corporate Office
Properties Trust, Inc., REIT ............ 661,850
190,370 D & N Financial Corp. ................... 3,664,622
43,900 Equity One, Inc., REIT .................. 400,588
24,000 Executive Risk, Inc. .................... 1,140,000
26,100 First Alliance Corp.* ................... 137,025
50,700 FirstBank Puerto Rico* .................. 1,219,969
23,000 GBC Bancorp ............................. 612,375
32,667 Hanmi Bank* ............................. 459,380
63,700 Healthcare Financial
Partners, Inc., REIT(A)* ................ 6,370,000
39,850 Healthcare Realty Trust, Inc., REIT ..... 933,984
48,700 Highlands Insurance Group, Inc.* ........ 505,262
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Cap Value Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
Finance (continued)
57,400 Imperial Credit
Commercial Mortgage ..................... $ 480,725
77,500 Innkeepers USA Trust, REIT .............. 891,250
60,000 Intercargo Corp. ........................ 720,000
50,000 IRT Property Co., REIT .................. 512,500
12,200 Kansas City Life Insurance Co. .......... 1,018,700
25,000 LaSalle Re Holdings, Ltd. ............... 590,625
25,400 Life Financial Corp.* ................... 101,600
98,700 Matrix Capital Corp.* ................... 1,172,063
30,000 Ohio Casualty Corp. ..................... 1,132,500
21,000 Pacific Bank ............................ 840,000
8,000 Penn-America Group, Inc. ................ 75,500
91,500 PICO Holdings, Inc.* .................... 333,117
53,450 Poe & Brown, Inc. ....................... 2,067,847
77,500 Point West Capital Corp. ................ 232,500
9,900 Pointe Financial Corp.* ................. 100,237
28,200 Prime Group Realty Trust, REIT .......... 452,963
50,100 Reliance Bancorp, Inc. .................. 1,239,975
80,000 Selective Insurance Group, Inc. ......... 1,465,000
15,500 SL Green Realty Corp., REIT ............. 293,531
42,446 Southwest Securities Group, Inc. ........ 785,251
20,000 Symons International Group, Inc.* ....... 125,000
16,800 Terra Nova (Bermuda)
Holdings, Ltd., Class A ................. 466,200
21,700 Tower Realty Trust, Inc., REIT .......... 439,425
22,677 UMB Financial Corp. ..................... 1,038,890
47,000 Willis Lease Finance Corp.* ............. 793,125
-------------
38,088,799
-------------
Consumer Staples - 11.84%
74,100 Advanced Health Corp.* .................. 185,250
23,700 American Healthcorp, Inc.* .............. 234,037
2,184 Amsurg Corp., Class A* .................. 14,469
14,073 Amsurg Corp., Class B* .................. 86,197
102,250 Apple Orthodontix, Inc.* ................ 357,875
47,500 Barrett Business Services, Inc.* ........ 338,438
80,200 Bindley Western Industries, Inc. ........ 2,907,250
24,900 Bioanalytical Systems, Inc.* ............ 143,175
32,100 Capital Senior Living Corp.* ............ 377,175
18,240 Cordiant Communications
Group, ADR .............................. 177,840
87,400 CTB International Corp.* ................ 611,800
122,800 Datascope Corp.* ........................ 2,770,675
36,000 Gish Biomedical, Inc.* .................. 101,250
162,000 Health Management Systems, Inc.* ........ 1,113,750
55,900 Hologic, Inc.* .......................... 765,131
142,826 ICN Pharmaceuticals, Inc. ............... 3,338,558
67,100 Invacare Corp. .......................... 1,509,750
94,300 Lifecore Biomedical, Inc.* .............. 671,887
129,875 Minntech Corp. .......................... 1,396,156
136,733 Morrison Health Care, Inc. .............. 2,367,190
98,000 Northland Cranberries, Inc., Class A .... 1,065,750
58,000 Noven Pharmaceuticals, Inc. ............. 235,625
143,700 Paracelsus Healthcare Corp.* ............ 269,438
108,500 Performance Food Group Co.* ............. 2,631,125
47,689 Pilgrim's Pride Corp. ................... 1,099,828
59,100 PMR Corp.* .............................. 406,312
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Consumer Staples (continued)
126,825 Res-Care, Inc.* ......................... $ 2,806,003
105,921 Respironics, Inc.* ...................... 1,635,155
131,800 Richfood Holdings, Inc. ................. 2,339,450
18,240 Saatchi & Saatchi, ADR .................. 177,840
131,400 SOS Staffing Services, Inc.* ............ 1,108,687
196,500 Unilab Corp.* ........................... 380,719
45,600 Warner Chilcott Laboratories, ADR* ...... 387,600
40,500 Westaff, Inc.* .......................... 349,313
-------------
34,360,698
-------------
Capital Goods and Construction - 11.57%
30,900 ABC Rail Products Corp.* ................ 432,600
79,250 Advanced Technical Products, Inc.* ...... 634,000
22,600 Aeroflex, Inc.* ......................... 254,250
65,500 Analysis & Technology, Inc. ............. 1,072,562
22,000 Atchison Casting Corp.* ................. 210,375
133,900 Brown & Sharpe
Manufacturing Co., Class A* ............. 1,054,463
127,550 Chicago Bridge & Iron Co. N.V ........... 1,299,416
100,300 Comptek Research, Inc.* ................. 877,625
74,400 Cuno, Inc.* ............................. 1,134,600
97,100 Denison International Plc, ADR* ......... 1,432,225
158,100 Evans & Sutherland
Computer Corp.* ......................... 2,806,275
150,875 Farr Co.* ............................... 1,376,734
73,700 Giga-Tronics, Inc.* ..................... 203,827
55,500 Global Industrial Technologies, Inc.* ... 482,156
50,600 Key Technology, Inc.* ................... 360,525
75,100 Ladish Co., Inc.* ....................... 643,044
74,000 Layne Christensen, Inc.* ................ 730,750
24,000 Lindberg Co. ............................ 306,000
197,300 LSI Industries, Inc. .................... 4,044,650
144,400 NCI Building Systems, Inc.* ............. 3,122,650
15,000 Osmonics, Inc.* ......................... 134,062
77,600 Reliance Steel & Aluminum Co. ........... 2,400,750
94,450 Shaw Group, Inc.* ....................... 909,081
53,600 SunSource, Inc. ......................... 834,150
87,744 Terex Corp.* ............................ 1,908,432
52,400 TransTechnology Corp. ................... 1,103,675
37,600 Ultralife Batteries, Inc.* .............. 200,925
99,500 Valmont Industries, Inc. ................ 1,567,125
68,198 Varlen Corp. ............................ 2,037,415
-------------
33,574,342
-------------
Basic Materials - 4.61%
12,100 Barringer Technologies, Inc.* ........... 89,994
30,000 Centex Construction Products ............ 1,008,750
75,700 Dexter Corp. ............................ 2,214,225
52,600 Dunn Computer Corp.* .................... 151,225
50,000 Elcor Corp. ............................. 1,450,000
10,300 Fuller (H.B.) Co. ....................... 423,587
84,700 Grief Brothers Corp., Class A ........... 2,710,400
46,400 JPS Packaging Co.* ...................... 174,000
69,120 Meridian Resource Corp.* ................ 289,440
65,100 MPW Industrial
Services Group, Inc.* ................... 651,000
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Cap Value Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
Basic Materials (continued)
170,100 Northwest Pipe Co.* ..................... $ 2,881,069
86,650 Peak International, Ltd.* ............... 790,681
26,700 Steel of West Virginia, Inc.* ........... 158,531
10,900 Sybron Chemicals, Inc.* ................. 182,575
50,100 Transmation, Inc.* ...................... 212,925
-------------
13,388,402
-------------
Energy - 4.05%
108,700 Bellwether Exploration Co.* ............. 747,312
44,200 Berry Petroleum Co., Class A ............ 580,125
120,100 Callon Petroleum Co.* ................... 1,486,238
63,000 Cross Timbers Oil Co. ................... 905,625
2,600 Dawson Geophysical Co.* ................. 26,000
32,200 Devon Energy Corp. ...................... 1,090,775
54,800 Houston Exploration Co.* ................ 972,700
107,400 Key Production Co., Inc.* ............... 839,062
30,000 MarkWest Hydrocarbon, Inc.* ............. 296,250
40,000 Nuevo Energy Co.* ....................... 847,500
18,800 Oceaneering International, Inc.* ........ 270,250
14,200 Petroglyph Energy, Inc.* ................ 78,100
29,500 Pioneer Natural Resources Co. ........... 444,344
44,800 Pogo Producing Co. ...................... 672,000
53,700 Pride International, Inc.* .............. 624,263
95,618 Range Resources ......................... 543,827
102,000 Vintage Petroleum, Inc. ................. 1,326,000
-------------
11,750,371
-------------
Transportation - 1.96%
127,300 AirNet Systems, Inc.* ................... 1,790,156
40,000 Arnold Industries, Inc. ................. 510,000
38,875 Cannon Express, Inc.* ................... 228,391
53,200 Gulfmark Offshore, Inc.* ................ 964,250
24,000 Midwest Express Holdings, Inc.* ......... 759,000
85,200 RailTex, Inc.* .......................... 921,225
94,500 Simon Transportation Services, Inc.* .... 519,750
-------------
5,692,772
-------------
Utilities - 1.25%
41,050 Atmos Energy Corp. ...................... 1,218,672
56,950 Cascade Natural Gas Corp. ............... 943,234
20,000 Middlesex Water Co., Inc. ............... 445,000
43,300 Southwest Gas Corp. ..................... 1,025,669
-------------
3,632,575
-------------
Total Common Stocks...................... 244,814,638
(Cost $251,467,379) -------------
<CAPTION>
Value
Shares (Note 2)
- --------- --------
CORPORATE BOND - 0.12%
$ 369,900 MacNeal-Schwendler Corp.
Convertible Subordinated Debenture
7.88%, 08/18/04 ......................... $ 347,706
-------------
Total Corporate Bond .................... 347,706
(Cost $369,900) -------------
U.S. AGENCY OBLIGATION (B) - 16.44%
Federal Home Loan
Mortgage Corporation - 16.44%
47,706,000 5.42%, 11/02/98 ......................... 47,698,818
-------------
Total U.S. Agency Obligation ............ 47,698,818
(Cost $47,698,818) -------------
Total Investments - 100.93% ............................... 292,861,162
(Cost $299,536,097) -------------
Net Other Assets and Liabilities - (0.93)% ................ (2,696,047)
-------------
Net Assets - 100.00% ...................................... $ 290,165,115
=============
</TABLE>
- ------------------------
* Non-income producing security.
(A) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. This security may only be resold,
in a transaction exempt from registration, to qualified institutional
buyers. At October 31, 1998 this security amounted to $6,370,000 or
2.20% of net assets.
(B) Discount yield at time of purchase.
REIT Real Estate Investment Trust
ADR American Depositary Receipt
See Notes to Financial Statements.
32
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Company Equity Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
COMMON STOCKS - 100.09%
Technology - 36.83%
54,280 Acxiom Corp.* ........................... $ 1,363,785
148,600 Advanced Fibre Communication* ........... 1,439,562
89,300 Applied Mirco Circuits Corp.* ........... 2,143,200
111,700 Ardent Software, Inc.* .................. 1,675,500
91,200 Aseco Corp. ............................. 131,100
168,432 Aspen Technology, Inc.* ................. 2,358,048
59,400 Axent Technologies* ..................... 1,492,425
36,200 Best Software, Inc.* .................... 886,900
53,800 BISYS Group, Inc.* ...................... 2,353,750
59,400 Cambridge Technology Partners, Inc.* .... 1,314,225
68,200 Concord Communications, Inc.* ........... 2,531,925
173,600 Condor Technology Solutions ............. 2,300,200
96,366 Cree Research, Inc. ..................... 2,433,242
274,750 Daou Systems, Inc. ...................... 1,253,547
126,600 Deltek Systems, Inc. .................... 2,262,975
74,300 FactSet Research Systems, Inc. .......... 2,229,000
86,300 Forrester Research, Inc.* ............... 2,783,175
117,400 Geotel Communications Corp.* ............ 3,052,400
129,700 Global Imaging Systems, Inc.* ........... 1,637,462
101,300 Great Plains Software, Inc. ............. 3,722,775
220,200 HTE, Inc.* .............................. 2,229,525
62,900 Hyperion Solutions Corp.* ............... 1,887,000
108,400 ICG Communications, Inc.* ............... 2,242,525
103,100 IDT Corp.* .............................. 1,714,038
268,592 Information Advantage* .................. 1,594,768
139,225 Information Management Resources, Inc.* . 3,271,787
95,592 Inso Corp.* ............................. 1,828,197
138,250 International Telecommunication
Data Systems, Inc.* ..................... 3,300,719
152,400 JDA Software Group, Inc.* ............... 1,447,800
155,400 Made2Manage Systems, Inc.* .............. 1,252,913
139,600 Mecon, Inc.* ............................ 907,400
158,700 Melita International Corp.* ............. 1,904,400
135,150 META Group, Inc.* ....................... 3,243,600
56,500 Metro Information Services, Inc.* ....... 1,341,875
140,800 Norstan, Inc.* .......................... 2,411,200
160,200 Ortel Corp.* ............................ 2,162,700
193,500 Pervasive Software, Inc.* ............... 1,862,437
629,800 Phonetel Technologies, Inc.* ............ 78,725
51,200 PMC Sierra, Inc.* ....................... 2,297,600
59,600 Probusiness Services, Inc.* ............. 2,179,125
205,200 Renaissance Worldwide, Inc.* ............ 1,936,575
117,700 Seamed Corp.* ........................... 1,515,388
130,400 Secure Computing Corp.* ................. 1,581,100
116,400 SIPEX Corp. ............................. 3,230,100
158,750 SmarTalk TeleServices, Inc.* ............ 922,734
185,100 SPR, Inc.* .............................. 3,331,800
71,245 SPSS, Inc.* ............................. 1,362,561
63,800 Star Telecommunications, Inc.* .......... 837,375
140,600 Tekelec* ................................ 2,522,012
119,100 Teletech Holdings* ...................... 1,176,113
180,700 Tier Technologies, Inc.* ................ 2,349,100
133,500 Timberline Software Corp. ............... 2,528,156
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Technology (continued)
107,900 Tollgrade Communications, Inc.* ......... $ 2,158,000
13,780 Total Control Products, Inc.* ........... 118,852
120,200 TSI International Software, Ltd.* ....... 3,771,275
142,700 Unitrode Corp.* ......................... 1,792,669
65,500 Visio Corp.* ............................ 1,743,938
59,400 Vitesse Semiconductor Corp.* ............ 1,915,650
262,000 Whittman-Hart, Inc.* .................... 5,207,250
64,900 World Access, Inc.* ..................... 1,387,237
143,550 YieldUP International Corp.* ............ 94,205
198,700 Zygo Corp.* ............................. 1,937,325
-------------
121,942,945
-------------
Consumer Cyclical - 23.17%
166,728 ABR Information Services, Inc.* ......... 3,146,991
64,300 Action Performance* ..................... 1,920,963
66,700 Ambassadors International, Inc.* ........ 975,487
63,800 Applied Graphics Technologies* .......... 761,613
122,500 ASI Solutions, Inc.* .................... 689,062
123,400 Bally's Total Fitness Corp.* ............ 2,329,175
35,700 Barbeques Galore, Ltd., ADR* ............ 148,378
253,300 Brass Eagle, Inc.* ...................... 3,134,588
65,000 Carey International, Inc.* .............. 1,161,875
65,200 Carriage Services, Inc.* ................ 1,524,050
65,000 CEC Entertainment, Inc.* ................ 1,836,250
76,700 Central Garden & Pet* ................... 1,514,825
63,300 Cost Plus, Inc.* ........................ 1,899,000
120,925 Data Processing Resources Corp.* ........ 2,766,159
100,300 Dura Automotive Systems, Inc.* .......... 2,394,663
39,300 Family Golf Centers, Inc.* .............. 827,756
270,520 First Years, Inc. ....................... 4,260,690
199,000 Funco, Inc. ............................. 2,935,250
119,100 Goody's Family Clothing, Inc.* .......... 1,272,881
64,300 Guitar Center, Inc.* .................... 1,101,137
143,200 Jones Inter Cable, Inc., Class A* ....... 4,018,550
197,300 Just For Feet, Inc. ..................... 3,341,769
114,900 Keystone Automotive
Industries, Inc. ........................ 2,147,194
75,900 Kroll-O'Gara Co.* ....................... 1,869,038
123,100 Lifeline Systems, Inc.* ................. 3,462,187
179,969 Lo-Jack Corp. ........................... 1,979,659
97,500 Market Facts, Inc.* ..................... 2,279,063
63,800 Metamor Worldwide, Inc.* ................ 1,638,862
59,600 Osh Kosh B'Gosh, Class A ................ 1,244,150
392,100 Players International, Inc.* ............ 1,690,931
84,770 Pre-Paid Legal Services, Inc.* .......... 2,029,182
210,100 Silverleaf Resorts, Inc.* ............... 2,481,806
177,200 Source Information
Management Co.* ......................... 1,007,825
183,350 Stein Mart, Inc.* ....................... 1,443,881
99,500 Steiner Leisure* ........................ 2,425,312
79,400 Travel Services International, Inc.* .... 1,607,850
100,200 Travis Boats & Motors, Inc.* ............ 1,647,038
161,225 West Marine, Inc.* ...................... 1,138,652
107,600 Wilmar Industries ....................... 2,663,100
-------------
76,716,842
-------------
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Company Equity Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
Consumer Staples - 20.41%
33,400 Access Health, Inc.* .................... $ 1,198,225
59,600 Alpharma, Inc., Class A ................. 1,650,175
119,900 Anesta Corp. ............................ 2,000,831
64,300 Boron Lepore & Associates, Inc.* ........ 1,736,100
122,704 Casey's General Stores, Inc. ............ 1,717,856
126,650 Cytyc Corp.* ............................ 2,121,388
64,300 Education Management Corp.* ............. 2,363,025
194,900 FirstService Corp.* ..................... 2,271,803
134,700 Geltex Pharmaceuticals, Inc.* ........... 3,367,500
24,620 G & K Services, Inc., Class A ........... 1,126,365
64,300 Ha-Lo Industries* ....................... 1,816,475
63,450 Hanger Orthopedic Group, Inc.* .......... 1,253,137
159,525 King Pharmaceuticals, Inc.* ............. 2,482,608
112,700 Natrol, Inc.* ........................... 1,296,050
96,700 Natural Alternatives International* ..... 1,269,188
133,450 Nature's Sunshine Products, Inc. ........ 2,118,519
95,800 NFO Worldwide, Inc.* .................... 898,125
65,000 NCS Healthcare Inc., Class A* ........... 1,145,625
121,312 On Assignment, Inc.* .................... 4,124,608
94,400 Osteotech, Inc.* ........................ 2,377,700
53,800 Parexel International Corp.* ............ 1,186,962
69,225 Patterson Dental Co.* ................... 2,855,531
80,900 Pediatrix Medical Group, Inc.* .......... 3,771,963
207,900 Pharmerica, Inc.* ....................... 701,662
101,500 Physicians Reliance Network* ............ 1,129,187
323,600 Physicians Specialty Corp.* ............. 2,305,650
71,850 Province Healthcare Co.* ................ 1,877,081
85,850 Renal Care Group, Inc.* ................. 2,500,381
89,300 Rexall Sundown, Inc.* ................... 1,601,819
168,164 Romac International, Inc.* .............. 2,942,870
213,550 Sheridan Healthcare, Inc.* .............. 1,521,544
63,800 Staffmark, Inc.* ........................ 1,120,488
59,600 Twinlab Corp.* .......................... 1,322,375
197,000 Weider Nutrition International, Inc. .... 972,687
47,500 Whole Foods Market, Inc.* ............... 1,902,969
34,050 Xomed Surgical Products, Inc.* .......... 1,530,122
-------------
67,578,594
-------------
Capital Goods and Construction - 9.28%
59,400 AAR Corp. ............................... 1,373,625
75,600 Advanced Lighting
Technologies, Inc.* ..................... 614,250
99,236 AFC Cable Systems, Inc. ................. 2,443,687
64,300 Astec Industries, Inc.* ................. 3,295,375
55,300 Aviation Sales Co.* ..................... 1,838,725
63,800 Comfort Systems USA, Inc.* .............. 1,212,200
105,275 Cuno, Inc.* ............................. 1,605,444
124,000 Group Maintenance
American Corp.* ......................... 1,604,250
70,900 Lindberg ................................ 903,975
115,400 MSC Industrial Direct, Inc., Class A* ... 2,452,250
97,000 Motivepower Industries, Inc.* ........... 2,467,437
159,500 Newpark Resources, Inc.* ................ 1,505,281
110,650 Omniquip International, Inc. ............ 1,479,944
284,110 PCD, Inc.* .............................. 3,622,403
132,100 Recycling Industries, Inc.* ............. 247,687
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Capital Goods
and Construction (continued)
9,200 Shaw Group, Inc.* ....................... $ 88,550
63,400 Superior Services, Inc.* ................ 1,331,400
119,100 Tower Automotive* ....................... 2,649,975
-------------
30,736,458
-------------
Transportation - 3.18%
72,300 AirNet Systems, Inc.* ................... 1,016,719
28,750 Alaska Air Group, Inc.* ................. 1,033,203
245,025 Dynamex, Inc.* .......................... 1,699,861
63,800 Eagle USA Airfreight, Inc.* ............. 817,438
64,400 Expeditors International of
Washington, Inc. ........................ 2,181,550
60,087 Midwest Express Holdings* ............... 1,900,251
130,100 US Express Enterprises* ................. 1,886,450
-------------
10,535,472
-------------
Finance - 2.34%
71,800 Enhance Financial Services Group ........ 1,763,587
54 Horizon Group
Properties, Inc., REIT* ................. 189
27,900 Policy Management Systems Co.* .......... 1,267,706
105,200 Prime Retail, Inc., REIT ................ 1,019,125
79,600 Riggs National Corp. .................... 1,920,350
251,000 Towne Services, Inc.* ................... 1,757,000
-------------
7,727,957
-------------
Energy - 2.40%
143,000 Abraxas Petroleum Corp.* ................ 831,188
132,700 Cabot Oil & Gas Corp. ................... 2,255,900
253,750 Coho Energy, Inc.* ...................... 1,141,875
149,167 Magin Energy, Inc.* ..................... 337,475
98,600 Nuevo Energy Co.* ....................... 2,089,087
110,583 Pride International, Inc.* .............. 1,285,527
-------------
7,941,052
-------------
Utilities - 1.51%
16,200 Architel Systems Corp.* ................. 153,900
120,500 Davel Communication Corp. ............... 1,596,625
195,100 Skytel Communications, Inc.* ............ 3,231,344
-------------
4,981,869
-------------
Basic Materials - 0.97%
94,500 Millipore Corp. ......................... 2,327,063
200,400 U.S. Home & Garden, Inc.* ............... 889,275
-------------
3,216,338
-------------
Total Common Stocks ..................... 331,377,527
(Cost $339,845,113) -------------
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Company Equity Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (A) - 0.46%
Federal Home Loan
Mortgage Corporation - 0.46%
$ 1,521,000 5.42%, 11/02/98 ......................... $ 1,520,771
-------------
Total U.S. Agency Obligation ............ 1,520,771
(Cost $1,520,771) -------------
Total Investments - 100.55% ............................... 332,898,298
(Cost $341,365,884) -------------
Net Other Assets and Liabilities - (0.55)% ................ (1,826,881)
-------------
Net Assets - 100.00% ...................................... $ 331,071,417
=============
</TABLE>
- --------------------------
* Non-income producing security.
(A) Discount yield at time of purchase.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
See Notes to Financial Statements.
35
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
International Equity Fund
PORTFOLIO OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
COMMON STOCKS - 97.18%
Australia - 1.61%
760,884 Australia & New Zealand
Banking Group Ltd. ...................... $ 4,354,438
621,455 Coca-Cola Amatil Ltd. ................... 2,295,986
-------------
6,650,424
-------------
Belguim - 1.50%
88,700 KBC Bankassurance Holding NV ............ 6,187,467
-------------
Canada - 1.82%
221,100 BCE, Inc. ............................... 7,494,187
-------------
France - 13.39%
47,294 Groupe Danone ........................... 12,506,280
174,419 Renault SA .............................. 7,456,889
104,474 Schneider SA ............................ 6,202,391
79,630 Suez Lyonnaise .......................... 14,262,646
78,967 Thomson CSF ............................. 2,743,490
80,041 Valeo SA ................................ 6,930,393
22,243 Vivendi ................................. 5,081,071
-------------
55,183,160
-------------
Germany - 3.37%
70,872 Daimler-Benz AG ......................... 5,497,104
85,230 Mannesmann AG ........................... 8,385,640
-------------
13,882,744
-------------
Hungary - 0.37%
46,270 Gedeon Richter, GDR ..................... 1,550,045
-------------
Hong Kong - 1.58%
676,000 Cheung Kong Ltd. ........................ 4,625,952
262,000 Hutchison Whampoa Ltd. .................. 1,877,469
-------------
6,503,421
-------------
Italy - 9.67%
4,184,163 Banco De Roma* .......................... 7,299,665
141,700 Banca Popolare di Bergamo ............... 2,895,630
1,674,869 Unicredito Italiano SPA ................. 8,990,665
1,026,881 Mediaset SPA ............................ 6,505,114
1,027,761 Olivetti SPA* ........................... 2,510,863
1,613,000 Telecom Italia SPA ...................... 11,659,530
-------------
39,861,467
-------------
<CAPTION>
Value
Shares (Note 2)
- --------- --------
Japan - 14.03%
196,000 Canon, Inc. ............................. $ 3,708,108
400,000 Denso Corp. ............................. 7,533,248
98,000 Ito-Yokado Co. Ltd. ..................... 5,717,718
295,000 Matsushita Electric
Industrial Co. Ltd. ..................... 4,330,716
107,000 Murata Manufacturing Co. Ltd. ........... 3,607,979
960 Nippon Telegraph &
Telephone Corp. ......................... 7,511,969
252,000 Nomura Securities Co. Ltd. .............. 1,902,703
245 NTT Mobile Communications ............... 8,849,850
64,000 Rohm Co. Ltd. ........................... 5,655,942
55,900 Sony Corp. .............................. 3,549,206
168,000 Takeda Chemical Industries .............. 5,463,063
-------------
57,830,502
-------------
Mexico - 1.92%
111,700 Grupo Televisa SA, GDR* ................. 3,029,863
92,778 Telefonos de Mexico S.A.,
Class L, ADR ............................ 4,899,838
-------------
7,929,701
-------------
Netherlands - 10.41%
162,700 Gucci Group ............................. 6,202,938
245,533 Koninklijke Ptt ......................... 9,540,876
71,105 Laurus NV ............................... 1,788,717
71,143 Philips Electronics ..................... 3,784,951
119,332 Royal Dutch Petroleum ................... 5,761,097
101,579 Vendex International* ................... 2,582,494
100,238 Vedior NV-CVA ........................... 2,553,766
309,239 VNU NV .................................. 10,692,236
-------------
42,907,075
-------------
New Zealand - 1.07%
927,422 Telecom Corp. of New Zealand ............ 1,807,308
633,465 Telecom Corp. of New Zealand Ltd. ....... 2,599,748
-------------
4,407,056
-------------
Phillipines - 0.27%
213,264 Metropolitan Bank & Trust Co. ........... 1,104,639
-------------
Portugal - 1.57%
136,437 Portugal Telecom SA ..................... 6,463,925
-------------
Singapore - 0.16%
106,000 Development Bank of Singapore ........... 664,332
-------------
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
International Equity Fund
PORTFOLIO OF INVESTMENTS (continued)
October 31, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------- --------
<S> <C> <C>
Spain - 4.74%
521,067 Corp Bancaria de Espana SA .............. $ 11,337,998
181,436 Telefonica de Espana SA ................. 8,192,055
-------------
19,530,053
-------------
Sweden - 2.71%
147,770 Hennes & Mauritz AB, Class B ............ 10,417,676
72,920 Skandinaviska Enskilda Banken ........... 738,407
-------------
11,156,083
-------------
Switzerland - 5.21%
2,099 Nestle SA ............................... 4,460,026
4,031 Novartis AG, Registered ................. 7,256,633
838 Roche Holdings AG ....................... 9,768,629
-------------
21,485,288
-------------
United Kingdom - 21.78%
343,431 Allied Zurich, Plc* ..................... 4,093,557
343,431 B.A.T. Industries, Plc* ................. 3,101,789
1,712,720 British Aerospace, Plc .................. 12,744,989
808,530 British Sky Broadcasting, Plc ........... 6,591,836
926,084 Diageo, Plc ............................. 9,999,802
448,913 Glaxo Wellcome, Plc ..................... 13,948,306
465,400 Imperial Chemical Industries, Plc 4,180,011
2,136,154 LucasVarity ............................. 7,295,315
1 PowerGen, Plc ........................... 14
287,902 Railtrack Group, Plc .................... 7,735,725
863,879 Vodafone Group, Plc ..................... 11,569,756
1,322,829 Somerfield, Plc ......................... 8,537,081
-------------
89,798,181
-------------
Total Common Stocks ..................... 400,589,750
(Cost $341,217,902) -------------
<CAPTION>
Value
Par Value (Note 2)
- --------- --------
<S> <C> <C>
U.S. AGENCY OBLIGATION (A) - 3.21%
Federal Home Loan
Mortgage Corporation - 3.21%
$13,235,000 5.42%, 11/02/98 ......................... $ 13,233,007
-------------
Total U.S. Agency Obligation ............ 13,233,007
(Cost $13,233,007) -------------
Total Investments - 100.39% ............................... 413,822,757
(Cost $354,450,909) -------------
Net Other Assets and Liabilities - (0.39)% ................ (1,589,754)
-------------
Net Assets - 100.00% ...................................... $ 412,233,003
=============
</TABLE>
- ------------------------
* Non-income producing security.
(A) Discount yield at time of purchase.
ADR American Depositary Receipt
GDR Global Depositary Receipt
FORWARD FOREIGN CURRENCY CONTRACTS SOLD:
<TABLE>
<CAPTION>
Unrealized
Currency Contract to Settlement Contract Appreciation
Value Deliver Dates At Value (Depreciation)
-------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C>
3,518,000,000 JPY 11/25/98 $30,295,381 $(5,618,918)
8,211,000 NZD 12/03/98 4,352,060 (230,138)
----------- -----------
$34,647,441 $(5,849,056)
=========== ===========
</TABLE>
- ------------------------
JPY Japanese Yen
NZD New Zealand Dollar
See Notes to Financial Statements.
37
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<CAPTION>
Asset Allocation Equity Income Growth and Income
Fund Fund Fund
---------------- ------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost .............................................. $510,219,963 $261,795,792 $461,595,370
Net unrealized appreciation (depreciation) on investments ........ 89,324,153 72,953,548 63,155,733
------------ ------------ ------------
Total investments at value ....................................... 599,544,116 334,749,340 524,751,103
Cash ............................................................... -- 2,404 126
Receivable for investments sold .................................... 11,449,384 -- --
Receivable for shares sold ......................................... 2,138,111 299,517 893,894
Interest and dividend receivable ................................... 3,977,474 664,613 402,990
Tax reclaim receivable ............................................. -- -- --
Deferred organizational expense (Note 2) ........................... -- -- --
Prepaid expenses ................................................... -- -- --
------------ ------------ ------------
Total Assets ..................................................... 617,109,085 335,715,874 526,048,113
------------ ------------ ------------
LIABILITIES:
Payable for open forward foreign currency contracts (Note 2) ....... -- -- --
Payable for investments purchased .................................. 12,440,229 -- 2,162,297
Payable to custodian ............................................... 3,330,765 -- --
Payable for shares repurchased ..................................... 659,741 131,159 2,084,629
Advisory fee payable (Note 3) ...................................... 364,219 205,171 296,491
Payable to Fleet affiliates (Note 3) ............................... 156,958 49,643 --
Payable to Administrator (Note 3) .................................. 90,659 52,512 59,388
Trustees' fees and expenses payable (Note 3) ....................... 5,671 3,931 3,371
Accrued expenses and other payables ................................ 20,538 55,858 56,103
------------ ------------ ------------
Total Liabilities ................................................ 17,068,780 498,274 4,662,279
------------ ------------ ------------
NET ASSETS ............................................................. $600,040,305 $335,217,600 $521,385,834
============ ============ ============
NET ASSETS consists of:
Par value (Note 5) ................................................. $ 35,403 $ 17,038 $ 35,036
Paid in capital in excess of par value ............................. 493,467,570 230,389,035 426,967,480
Undistributed (overdistributed) net investment income (loss) ....... 1,673,336 601,021 78,104
Accumulated net realized gain (loss) on investments sold and
written options .................................................. 15,539,843 31,256,958 31,149,481
Net unrealized appreciation (depreciation) of investments, written
options, foreign currency and forward foreign currency contracts . 89,324,153 72,953,548 63,155,733
------------ ------------ ------------
TOTAL NET ASSETS ....................................................... $600,040,305 $335,217,600 $521,385,834
============ ============ ============
Retail A Shares:
Net Assets ......................................................... $323,498,431 $207,850,435 $214,109,905
Shares of beneficial interest outstanding .......................... 19,085,603 10,569,343 14,401,818
NET ASSET VALUE and redemption price per share ..................... $ 16.95 $ 19.67 $ 14.87
Sales charge - 3.75% of offering price ............................. 0.66 0.77 0.58
------------ ------------ ------------
Maximum offering price per share ................................... $ 17.61 $ 20.44 $ 15.45
============ ============ ============
Retail B Shares:
Net Assets ......................................................... $ 57,876,192 N/A $ 53,215,788
Shares of beneficial interest outstanding .......................... 3,421,300 N/A 3,587,678
------------ ------------ ------------
NET ASSET VALUE and offering price per share* ...................... $ 16.92 N/A $ 14.83
============ ============ ============
Trust Shares:
Net Assets ......................................................... $218,665,682 $127,367,165 $254,060,141
Shares of beneficial interest outstanding .......................... 12,896,433 6,469,073 17,046,177
------------ ------------ ------------
NET ASSET VALUE, offering and redemption price per share............ $ 16.96 $ 19.69 $ 14.90
============ ============ ============
</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.
38
<PAGE>
<TABLE>
<CAPTION>
Equity Value Strategic Equity Equity Growth Small Cap Small Company International
Fund Fund Fund Value Fund Equity Fund Equity Fund
------------ ---------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$428,794,329 $63,576,672 $ 808,612,669 $299,536,097 $341,365,884 $354,450,909
84,022,725 4,865,978 354,661,714 (6,674,935) (8,467,586) 59,371,848
------------ ----------- -------------- ------------- ------------ ------------
512,817,054 68,442,650 1,163,274,383 292,861,162 332,898,298 413,822,757
14,717 1,921 6,500 -- 514 --
-- -- -- 402,131 1,172,710 3,512,125
484,549 73,878 1,268,852 1,063,716 835,217 3,143,778
578,644 23,690 1,030,118 61,355 45,403 381,533
-- -- -- -- -- 343,410
-- 14,747 -- -- -- --
-- 24,466 -- -- -- --
------------ ----------- -------------- ------------- ------------ ------------
513,894,964 68,581,352 1,165,579,853 294,388,364 334,952,142 421,203,603
------------ ----------- -------------- ------------- ------------ ------------
-- -- -- -- -- 5,849,056
752,000 770,269 9,281 2,708,003 1,491,818 2,488,482
-- -- -- 1,268 -- 66,981
372,587 42,439 1,190,418 1,340,755 2,002,727 271,377
297,877 27,702 678,874 68,493 165,591 213,235
97,144 2,694 122,131 27,025 67,306 60,846
80,455 5,878 128,220 49,717 60,523 18,996
5,819 113 13,037 2,997 4,694 1,250
24,972 37,661 38,145 24,991 88,066 377
------------ ----------- -------------- ------------- ------------ ------------
1,630,854 886,756 2,180,106 4,223,249 3,880,725 8,970,600
------------ ----------- -------------- ------------- ------------ ------------
$512,264,110 $67,694,596 $1,163,399,747 $ 290,165,115 $331,071,417 $412,233,003
============ =========== ============== ============= ============ ============
$ 31,048 $ 7,030 $ 47,498 $21,352 $ 23,918 $ 24,306
410,298,099 63,053,356 719,444,021 269,196,091 373,035,059 335,928,095
-- 8,943 -- 240,012 -- 9,022,053
17,912,238 (240,711) 89,246,514 27,382,595 (33,519,974) 13,737,474
84,022,725 4,865,978 354,661,714 (6,674,935) (8,467,586) 53,521,075
------------ ----------- -------------- ------------- ------------ ------------
$512,264,110 $67,694,596 $1,163,399,747 $ 290,165,115 $331,071,417 $412,233,003
============ =========== ============== ============= ============ ============
$234,729,786 $ 4,050,710 $ 312,951,175 $ 87,780,606 $ 95,831,047 $ 66,540,867
14,230,208 420,985 12,787,605 6,486,539 7,031,742 3,972,244
$ 16.50 $ 9.62 $ 24.47 $ 13.53 $ 13.63 $ 16.75
0.64 0.37 0.95 0.53 0.53 0.65
------------ ----------- -------------- ------------- ------------ ------------
$ 17.14 $ 9.99 $ 25.42 $ 14.06 $ 14.16 $ 17.40
============ =========== ============== ============= ============ ============
$ 23,102,812 $ 583,078 $ 34,692,617 N/A $ 12,565,162 N/A
1,404,985 60,681 1,441,549 N/A 938,531 N/A
------------ ----------- -------------- ------------- ------------ ------------
$ 16.44 $ 9.61 $ 24.07 N/A $ 13.39 N/A
============ =========== ============== ============= ============ ============
$254,431,512 $63,060,808 $ 815,755,955 $ 202,384,509 $222,675,208 $345,692,136
15,412,611 6,547,910 33,268,686 14,864,972 15,947,373 20,334,246
------------ ----------- -------------- ------------- ------------ ------------
$ 16.51 $ 9.63 $ 24.52 $ 13.61 $ 13.96 $ 17.00
============ =========== ============== ============= ============ ============
</TABLE>
39
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<CAPTION>
Asset Allocation Equity Income Growth and Income
Fund Fund Fund
---------------- ------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend (Note 2) ............................... $ 2,742,916 $ 5,919,202 $ 8,335,192
Interest (Note 2) ............................... 16,039,407 2,738,174 2,096,273
Less: net foreign taxes withheld (Note 2) ....... -- -- --
------------- ------------ ------------
Total investment income ...................... 18,782,323 8,657,376 10,431,465
------------- ------------ ------------
EXPENSES:
Investment advisory fee (Note 3)................. 3,743,922 2,457,188 3,852,449
Administration fee (Note 3)...................... 401,495 263,640 413,204
Custodian fee ................................... 28,371 16,104 41,661
Fund accounting fee (Note 3) .................... 89,951 62,674 75,413
Legal fee (Note 3) .............................. 19,563 14,017 21,331
Audit fee ....................................... 19,172 19,172 19,172
Transfer agent fee (Note 3) ..................... 814,708 279,360 838,571
12b-1 fee (Note 3)............................... 427,144 -- 431,812
Shareholder servicing fee (Note 3) .............. 763,611 599,940 472,627
Trustees' fees and expenses (Note 3) ............ 10,701 7,605 11,618
Amortization of organization cost (Note 2) ...... -- -- --
Amortization of prepaid expenses................. -- -- --
Reports to shareholders ......................... 151,088 98,469 159,849
Registration fee................................. 42,059 8,275 40,946
Insurance ....................................... 3,857 2,898 4,132
Miscellaneous ................................... 17,545 23,957 19,041
------------- ------------ ------------
Total expenses before reimbursement/waiver.... 6,533,187 3,853,299 6,401,826
------------- ------------ ------------
Less: reimbursement/waiver (Note 4) .......... -- -- (150,727)
------------- ------------ ------------
Total expenses net of reimbursement/waiver ... 6,533,187 3,853,299 6,251,099
------------- ------------ ------------
NET INVESTMENT INCOME (LOSS)......................... 12,249,136 4,804,077 4,180,366
------------- ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 & 6):
Net realized gain (loss) on investments sold .... 15,626,374 31,256,958 31,756,496
Net realized gain on written options............. -- -- --
Net realized gain on forward foreign currency
contracts and foreign currency ............... -- -- --
Net change in unrealized appreciation
(depreciation) on investments, written
options, foreign currency and
forward foreign currency contracts ........... 32,906,427 8,105,519 4,195,055
------------- ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS....................... 48,532,801 39,362,477 35,951,551
------------- ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ................ $ 60,781,937 $ 44,166,554 $ 40,131,917
============= ============ ============
</TABLE>
- -------------------------
(1) The Strategic Equity Fund commenced operations on March 4, 1998.
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
Equity Value Strategic Equity Equity Growth Small Cap Small Company International
Fund Fund (1) Fund Value Fund Equity Fund Equity Fund
------------ ---------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 6,516,463 $ 119,536 $ 11,553,947 $ 2,531,840 $ 579,103 $ 7,479,704
1,154,402 74,208 3,509,239 2,317,860 824,083 662,414
-- -- -- -- -- (1,032,027)
------------ ----------- -------------- ------------- ------------- ------------
7,670,865 193,744 15,063,186 4,849,700 1,403,186 7,110,091
------------ ----------- -------------- ------------- ------------- ------------
3,782,620 99,711 8,345,236 2,157,610 3,194,228 3,431,231
405,740 10,624 895,213 231,440 342,901 305,871
25,234 13,071 27,783 32,577 34,180 366,780
75,262 25,355 125,512 71,734 82,498 92,828
21,410 520 47,703 12,173 20,274 15,558
19,172 19,679 19,172 19,172 19,172 21,610
738,197 10,637 1,080,853 253,264 874,637 407,114
193,601 1,900 269,689 -- 142,917 --
667,247 4,356 841,650 250,077 343,948 191,712
11,641 246 25,893 6,636 10,954 8,467
-- 2,253 -- -- -- --
-- 7,534 -- -- -- --
164,938 1,731 228,526 85,286 140,464 71,689
34,836 13,988 47,940 24,803 37,594 17,913
4,331 107 9,777 2,285 3,983 3,202
19,181 483 42,826 10,863 18,405 14,096
------------ ----------- -------------- ------------- ------------- ------------
6,163,410 212,195 12,007,773 3,157,920 5,266,155 4,948,071
------------ ----------- -------------- ------------- ------------- ------------
-- (40,142) -- (115,022) (27,376) (950,363)
------------ ----------- -------------- ------------- ------------- ------------
6,163,410 172,053 12,007,773 3,042,898 5,238,779 3,997,708
------------ ----------- -------------- ------------- ------------- ------------
1,507,455 21,691 3,055,413 1,806,802 (3,835,593) 3,112,383
------------ ----------- -------------- ------------- ------------- ------------
18,062,600 (240,711) 89,513,054 27,382,595 (33,381,616) 13,739,754
62,607 -- -- -- -- --
-- -- -- -- -- 5,322,536
21,688,342 4,865,978 55,319,656 (70,528,722) (78,673,832) 21,492,799
------------ ----------- -------------- ------------- ------------- ------------
39,813,549 4,625,267 144,832,710 (43,146,127) (112,055,448) 40,555,089
------------ ----------- -------------- ------------- ------------- ------------
$ 41,321,004 $ 4,646,958 $ 147,888,123 $ (41,339,325) $(115,891,041) $ 43,667,472
============ =========== ============== ============= ============= ============
</TABLE>
41
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Allocation Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
NET ASSETS at beginning of the period ............................... $ 379,667,751 $ 244,011,978
-------------- --------------
Increase in Net Assets resulting from operations:
Net investment income ........................................... 12,249,136 8,414,727
Net realized gain on investments sold and written options ....... 15,626,374 28,959,256
Net change in unrealized appreciation on investments and written
options ....................................................... 32,906,427 19,025,147
-------------- --------------
Net increase in net assets resulting from operations ......... 60,781,937 56,399,130
-------------- --------------
Dividends to shareholders from:
Retail A Shares:
Net investment income ........................................... (6,075,376) (3,460,283)
Net realized gain on investments and written options ............ (13,560,204) (4,172,278)
-------------- --------------
Total Dividends .............................................. (19,635,580) (7,632,561)
-------------- --------------
Retail B Shares:
Net investment income ........................................... (791,253) (264,937)
Net realized gain on investments and written options ............ (2,342,924) (156,296)
-------------- --------------
Total Dividends............................................... (3,134,177) (421,233)
-------------- --------------
Trust Shares:
Net investment income ........................................... (5,157,025) (3,952,828)
Net realized gain on investments and written options ............ (13,004,072) (4,447,875)
-------------- --------------
Total Dividends............................................... (18,161,097) (8,400,703)
-------------- --------------
Total Dividends to shareholders............................... (40,930,854) (16,454,497)
-------------- --------------
Net increase from share transactions(1) ............................. 200,521,471 95,711,140
-------------- --------------
Net increase in net assets....................................... 220,372,554 135,655,773
-------------- --------------
NET ASSETS at end of the period (including line A)................... $ 600,040,305 $ 379,667,751
============== ==============
(A) Undistributed net investment income ............................. $ 1,673,336 $ 1,372,678
============== ==============
</TABLE>
- -------------------------
(1) For detail on share transactions by series, see Statements of
Changes in Net Assets - Capital Stock Activity on pages 48-49.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
Equity Income Fund Growth and Income Fund
--------------------------------- ----------------------------------
Years ended October 31, Years ended October 31,
--------------------------------- ----------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 288,780,499 $ 233,045,808 $ 423,715,404 $ 269,046,012
------------- ------------- ------------- -------------
4,804,077 4,996,322 4,180,366 4,623,605
31,256,958 24,383,465 31,756,496 71,281,727
8,105,519 25,153,634 4,195,055 12,928,084
------------- ------------- ------------- -------------
44,166,554 54,533,421 40,131,917 88,833,416
------------- ------------- ------------- -------------
(2,568,825) (2,509,541) (1,497,114) (1,420,690)
(14,397,057) (10,947,176) (24,191,677) (6,955,593)
------------- ------------- ------------- -------------
(16,965,882) (13,456,717) (25,688,791) (8,376,283)
------------- ------------- ------------- -------------
N/A N/A (88,866) (84,981)
N/A N/A (5,994,237) (514,691)
------------- ------------- ------------- -------------
N/A N/A (6,083,103) (599,672)
------------- ------------- ------------- -------------
(2,137,883) (2,407,552) (2,841,771) (3,399,485)
(9,987,624) (8,963,175) (41,422,903) (15,545,258)
------------- ------------- ------------- -------------
(12,125,507) (11,370,727) (44,264,674) (18,944,743)
------------- ------------- ------------- -------------
(29,091,389) (24,827,444) (76,036,568) (27,920,698)
------------- ------------- ------------- -------------
31,361,936 26,028,714 133,575,081 93,756,674
------------- ------------- ------------- -------------
46,437,101 55,734,691 97,670,430 154,669,392
------------- ------------- ------------- -------------
$ 335,217,600 $ 288,780,499 $ 521,385,834 $ 423,715,404
============= ============= ============= =============
$ 601,021 $ 505,696 $ 78,104 $ 325,489
============= ============= ============= =============
</TABLE>
43
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Equity Value Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
NET ASSETS at beginning of the period ................................ $ 439,131,322 $ 328,740,298
-------------- --------------
Increase in Net Assets resulting from operations:
Net investment income ............................................ 1,507,455 3,139,247
Net realized gain (loss) on investments sold and written options . 18,125,207 77,944,828
Net change in unrealized appreciation on investments and written
options ........................................................ 21,688,342 16,520,748
-------------- --------------
Net increase in net assets resulting from operations........... 41,321,004 97,604,823
-------------- --------------
Dividends to shareholders from:
Retail A Shares:
Net investment income ............................................ (476,968) (1,106,478)
Dividends in excess of net investment income ..................... -- --
Net realized gain on investments and written options ............. (32,768,243) (15,644,273)
-------------- --------------
Total Dividends................................................ (33,245,211) (16,750,751)
-------------- --------------
Retail B Shares:
Net investment income -- (4,176)
Net realized gain on investments and written options ............. (2,708,059) (266,616)
-------------- --------------
Total Dividends................................................ (2,708,059) (270,792)
-------------- --------------
Trust Shares:
Net investment income ............................................ (1,186,963) (2,305,587)
Dividends in excess of net investment income...................... -- --
Net realized gain on investments and written options.............. (42,454,539) (23,060,210)
-------------- --------------
Total Dividends................................................ (43,641,502) (25,365,797)
-------------- --------------
Total Dividends to shareholders................................ (79,594,772) (42,387,340)
-------------- --------------
Net increase from share transactions(1) .............................. 111,406,556 55,173,541
-------------- --------------
Net increase in net assets........................................ 73,132,788 110,391,024
-------------- --------------
NET ASSETS at end of the period (including line A).................... $ 512,264,110 $ 439,131,322
============== ==============
(A) Undistributed (overdistributed) net investment income (loss)...... $ -- $ 11,330
============== ==============
</TABLE>
- ---------------------------------
(1) For detail on share transactions by series, see Statements of Changes
in Net Assets - Capital Stock Activity on pages 50-51.
(A) Represents initial seed money.
* The Strategic Equity Fund commenced operations on March 4, 1998.
See Notes to Financial Statements.
44
<PAGE>
<TABLE>
<CAPTION>
Strategic Equity Fund Equity Growth Fund
--------------------- -----------------------------------------------
Period ended October 31, Years ended October 31,
- ------------------------- -----------------------------------------------
1998* 1998 1997
------------- ---------------- --------------
<S> <C> <C>
$ 30(A) $ 992,229,709 $ 727,214,473
------------- ---------------- --------------
21,691 3,055,413 5,354,689
(240,711) 89,513,054 152,556,524
4,865,978 55,319,656 83,141,716
------------- ---------------- --------------
4,646,958 147,888,123 241,052,929
------------- ---------------- --------------
(1,095) (289,751) (576,083)
-- (15,743) --
-- (35,424,489) (10,203,437)
------------- ---------------- --------------
(1,095) (35,729,983) (10,779,520)
------------- ---------------- --------------
-- -- --
-- (3,245,295) (297,157)
------------- ---------------- --------------
-- (3,245,295) (297,157)
------------- ---------------- --------------
(13,906) (3,238,930) (4,700,379)
-- (176,015) --
-- (113,959,378) (35,183,098)
------------- ---------------- --------------
(13,906) (117,374,323) (39,883,477)
------------- ---------------- --------------
(15,001) (156,349,601) (50,960,154)
------------- ---------------- --------------
63,062,609 179,631,516 74,922,461
------------- ---------------- --------------
67,694,566 171,170,038 265,015,236
------------- ---------------- --------------
$ 67,694,596 $ 1,163,399,747 $ 992,229,709
============= ================ ==============
$ 8,943 $ -- $ 473,268
============= ================ ==============
</TABLE>
45
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Small Cap Value Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
NET ASSETS at beginning of the period................................. $ 252,915,472 $ 171,743,742
-------------- --------------
Increase (Decrease) in Net Assets resulting from operations:
Net investment income (loss)...................................... 1,806,802 27,874
Net realized gain (loss) on investments sold...................... 27,382,595 38,132,709
Net realized gain on forward foreign currency
contracts and foreign currency................................. -- --
Net change in unrealized appreciation (depreciation) on
investments, foreign currency and forward foreign currency
contracts...................................................... (70,528,722) 34,941,572
-------------- --------------
Net increase (decrease) in net assets resulting from operations (41,339,325) 73,102,155
-------------- --------------
Dividends to shareholders from:
Retail A Shares:
Net investment income ............................................ (335,684) --
In excess of net investment income................................ -- --
Net realized gain on investments, forward foreign
currency contracts and foreign currency........................ (9,778,432) (4,993,083)
In excess of net realized gains on investments.................... -- --
-------------- --------------
Total Dividends................................................ (10,114,116) (4,993,083)
-------------- --------------
Retail B Shares:
Net realized gain on investments, forward foreign
currency contracts and foreign currency........................ N/A N/A
In excess of net realized gains on investments.................... N/A N/A
-------------- --------------
Total Dividends................................................ N/A N/A
-------------- --------------
Trust Shares:
Net investment income ............................................ (1,582,494) --
In excess of net investment income................................ -- --
Net realized gain on investments, forward foreign
currency contracts and foreign currency........................ (28,007,227) (20,583,646)
In excess of net realized gains on investments.................... -- --
-------------- --------------
Total Dividends................................................ (29,589,721) (20,583,646)
-------------- --------------
Total Dividends to shareholders................................ (39,703,837) (25,576,729)
-------------- --------------
Net increase from share transactions(1) .............................. 118,292,805 33,646,304
-------------- --------------
Net increase (decrease) in net assets............................. 37,249,643 81,171,730
-------------- --------------
NET ASSETS at end of the period (including line A).................... $ 290,165,115 $ 252,915,472
============== ==============
(A) Undistributed (overdistributed) net investment income (loss)...... $ 240,012 $ 374,156
============== ==============
</TABLE>
- ----------------------------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on pages 52-53.
See Notes to Financial Statements.
46
<PAGE>
<TABLE>
<CAPTION>
Small Company Equity Fund International Equity Fund
-------------------------------------------- --------------------------------------------
Years ended October 31, Years ended October 31,
-------------------------------------------- --------------------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 461,077,407 $ 289,749,249 $ 321,715,516 $ 207,704,676
-------------- -------------- -------------- --------------
(3,835,593) (2,866,390) 3,112,383 1,350,172
(33,381,616) 51,415,977 13,739,754 7,500,231
-- -- 5,322,536 1,589,424
(78,673,832) 21,261,937 21,492,799 26,058,877
-------------- -------------- -------------- --------------
(115,891,041) 69,811,524 43,667,472 36,498,704
-------------- -------------- -------------- --------------
-- -- (239,530) (451,614)
-- -- -- --
(13,856,463) (13,205,190) (1,235,651) (1,728,957)
(2,617) -- -- --
-------------- -------------- -------------- --------------
(13,859,080) (13,205,190) (1,475,181) (2,180,571)
-------------- -------------- -------------- --------------
(1,647,828) (511,664) N/A N/A
(312) -- N/A N/A
-------------- -------------- -------------- --------------
(1,648,140) (511,664) N/A N/A
-------------- -------------- -------------- --------------
-- -- (1,544,939) (2,613,586)
-- -- -- --
(33,024,373) (21,205,020) (6,265,777) (8,813,614)
(6,237) -- -- --
-------------- -------------- -------------- --------------
(33,030,610) (21,205,020) (7,810,716) (11,427,200)
-------------- -------------- -------------- --------------
(48,537,830) (34,921,874) (9,285,897) (13,607,771)
-------------- -------------- -------------- --------------
34,422,881 136,438,508 56,135,912 91,119,907
-------------- -------------- -------------- --------------
(130,005,990) 171,328,158 90,517,487 114,010,840
-------------- -------------- -------------- --------------
$ 331,071,417 $ 461,077,407 $ 412,233,003 $ 321,715,516
============== ============== ============== ==============
$ -- $ -- $ 9,022,053 $ 2,371,603
============== ============== ============== ==============
</TABLE>
47
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS -
Capital Stock Activity
<TABLE>
<CAPTION>
Asset Allocation Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold.............................................................. $ 165,898,714 $ 57,713,278
Issued to shareholders in reinvestment of dividends............... 19,205,127 7,455,587
Repurchased....................................................... (49,327,967) (22,927,516)
-------------- --------------
Net increase in shares outstanding................................ $ 135,775,874 $ 42,241,349
============== ==============
Retail B Shares:
Sold.............................................................. $ 28,201,780 $ 26,811,230
Issued to shareholders in reinvestment of dividends............... 3,057,363 406,160
Repurchased....................................................... (5,925,878) (2,154,383)
-------------- --------------
Net increase in shares outstanding................................ $ 25,333,265 $ 25,063,007
============== ==============
Trust Shares:
Sold.............................................................. $ 72,415,149 $ 61,687,598
Issued to shareholders in reinvestment of dividends............... 16,323,828 7,057,551
Repurchased....................................................... (49,326,645) (40,338,365)
-------------- --------------
Net increase in shares outstanding................................ $ 39,412,332 $ 28,406,784
============== ==============
SHARE ACTIVITY
Retail A Shares:
Sold.............................................................. 10,096,211 3,704,322
Issued to shareholders in reinvestment of dividends............... 1,234,122 503,522
Repurchased....................................................... (3,012,818) (1,486,276)
-------------- --------------
Net increase in shares outstanding................................ 8,317,515 2,721,568
============== ==============
Retail B Shares:
Sold.............................................................. 1,720,422 1,735,659
Issued to shareholders in reinvestment of dividends............... 197,145 26,813
Repurchased....................................................... (363,558) (140,353)
-------------- --------------
Net increase in shares outstanding................................ 1,554,009 1,622,119
============== ==============
Trust Shares:
Sold.............................................................. 4,431,090 4,054,008
Issued to shareholders in reinvestment of dividends............... 1,053,874 476,312
Repurchased....................................................... (3,019,092) (2,608,229)
-------------- --------------
Net increase in shares outstanding................................ 2,465,872 1,922,091
============== ==============
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
<TABLE>
<CAPTION>
Equity Income Fund Growth and Income Fund
-------------------------------------------- --------------------------------------------
Years ended October 31, Years ended October 31,
-------------------------------------------- --------------------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 47,393,968 $ 35,539,246 $ 99,093,005 $ 54,774,958
16,360,921 12,956,963 25,378,015 8,237,158
(33,988,418) (23,174,748) (38,410,144) (17,102,549)
-------------- -------------- -------------- --------------
$ 29,766,471 $ 25,321,461 $ 86,060,876 $ 45,909,567
============== ============== ============== ==============
N/A N/A $ 21,007,328 $ 28,282,666
N/A N/A 5,973,835 589,505
N/A N/A (5,571,374) (1,499,015)
-------------- -------------- -------------- --------------
N/A N/A $ 21,409,789 $ 27,373,156
============== ============== ============== ==============
$ 14,958,563 $ 15,795,464 $ 56,352,388 $ 88,184,425
6,743,274 6,452,967 41,712,836 17,190,899
(20,106,372) (21,541,178) (71,960,808) (84,901,373)
-------------- -------------- -------------- --------------
$ 1,595,465 $ 707,253 $ 26,104,416 $ 20,473,951
============== ============== ============== ==============
2,432,108 2,004,408 6,417,123 3,629,393
908,536 792,968 1,806,453 605,724
(1,764,920) (1,309,795) (2,556,615) (1,143,729)
-------------- -------------- -------------- --------------
1,575,724 1,487,581 5,666,961 3,091,388
============== ============== ============== ==============
N/A N/A 1,368,708 1,890,792
N/A N/A 425,584 43,421
N/A N/A (374,402) (97,779)
-------------- -------------- -------------- --------------
N/A N/A 1,419,890 1,836,434
============== ============== ============== ==============
780,277 894,132 3,666,013 6,029,540
376,283 399,074 2,916,670 1,268,797
(1,031,181) (1,217,787) (4,690,328) (5,677,998)
-------------- -------------- -------------- --------------
125,379 75,419 1,892,355 1,620,339
============== ============== ============== ==============
</TABLE>
49
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS -
Capital Stock Activity (continued)
<TABLE>
<CAPTION>
Equity Value Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold.............................................................. $ 71,563,855 $ 34,972,818
Issued to shareholders in reinvestment of dividends............... 32,705,099 16,568,831
Repurchased....................................................... (35,674,663) (23,738,345)
-------------- --------------
Net increase in shares outstanding................................ $ 68,594,291 $ 27,803,304
============== ==============
Retail B Shares:
Sold.............................................................. $ 9,284,286 $ 11,894,526
Issued to shareholders in reinvestment of dividends............... 2,694,779 267,372
Repurchased....................................................... (2,282,148) (609,174)
-------------- --------------
Net increase in shares outstanding................................ $ 9,696,917 $ 11,552,724
============== ==============
Trust Shares:
Sold.............................................................. $ 56,562,120 $ 66,639,995
Issued to shareholders in reinvestment of dividends............... 34,594,314 19,386,069
Repurchased....................................................... (58,041,086) (70,208,551)
-------------- --------------
Net increase in shares outstanding................................ $ 33,115,348 $ 15,817,513
============== ==============
SHARE ACTIVITY
Retail A Shares:
Sold.............................................................. 4,201,249 2,092,664
Issued to shareholders in reinvestment of dividends............... 2,147,298 1,097,361
Repurchased....................................................... (2,145,298) (1,432,364)
-------------- --------------
Net increase in shares outstanding................................ 4,203,249 1,757,661
============== ==============
Retail B Shares:
Sold.............................................................. 547,518 717,960
Issued to shareholders in reinvestment of dividends............... 176,860 17,751
Repurchased....................................................... (139,566) (35,314)
-------------- --------------
Net increase in shares outstanding................................ 584,812 700,397
============== ==============
Trust Shares:
Sold.............................................................. 3,384,178 4,120,116
Issued to shareholders in reinvestment of dividends............... 2,265,774 1,282,399
Repurchased....................................................... (3,499,469) (4,347,383)
-------------- --------------
Net increase in shares outstanding................................ 2,150,483 1,055,132
============== ==============
</TABLE>
- -------------------------
(1) The Strategic Equity Fund commenced operations on March 4, 1998.
See Notes to Financial Statements.
50
<PAGE>
<TABLE>
<CAPTION>
Strategic Equity Fund Equity Growth Fund
--------------------- -----------------------------------------------
Period ended October 31, Years ended October 31,
- ------------------------- -----------------------------------------------
1998(1) 1998 1997
------------- ---------------- --------------
<S> <C> <C>
$ 4,292,625 $ 98,981,024 $ 40,088,595
1,069 35,167,848 10,643,227
(220,560) (45,458,821) (26,731,145)
------------- ---------------- --------------
$ 4,073,134 $ 88,690,051 $ 24,000,677
============= ================ ==============
$ 597,208 $ 14,385,751 $ 14,432,259
-- 3,227,617 296,380
(17,158) (3,051,869) (1,016,169)
------------- ---------------- --------------
$ 580,050 $ 14,561,499 $ 13,712,470
============= ================ ==============
$ 58,395,708 $ 119,883,832 $ 164,574,450
13,717 93,593,644 27,032,380
-- (137,097,510) (154,397,516)
------------- ---------------- --------------
$ 58,409,425 $ 76,379,966 $ 37,209,314
============= ================ ==============
445,623 4,078,424 1,782,044
112 1,625,130 523,825
(24,750) (1,917,325) (1,197,990)
------------- ---------------- --------------
420,985 3,786,229 1,107,879
============= ================ ==============
62,555 603,613 649,862
-- 150,964 14,753
(1,874) (130,378) (44,450)
------------- ---------------- --------------
60,681 624,199 620,165
============= ================ ==============
6,546,472 5,054,546 7,599,518
1,438 4,313,303 1,322,142
-- (5,715,179) (6,885,796)
------------- ---------------- --------------
6,547,910 3,652,670 2,035,864
============= ================ ==============
</TABLE>
51
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
STATEMENTS OF CHANGES IN NET ASSETS -
Capital Stock Activity (continued)
<TABLE>
<CAPTION>
Small Cap Value Fund
---------------------------------
Years ended October 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold.............................................................. $ 106,572,187 $ 31,357,694
Issued to shareholders in reinvestment of dividends............... 10,065,718 4,980,153
Repurchased....................................................... (69,195,926) (18,434,665)
-------------- --------------
Net increase in shares outstanding................................ $ 47,441,979 $ 17,903,182
============== ==============
Retail B Shares:
Sold.............................................................. N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A
Repurchased....................................................... N/A N/A
-------------- --------------
Net increase in shares outstanding................................ N/A N/A
============== ==============
Trust Shares:
Sold.............................................................. $ 74,813,946 $ 59,290,339
Issued to shareholders in reinvestment of dividends............... 25,163,148 20,272,927
Repurchased....................................................... (29,126,268) (63,820,144)
-------------- --------------
Net increase in shares outstanding................................ $ 70,850,826 $ 15,743,122
============== ==============
SHARE ACTIVITY
Retail A Shares:
Sold ............................................................. 6,791,402 1,881,873
Issued to shareholders in reinvestment of dividends............... 666,385 368,084
Repurchased....................................................... (4,451,699) (1,101,834)
-------------- --------------
Net increase in shares outstanding................................ 3,006,088 1,148,123
============== ==============
Retail B Shares:
Sold.............................................................. N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A
Repurchased....................................................... N/A N/A
-------------- --------------
Net increase in shares outstanding................................ N/A N/A
============== ==============
Trust Shares:
Sold ............................................................. 4,874,052 3,798,315
Issued to shareholders in reinvestment of dividends............... 1,629,237 1,496,157
Repurchased....................................................... (1,941,937) (4,295,147)
-------------- --------------
Net increase in shares outstanding................................ 4,561,352 999,325
============== ==============
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
<TABLE>
<CAPTION>
Small Company Equity Fund International Equity Fund
-------------------------------------------- --------------------------------------------
Years ended October 31, Years ended October 31,
-------------------------------------------- --------------------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 512,095,154 $ 375,986,702 $ 238,332,225 $ 82,857,874
13,430,846 12,695,841 1,448,658 2,141,590
(522,137,062) (372,674,895) (236,467,330) (67,026,314)
-------------- -------------- -------------- --------------
$ 3,388,938 $ 16,007,648 $ 3,313,553 $ 17,973,150
============== ============== ============== ==============
$ 7,810,194 $ 10,578,874 N/A N/A
1,613,677 507,890 N/A N/A
(5,481,887) (1,427,627) N/A N/A
-------------- -------------- -------------- --------------
$ 3,941,984 $ 9,659,137 N/A N/A
============== ============== ============== ==============
$ 277,438,222 $ 286,798,732 $ 248,673,207 185,357,231
24,548,356 14,295,814 4,418,249 6,098,028
(274,894,619) (190,322,823) (200,269,097) (118,308,502)
-------------- -------------- -------------- --------------
$ 27,091,959 $ 110,771,723 $ 52,822,359 $ 73,146,757
============== ============== ============== ==============
29,780,474 19,924,624 13,783,137 5,189,678
787,731 724,649 99,496 159,107
(30,011,680) (19,741,525) (13,638,723) (4,142,407)
-------------- -------------- -------------- --------------
556,525 907,748 243,910 1,206,378
============== ============== ============== ==============
458,341 572,164 N/A N/A
95,825 29,089 N/A N/A
(326,209) (74,427) N/A N/A
-------------- -------------- -------------- --------------
227,957 526,826 N/A N/A
============== ============== ============== ==============
15,624,925 15,273,312 14,546,109 12,280,035
1,410,015 804,039 300,561 450,372
(15,661,716) (10,166,105) (11,806,941) (7,749,015)
-------------- -------------- -------------- --------------
1,373,224 5,911,246 3,039,729 4,981,392
============== ============== ============== ==============
</TABLE>
53
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Asset Allocation Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $ 16.46 $ 14.52 $ 12.82 $ 10.67 $ 11.15
---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (B)..................... 0.38 0.40 0.30 0.30 0.27
Net realized and unrealized gain (loss) on
investments ................................ 1.72 2.43 1.83 2.16 (0.49)
---------- ---------- ---------- ---------- ----------
Total from Investment Operations: .......... 2.10 2.83 2.13 2.46 (0.22)
---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net investment income ......... (0.40) (0.38) (0.30) (0.31) (0.26)
Dividends from net realized capital gains .... (1.21) (0.51) (0.13) -- --
---------- ---------- ---------- ---------- ----------
Total Dividends: ........................... (1.61) (0.89) (0.43) (0.31) (0.26)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value........ 0.49 1.94 1.70 2.15 (0.48)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ................... $ 16.95 $ 16.46 $ 14.52 $ 12.82 $ 10.67
========== ========== ========== ========== ==========
Total Return (A).................................. 13.85% 20.23% 16.92% 23.42% (2.02)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................ $ 323,498 $ 177,239 $ 116,852 $ 76,368 $ 73,574
Ratios to average net assets:
Net investment income including
reimbursement/waiver ....................... 2.43% 2.66% 2.29% 2.52% 2.66%
Operating expenses including
reimbursement/waiver ....................... 1.33% 1.37% 1.42% 1.48% 1.21%
Operating expenses excluding
reimbursement/waiver ....................... 1.33% 1.37% 1.42% 1.50% 1.22%
Portfolio Turnover Rate .......................... 108% 58% 48% 41% 23%
</TABLE>
- -------------------------------
* Annualized
** Not Annualized
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B shares.
(B) Net investment income per share before reimbursement/waiver of fees by
the Investment Advisor and/or Administrator for Retail A Shares for the
years ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.38, $0.40,
$0.30, $0.30 and $0.27, respectively. Net investment income per share
before reimbursement/waiver of fees by the Investment Advisor and/or
Administrator for Trust Shares for the years ended October 31, 1998, 1997,
1996, 1995 and 1994 were $0.42, $0.43, $0.33, $0.32 and $0.28,
respectively. Net investment income per share before reimbursement/waiver
of fees by the Investment Advisor and/or Administrator for Retail B Shares
for the years ended October 31, 1998 and 1997 and the period ended October
31, 1996 were $0.29, $0.28 and $0.12, respectively.
See Notes to Financial Statements.
54
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Years ended October 31, Years ended October 31, Period ended
--------------------------------------------------------------------- ------------------------ October 31,
1998 1997 1996 1995 1994 1998 1997 1996(1)
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16.47 $ 14.53 $ 12.83 $ 10.68 $ 11.15 $ 16.43 $ 14.51 $ 13.59
--------- --------- --------- --------- --------- --------- --------- ---------
0.42 0.43 0.33 0.32 0.28 0.29 0.29 0.13
1.71 2.42 1.83 2.16 (0.49) 1.71 2.42 0.91
--------- --------- --------- --------- --------- --------- --------- ---------
2.13 2.85 2.16 2.48 (0.21) 2.00 2.71 1.04
--------- --------- --------- --------- --------- --------- --------- ---------
(0.43) (0.40) (0.33) (0.33) (0.26) (0.30) (0.28) (0.12)
(1.21) (0.51) (0.13) -- -- (1.21) (0.51) --
--------- --------- --------- --------- --------- --------- --------- ---------
(1.64) (0.91) (0.46) (0.33) (0.26) (1.51) (0.79) (0.12)
--------- --------- --------- --------- --------- --------- --------- ---------
0.49 1.94 1.70 2.15 (0.47) 0.49 1.92 0.92
--------- --------- --------- --------- --------- --------- --------- ---------
$ 16.96 $ 16.47 $ 14.53 $ 12.83 $ 10.68 $ 16.92 $ 16.43 $ 14.51
========= ========= ========= ========= ========= ========= ========= =========
14.05% 20.42% 17.19% 23.68% (1.93)% 13.14% 19.34% 7.71%**
$ 218,666 $ 171,741 $ 123,603 $ 76,771 $ 65,464 $ 57,876 $ 30,688 $ 3,557
2.63% 2.82% 2.52% 2.74% 2.70% 1.77% 1.95% 1.73%*
1.13% 1.21% 1.19% 1.26% 1.18% 1.99% 2.10% 1.95%*
1.13% 1.22% 1.21% 1.30% 1.18% 1.99% 2.19% 2.15%*
108% 58% 48% 41% 23% 108% 58% 48%
</TABLE>
55
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Income Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Retail A Shares
Years ended October 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 18.82 $ 16.91 $ 14.98 $ 12.74 $ 12.85
---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (B).................. 0.25 0.30 0.30 0.28 0.30
Net realized and unrealized gain on
investments ............................. 2.43 3.35 2.47 2.47 0.07
---------- ---------- ---------- ---------- ----------
Total from Investment Operations: ....... 2.68 3.65 2.77 2.75 0.37
---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net investment income ...... (0.25) (0.30) (0.30) (0.30) (0.29)
Dividends from net realized capital gains . (1.58) (1.44) (0.54) (0.21) (0.19)
---------- ---------- ---------- ---------- ----------
Total Dividends:......................... (1.83) (1.74) (0.84) (0.51) (0.48)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value .... 0.85 1.91 1.93 2.24 (0.11)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ................ $ 19.67 $ 18.82 $ 16.91 $ 14.98 $ 12.74
========== ========== ========== ========== ==========
Total Return (A)............................... 15.23% 23.28% 19.01% 22.23% 2.94%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............. $ 207,850 $ 169,276 $26,952 $ 81,802 $ 63,532
Ratios to average net assets:
Net investment income including
reimbursement/waiver .................... 1.30% 1.70% 1.86% 2.08% 2.45%
Operating expenses including
reimbursement/waiver .................... 1.34% 1.39% 1.40% 1.49% 1.11%
Operating expenses excluding
reimbursement/waiver .................... 1.34% 1.41% 1.40% 1.51% 1.12%
Portfolio Turnover Rate ....................... 46% 37% 45% 21% 31%
</TABLE>
- --------------------------------
(A) Calculation does not include the effect of any sales charge for Retail A
Shares.
(B) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail A Shares for the years
ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.25, $0.30, $0.30,
$0.28 and $0.30, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Trust Shares for the years ended October 31, 1998, 1997, 1996, 1995 and
1994 were $0.34, $0.38, $0.37, $0.36 and $0.31, respectively.
See Notes to Financial Statements.
56
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Years ended October 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
$ 18.84 $ 16.93 $ 14.99 $ 12.75 $ 12.85
-------- -------- -------- ------- -------
0.34 0.38 0.37 0.36 0.31
2.42 3.35 2.48 2.45 0.07
-------- -------- -------- ------- -------
2.76 3.73 2.85 2.81 0.38
-------- -------- -------- ------- -------
(0.33) (0.38) (0.37) (0.36) (0.29)
(1.58) (1.44) (0.54) (0.21) (0.19)
-------- -------- -------- ------- -------
(1.91) (1.82) (0.91) (0.57) (0.48)
-------- -------- -------- ------- -------
0.85 1.91 1.94 2.24 (0.10)
-------- -------- -------- ------- -------
$ 19.69 $ 18.84 $ 16.93 $ 14.99 $ 12.75
======== ======== ======== ======= =======
15.67% 23.80% 19.65% 22.81% 3.02%
$127,367 $119,505 $106,094 $87,819 $78,880
1.72% 2.14% 2.32% 2.60% 2.49%
0.92% 0.95% 0.94% 0.98% 1.07%
0.92% 0.97% 0.94% 1.00% 1.07%
46% 37% 45% 21% 31%
</TABLE>
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Growth and Income Fund
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
--------------------------------------------------------------------
1998 1997 1996(1) 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 16.24 $ 13.78 $ 12.35 $ 11.15 $ 10.69
-------- -------- ------- ------- -------
Income from Investment Operations:
Net investment income (B)......................... 0.12 0.18 0.21 0.24 0.22
Net realized and unrealized gain on investments... 1.32 3.67 2.16 1.70 0.72
-------- -------- ------- ------- -------
Total from Investment Operations:................. 1.44 3.85 2.37 1.94 0.94
-------- -------- ------- ------- -------
Less Dividends:
Dividends from net investment income.............. (0.13) (0.20) (0.21) (0.25) (0.20)
Dividends from net realized capital gains......... (2.68) (1.19) (0.73) (0.49) (0.28)
-------- -------- ------- ------- -------
Total Dividends:.................................. (2.81) (1.39) (0.94) (0.74) (0.48)
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value............ (1.37) 2.46 1.43 1.20 0.46
-------- -------- ------- ------- -------
Net Asset Value, End of Period........................ $ 14.87 $ 16.24 $ 13.78 $ 12.35 $ 11.15
-------- -------- ------- ------- -------
Total Return (A)...................................... 9.93% 30.10% 20.25% 18.52% 9.12%
Ratios/Supplemental Data:
Net Assets, End of Period (000's)..................... $214,110 $141,884 $77,776 $51,078 $22,244
Ratios to average net assets:
Net investment income including reimbursement/waiver 0.75% 1.18% 1.65% 2.10% 2.06%
Operating expenses including reimbursement/waiver. 1.28% 1.27% 1.34% 1.32% 1.29%
Operating expenses excluding reimbursement/waiver. 1.35% 1.45% 1.45% 1.77% 1.74%
Portfolio Turnover Rate............................... 38% 93% 59% 51% 73%
</TABLE>
- ------------------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on December 14, 1992 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of the Trust.
Prior to the reorganization, the Predecessor Fund offered and sold two
series of shares, Investment Shares and Trust Shares, that were similar to
the Fund's Retail A and Trust Shares, respectively. In connection with the
reorganization, shareholders of the Predecessor Fund exchanged Investment
Shares and Trust Shares for Retail A Shares and Trust Shares, respectively,
in the Galaxy Growth and Income Fund.
(2) The Fund began issuing Retail B Shares on March 4, 1996.
(3) Net investment income per share is less than $0.005.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(B) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail A Shares for the years
ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.10, $0.18, $0.19,
$0.22 and $0.18, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Trust Shares for the years ended October 31, 1998, 1997, 1996, 1995 and
1994 were $0.15, $0.21, $0.27, $0.25 and $0.22, respectively. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or Administrator for Retail B Shares for the years ended October
31, 1998 and 1997 and for the period ended October 31, 1996 were $0.00,
$0.08 and $0.05, respectively.
See Notes to Financial Statements.
58
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Years ended October 31, Years ended October 31, Period ended
- ------------------------------------------------------------------- ----------------------- October 31,
1998 1997 1996(1) 1995 1994 1998 1997 1996(2)
- -------- -------- -------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16.28 $ 13.80 $ 12.35 $ 11.15 $ 10.69 $ 16.23 $ 13.77 $12.97
- -------- -------- -------- -------- -------- ------- ------- ------
0.15 0.22 0.27 0.28 0.25 --(3) 0.10 0.07
1.31 3.68 2.16 1.69 0.72 1.31 3.65 0.81
- -------- -------- -------- -------- -------- ------- ------- ------
1.46 3.90 2.43 1.97 0.97 1.31 3.75 0.88
- -------- -------- -------- -------- -------- ------- ------- ------
(0.16) (0.23) (0.25) (0.28) (0.23) (0.03) (0.10) (0.08)
(2.68) (1.19) (0.73) (0.49) (0.28) (2.68) (1.19) --
- -------- -------- -------- -------- -------- ------- ------- ------
(2.84) (1.42) (0.98) (0.77) (0.51) (2.71) (1.29) (0.08)
- -------- -------- -------- -------- -------- ------- ------- ------
(1.38) 2.48 1.45 1.20 0.46 (1.40) 2.46 0.80
- -------- -------- -------- -------- -------- ------- ------- ------
$ 14.90 $ 16.28 $ 13.80 $ 12.35 $ 11.15 $ 14.83 $ 16.23 $13.77
======== ======== ======== ======== ======== ======= ======= ======
10.10% 30.43% 20.77% 18.80% 9.45% 9.09% 29.11% 6.83%**
$254,060 $246,654 $186,708 $189,011 $156,827 $53,216 $35,178 $4,562
1.00% 1.44% 2.01% 2.42% 2.31% 0.01% 0.31% 0.79%*
1.03% 1.03% 1.02% 1.07% 1.04% 2.02% 2.05% 1.96%*
1.03% 1.06% 1.03% 1.27% 1.24% 2.02% 2.28% 2.11%*
38% 93% 59% 51% 73% 38% 93% 59%
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Value Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 18.21 $ 15.96 $ 14.33 $ 13.31 $ 13.12
-------- -------- -------- ------- -------
Income from Investment Operations:
Net investment income (loss) (B).................. 0.03 0.11 0.14 0.22 0.18
Net realized and unrealized gain on investments... 1.50 4.16 2.74 2.24 0.45
-------- -------- -------- ------- -------
Total from Investment Operations: ............ 1.53 4.27 2.88 2.46 0.63
-------- -------- -------- ------- -------
Less Dividends:
Dividends from net investment income ............. (0.04) (0.12) (0.14) (0.23) (0.16)
Dividends from net realized capital gains......... (3.20) (1.90) (1.11) (1.21) (0.28)
-------- -------- -------- ------- -------
Total Dividends: ............................. (3.24) (2.02) (1.25) (1.44) (0.44)
-------- -------- -------- ------- -------
Net increase (decrease) in net asset value ......... (1.71) 2.25 1.63 1.02 0.19
-------- -------- -------- ------- -------
Net Asset Value, End of Period ..................... $ 16.50 $ 18.21 $ 15.96 $ 14.33 $ 13.31
======== ======== ======== ======= =======
Total Return (A).................................... 9.88% 29.48% 21.49% 20.81% 4.97%
Ratios/Supplemental Data:
Net Assets, End of Period (000's)................... $234,730 $182,641 $131,998 $96,555 $74,001
Ratios to average net assets:
Net investment income (loss) including
reimbursement/waiver ........................... 0.15% 0.63% 1.00% 1.62% 1.45%
Operating expenses
including reimbursement/waiver.................. 1.37% 1.38% 1.45% 1.49% 1.08%
Operating expenses
excluding reimbursement/waiver.................. 1.37% 1.38% 1.45% 1.50% 1.11%
Portfolio Turnover Rate............................. 82% 111% 116% 76% 71%
</TABLE>
- ---------------------------------------
* Annualized
** Not Annualized
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B shares.
(B) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail A Shares for the years
ended October 31, 1998, 1997, 1996, 1995, and 1994 were $0.03, $0.11, $0.14,
$0.22 and $0.18, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Trust Shares for the years ended October 31, 1998, 1997, 1996, 1995, and
1994 were $0.08, $0.17, $0.21, $0.28 and $0.19, respectively. Net investment
income (loss) per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail B Shares for the years
ended October 31, 1998 and 1997 and the period ended October 31, 1996 were
$(0.08), $(0.03) and $0.01, respectively.
See Notes to Financial Statements.
60
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Period
Years ended October 31, Years ended October 31, ended
--------------------------------------------------------------------- ----------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996(1)
-------- -------- -------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 18.21 $ 15.96 $ 14.33 $ 13.32 $ 13.12 $ 18.24 $ 15.99 $14.74
-------- -------- -------- -------- -------- ------- ------- ------
0.08 0.17 0.21 0.28 0.19 (0.08) -- 0.04
1.49 4.16 2.74 2.24 0.45 1.48 4.17 1.25
-------- -------- -------- -------- -------- ------- ------- ------
1.57 4.33 2.95 2.52 0.64 1.40 4.17 1.29
-------- -------- -------- -------- -------- ------- ------- ------
(0.07) (0.18) (0.21) (0.30) (0.16) -- (0.02) (0.04)
(3.20) (1.90) (1.11) (1.21) (0.28) (3.20) (1.90) --
-------- -------- -------- -------- -------- ------- ------- ------
(3.27) (2.08) (1.32) (1.51) (0.44) (3.20) (1.92) (0.04)
-------- -------- -------- -------- -------- ------- ------- ------
(1.70) 2.25 1.63 1.01 0.20 (1.80) 2.25 1.25
-------- -------- -------- -------- -------- ------- ------- ------
$ 16.51 $ 18.21 $ 15.96 $ 14.33 $ 13.32 $ 16.44 $ 18.24 $15.99
======== ======== ======== ======== ======== ======= ======= ======
10.27% 29.87% 22.05% 21.31% 5.05% 9.07% 28.60% 8.80%**
$254,432 $241,532 $194,827 $165,330 $154,403 $23,103 $14,958 $1,916
0.49% 0.98% 1.42% 2.10% 1.46% (0.54)% (0.13)% 0.43%*
1.03% 1.04% 1.03% 1.02% 1.06% 2.06% 2.07% 1.94%*
1.03% 1.04% 1.03% 1.02% 1.06% 2.06% 2.38% 2.24%*
82% 111% 116% 76% 71% 82% 111% 116%
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Strategic Equity Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout the period.
Retail A Shares
<TABLE>
<CAPTION>
Period ended
October 31,
1998(1)
------------
<S> <C>
Net Asset Value, Beginning of Period ................... $10.00
------
Income from Investment Operations:
Net investment income (loss) (B).................... --(2)
Net realized and unrealized (loss) on investments .. (0.38)
------
Total from Investment Operations: .............. (0.38)
------
Less Dividends:
Dividends from net investment income ............... --
Dividends from net realized capital gains........... --
------
Total Dividends: --
------
Net decrease in net asset value ........................ (0.38)
------
Net Asset Value, End of Period ......................... $ 9.62
======
Total Return (A)........................................ (3.75)%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's)....................... $4,051
Ratios to average net assets:
Net investment income (loss) including
reimbursement/waiver ........................... 0.06%*
Operating expenses including reimbursement/waiver... 1.40%*
Operating expenses excluding reimbursement/waiver... 2.41%*
Portfolio Turnover Rate................................. 30%**
</TABLE>
- ---------------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 4, 1998.
(2) Net investment income per share is less than $0.005.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(B) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for Retail A Shares, Trust
Shares and Retail B Shares for the period ended October 31, 1998 were $0.00,
$0.00 and $(0.06), respectively.
See Notes to Financial Statements.
62
<PAGE>
Trust Shares Retail B Shares
<TABLE>
<CAPTION>
Period ended Period ended
October 31, October 31,
1998(1) 1998(1)
------- ------
<S> <C>
$ 10.00 $10.00
------- ------
0.01 (0.02)
(0.37) (0.37)
------- ------
(0.36) (0.39)
------- ------
(0.01) --
-- --
------- ------
(0.01) --
------- ------
(0.37) (0.39)
------- ------
$ 9.63 $ 9.61
======= ======
(3.62)%** (4.76)%**
$63,061 $ 583
0.19%* (0.55)%*
1.27%* 2.01%*
1.47%* 3.05%*
30%** 30%**
</TABLE>
63
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Equity Growth Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 25.14 $ 20.37 $ 17.29 $ 14.18 $ 13.76
-------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income (loss) (B).................. 0.01 0.07 0.10 0.14 0.17
Net realized and unrealized gain
on investments ................................. 3.19 6.05 3.39 3.28 0.47
-------- -------- -------- -------- -------
Total from Investment Operations:............... 3.20 6.12 3.49 3.42 0.64
-------- -------- -------- -------- -------
Less Dividends:
Dividends from net investment income ............. (0.03) (0.07) (0.11) (0.14) (0.16)
Dividends in excess of net investment income...... --(3) -- -- -- --
Dividends from net realized capital gains ........ (3.84) (1.28) (0.30) (0.17) (0.06)
-------- -------- -------- -------- -------
Total Dividends: ............................... (3.87) (1.35) (0.41) (0.31) (0.22)
-------- -------- -------- -------- -------
Net increase (decrease) in net asset value ........... (0.67) 4.77 3.08 3.11 0.42
-------- -------- -------- -------- -------
Net Asset Value, End of Period........................ $ 24.47 $ 25.14 $ 20.37 $ 17.29 $ 14.18
======== ======== ======== ======== =======
Total Return (A)...................................... 14.73% 31.61% 20.51% 24.54% 4.72%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) .................... $312,951 $226,330 $160,800 $ 98,911 $70,338
Ratios to average net assets:
Net investment income (loss)
including reimbursement/waiver.................. 0.02% 0.30% 0.50% 0.85% 1.22%
Operating expenses
including reimbursement/waiver.................. 1.34% 1.37% 1.40% 1.45% 0.98%
Operating expenses
excluding reimbursement/waiver.................. 1.34% 1.37% 1.40% 1.47% 0.99%
Portfolio Turnover Rate .............................. 60% 66% 36% 14% 18%
</TABLE>
- -----------------------------------------
* Annualized
** Not Annualized
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) The selected per share data was calculated using the weighted average shares
outstanding method for the year.
(3) Dividends in excess of net investment income per share were less than
$0.005.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(B) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail A Shares for the years
ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.01, $0.07, $0.10,
$0.13 and $0.17, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Trust Shares for the years ended October 31, 1998, 1997, 1996, 1995 and
1994 were $0.09, $0.16, $0.17, $0.20 and $0.18, respectively. Net investment
income (loss) per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Retail B Shares for the years
ended October 31, 1998 and 1997 and for the period ended October 31, 1996
were $(0.16)(2), $(0.14)(2) and $(0.03), respectively.
See Notes to Financial Statements.
64
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Years ended October 31, Years ended October 31, Period ended
-------------------------------------------------------------------- ---------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996(1)
-------- -------- -------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 25.17 $ 20.39 $ 17.30 $ 14.19 $ 13.76 $ 24.91 $ 20.26 $18.77
-------- -------- -------- -------- -------- ------- ------- ------
0.09 0.16 0.17 0.20 0.18 (0.16)(2) (0.09)(2) (0.01)
3.20 6.06 3.40 3.28 0.47 3.16 6.02 1.50
-------- -------- -------- -------- -------- ------- ------- ------
3.29 6.22 3.57 3.48 0.65 3.00 5.93 1.49
-------- -------- -------- -------- -------- ------- ------- ------
(0.09) (0.16) (0.18) (0.20) (0.16) -- -- --
(0.01) -- -- -- -- --(3) -- --
(3.84) (1.28) (0.30) (0.17) (0.06) (3.84) (1.28) --
-------- -------- -------- -------- -------- ------- ------- ------
(3.94) (1.44) (0.48) (0.37) (0.22) (3.84) (1.28) --
-------- -------- -------- -------- -------- ------- ------- ------
(0.65) 4.78 3.09 3.11 0.43 (0.84) 4.65 1.49
-------- -------- -------- -------- -------- ------- ------- ------
$ 24.52 $ 25.17 $ 20.39 $ 17.30 $ 14.19 $ 24.07 $ 24.91 $20.26
======== ======== ======== ======== ======== ======= ======= ======
15.17% 32.16% 21.03% 25.08% 4.80% 13.98% 30.78% 7.95%**
$815,756 $745,537 $562,419 $420,016 $362,094 $34,693 $20,363 $3,995
0.40% 0.72% 0.92% 1.31% 1.27% (0.68)% (0.40)% (0.16)%*
0.96% 0.95% 0.98% 1.00% 0.93% 2.04% 2.07% 1.92%*
0.96% 0.95% 0.98% 1.00% 0.93% 2.04% 2.30% 2.29%*
60% 66% 36% 14% 18% 60% 66% 36%
</TABLE>
65
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Cap Value Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
-------------------------------------------------------------
1998 1997 1996(1) 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 18.29 $ 14.75 $ 12.68 $ 11.06 $ 11.21
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income (loss) (B).................. 0.08 (0.04)(2) 0.01 (0.02) (0.01)
Net realized and unrealized gain
(loss) on investments .......................... (2.08) 5.72 2.95 2.21 0.18
------- ------- ------- ------- -------
Total from Investment Operations:............... (2.00) 5.68 2.96 2.19 0.17
------- ------- ------- ------- -------
Less Dividends:
Dividends from net investment income.............. (0.08) -- (0.02) -- --
Dividends in excess of net investment income...... -- -- -- -- --
Dividends from net realized capital gains......... (2.68) (2.14) (0.87) (0.57) (0.32)
------- ------- ------- ------- -------
Total Dividends:................................ (2.76) (2.14) (0.89) (0.57) (0.32)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value............ (4.76) 3.54 2.07 1.62 (0.15)
------- ------- ------- ------- -------
Net Asset Value, End of Period........................ $ 13.53 $ 18.29 $ 14.75 $ 12.68 $ 11.06
======= ======= ======= ======= =======
Total Return (A)...................................... (12.52)% 43.58% 24.77% 21.27% 1.64%
Ratios/Supplemental Data:
Net Assets, End of Period (000's)..................... $87,781 $63,658 $34,402 $27,546 $19,764
Ratios to average net assets:
Net investment income (loss) including
reimbursement/waiver............................ 0.38% (0.25)% 0.08% (0.19)% (0.10)%
Operating expenses including reimbursement/waiver. 1.31% 1.30% 1.40% 1.35% 1.31%
Operating expenses excluding reimbursement/waiver. 1.45% 1.52% 1.55% 1.85% 1.84%
Portfolio Turnover Rate............................... 33% 52% 39% 32% 29%
</TABLE>
- --------------------------------------
(1) The Fund commenced operations on December 14, 1992 as a separate investment
portfolio (the "Predecessor Fund") of the Shawmut Funds. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of the Trust.
Prior to the reorganization, the Predecessor Fund offered and sold two
series of shares, Investment Shares and Trust Shares, that were similar to
the Fund's Retail A and Trust Shares, respectively. In connection with the
reorganization, shareholders of the Predecessor Fund exchanged Investment
Shares and Trust Shares for Retail A Shares and Trust Shares, respectively,
in the Galaxy Small Cap Value Fund.
(2) The selected per share data was calculated using the weighted average shares
outstanding method for the year.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares.
(B) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for Retail A Shares for the
years ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.05, $(0.02),
$0.01, $(0.08) and $(0.06), respectively. Net investment income (loss) per
share before reimbursement/waiver of fees by the Investment Advisor and/or
Administrator for Trust Shares for the years ended October 31, 1998, 1997,
1996, 1995 and 1994 were $0.11, $0.05, $0.05, $(0.03) and $(0.01),
respectively.
See Notes to Financial Statements.
66
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Years ended October 31,
------------------------------------------------------------------
1998 1997 1996(1) 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 18.37 $ 14.76 $ 12.71 $ 11.07 $ 11.21
-------- -------- -------- -------- --------
0.11 0.01(2) 0.05 0.01 0.02
(2.06) 5.74 2.97 2.21 0.17
-------- -------- -------- -------- --------
(1.95) 5.75 3.02 2.22 0.19
-------- -------- -------- -------- --------
(0.13) -- (0.05) (0.01) (0.01)
-- -- (0.01) -- --
(2.68) (2.14) (0.91) (0.57) (0.32)
-------- -------- -------- -------- --------
(2.81) (2.14) (0.97) (0.58) (0.33)
-------- -------- -------- -------- --------
(4.76) 3.61 2.05 1.64 (0.14)
-------- -------- -------- -------- --------
$ 13.61 $ 18.37 $ 14.76 $ 12.71 $ 11.07
======== ======== ======== ======== ========
(12.07)% 44.08% 25.22% 21.52% 1.86%
$202,385 $189,257 $137,341 $121,364 $101,905
0.73% 0.09% 0.45% 0.07% 0.15%
0.96% 0.96% 1.05% 1.10% 1.06%
0.96% 0.96% 1.06% 1.35% 1.34%
33% 52% 39% 32% 29%
</TABLE>
67
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
Small Company Equity Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 20.94 $ 19.96 $ 16.28 $ 12.35 $ 12.41
------- -------- -------- ------- -------
Income from Investment Operations:
Net investment (loss) (B)......................... (0.19) (0.18) (0.14) (0.09) (0.01)
Net realized and unrealized gain
(loss) on investments .......................... (4.86) 3.54 3.99 4.21 --
------- -------- -------- ------- -------
Total from Investment Operations: .............. (5.05) 3.36 3.85 4.12 (0.01)
------- -------- -------- ------- -------
Less Dividends:
Dividends from net investment income ............. -- -- -- -- --
Dividends from net realized capital gains ........ (2.26) (2.38) (0.17) (0.19) (0.05)
------- -------- -------- ------- -------
Total Dividends: ............................... (2.26) (2.38) (0.17) (0.19) (0.05)
------- -------- -------- ------- -------
Net increase (decrease) in net asset value............ (7.31) 0.98 3.68 3.93 (0.06)
------- -------- -------- ------- -------
Net Asset Value, End of Period ....................... $ 13.63 $ 20.94 $ 19.96 $ 16.28 $ 12.35
======= ======== ======== ======= =======
Total Return (A)...................................... (26.26)% 19.08% 23.97% 34.01% (0.06)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) .................... $95,831 $135,593 $111,101 $45,668 $30,845
Ratios to average net assets:
Net investment (loss)
including reimbursement/waiver.................. (1.13)% (1.02)% (1.03)% (0.85)% (0.40)%
Operating expenses including reimbursement/waiver. 1.46% 1.46% 1.57% 1.60% 1.31%
Operating expenses excluding reimbursement/waiver. 1.47% 1.48% 1.57% 1.64% 1.34%
Portfolio Turnover Rate .............................. 78% 69% 82% 54% 35%
</TABLE>
- --------------------------------
* Annualized
** Not Annualized
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) The selected per share data was calculated using the weighted average shares
outstanding method for the period.
(A) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B shares.
(B) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for Retail A Shares for the
years ended October 31, 1998, 1997, 1996, 1995 and 1994 were $(0.19),
$(0.18), $(0.14), $(0.09) and $(0.01), respectively. Net investment income
(loss) per share before reimbursement/waiver of fees by the Investment
Advisor and/or Administrator for Trust Shares for the years ended October
31, 1998, 1997, 1996, 1995 and 1994 were $(0.14), $(0.11), $(0.09), $(0.04)
and $0.00, respectively. Net investment income (loss) per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Retail B Shares for the years ended October 31, 1998 and 1997 and the
period ended October 31, 1996 were $(0.30), $(0.24) and $(0.24),
respectively.
See Notes to Financial Statements.
68
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Years ended October 31, Years ended October 31, Period ended
------------------------------------------------------------------- ---------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996(1)
-------- -------- -------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 21.32 $ 20.20 $ 16.38 $ 12.36 $ 12.41 $ 20.73 $ 19.91 $17.27
-------- -------- -------- ------- ------- ------- ------- ------
(0.14) (0.11) (0.09) (0.04) -- (0.30) (0.21) (0.19)(2)
(4.96) 3.61 4.08 4.25 -- (4.78) 3.41 2.83
-------- -------- -------- ------- ------- ------- ------- ------
(5.10) 3.50 3.99 4.21 -- (5.08) 3.20 2.64
-------- -------- -------- ------- ------- ------- ------- ------
-- -- -- -- -- -- -- --
(2.26) (2.38) (0.17) (0.19) (0.05) (2.26) (2.38) --
-------- -------- -------- ------- ------- ------- ------- ------
(2.26) (2.38) (0.17) (0.19) (0.05) (2.26) (2.38) --
-------- -------- -------- ------- ------- ------- ------- ------
(7.36) 1.12 3.82 4.02 (0.05) (7.34) 0.82 2.64
-------- -------- -------- ------- ------- ------- ------- ------
$ 13.96 $ 21.32 $ 20.20 $ 16.38 $ 12.36 $ 13.39 $ 20.73 $19.91
======== ======== ======== ======= ======= ======= ======= ======
(26.00)% 19.59% 24.69% 34.73% 0.02% (26.72)% 18.23% 15.34%**
$222,675 $310,751 $174,990 $94,831 $66,462 $12,565 $14,731 $3,659
(0.76)% (0.65)% (0.60)% (0.37)% (0.35)% (1.78)% (1.76)% (1.50)%*
1.09% 1.09% 1.14% 1.12% 1.27% 2.11% 2.20% 2.04%*
1.09% 1.12% 1.14% 1.12% 1.27% 2.16% 2.44% 2.44%*
78% 69% 82% 54% 35% 78% 69% 82%
</TABLE>
69
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
International Equity Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Years ended October 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 15.18 $ 13.94 $ 12.92 $ 13.20 $ 12.13
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income (B)......................... 0.07 0.01 0.11 0.11 0.06
Net realized and unrealized gain (loss)
on investments ................................. 1.93 2.09 1.27 (0.21) 1.02
------- ------- ------- ------- -------
Total from Investment Operations:............... 2.00 2.10 1.38 (0.10) 1.08
------- ------- ------- ------- -------
Less Dividends:
Dividends from net investment income ............. (0.07) (0.18) (0.12) (0.02) (0.01)
Dividends from net realized capital gains ........ (0.36) (0.68) (0.24) (0.16) --
------- ------- ------- ------- -------
Total Dividends: ............................... (0.43) (0.86) (0.36) (0.18) (0.01)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value ........... 1.57 1.24 1.02 (0.28) 1.07
------- ------- ------- ------- -------
Net Asset Value, End of Period ....................... $ 16.75 $ 15.18 $ 13.94 $ 12.92 $ 13.20
======= ======= ======= ======= =======
Total Return (A)...................................... 13.64% 15.88% 10.86% (0.64)% 8.91%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) .................... $66,541 $56,592 $35,144 $30,104 $32,887
Ratios to average net assets:
Net investment income including
reimbursement/waiver............................ 0.39% 0.03% 0.78% 0.84% 0.69%
Operating expenses including reimbursement/waiver. 1.48% 1.60% 1.70% 1.76% 1.49%
Operating expenses excluding reimbursement/waiver. 1.73% 1.85% 1.98% 2.03% 1.79%
Portfolio Turnover Rate .............................. 49% 45% 146% 48% 39%
</TABLE>
- -----------------------------------------
(A) Calculation does not include the effect of any sales charge for Retail A
Shares.
(B) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for Retail A Shares for the
years ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.03, $(0.01),
$0.07, $0.08 and $0.03, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for Trust Shares for the years ended October 31, 1998, 1997, 1996, 1995 and
1994 were $0.10, $0.04, $0.13, $0.13 and $0.04, respectively.
See Notes to Financial Statements.
70
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Years ended October 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
$ 15.33 $ 14.01 $ 12.98 $ 13.20 $ 12.13
-------- -------- -------- ------- -------
0.14 0.08 0.17 0.16 0.06
1.98 2.12 1.30 (0.18) 1.02
-------- -------- -------- ------- -------
2.12 2.20 1.47 (0.02) 1.08
-------- -------- -------- ------- -------
(0.09) (0.20) (0.20) (0.04) (0.01)
(0.36) (0.68) (0.24) (0.16) --
-------- -------- -------- ------- -------
(0.45) (0.88) (0.44) (0.20) (0.01)
-------- -------- -------- ------- -------
1.67 1.32 1.03 (0.22) 1.07
-------- -------- -------- ------- -------
$ 17.00 $ 15.33 $ 14.01 $ 12.98 $ 13.20
-------- -------- -------- ------- -------
14.32% 16.60% 11.51% (0.02)% 8.91%
$345,692 $265,124 $172,561 $89,614 $82,350
0.91% 0.57% 1.40% 1.36% 0.74%
0.96% 1.06% 1.08% 1.22% 1.43%
1.21% 1.32% 1.36% 1.48% 1.72%
49% 45% 146% 48% 39%
</TABLE>
71
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS
1.Organization
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. As of the date of this report, the Trust offered twenty-nine
managed investment portfolios. The accompanying financial statements and
financial highlights are those of the Asset Allocation, Equity Income, Growth
and Income, Equity Value, Strategic Equity, Equity Growth, Small Cap Value,
Small Company Equity and International Equity Funds (individually, a "Fund,"
collectively, the "Funds") only.
Each Fund is authorized to issue three series of shares (Trust Shares, Retail
A Shares and Retail B Shares). Currently, the Asset Allocation, Growth and
Income, Equity Value, Strategic Equity, Equity Growth and Small Company Equity
Funds offer all three series of shares and the Equity Income, Small Cap Value
and International Equity Funds offer Trust Shares and Retail A Shares. Trust
Shares, Retail A Shares and Retail B Shares are substantially the same, except
that (i) Retail A Shares are subject to a maximum 3.75% front-end sales charge,
(ii) Retail B Shares are subject to a maximum 5.00% contingent deferred sales
charge, and (iii) each series of shares bears the following series specific
expenses: distribution fees and/or shareholder servicing and related fees and
transfer agency expenses. Six years after purchase, Retail B Shares will convert
automatically to Retail A Shares.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of their
financial statements.
Portfolio Valuation: Investments in securities which are traded on a
recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded, or at the last sale
price on the national securities market. Securities traded on over-the-counter
markets are valued at the last bid price. 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. Dividend income is recorded on the ex-dividend
date. 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.
Forward Foreign Currency Exchange Contracts: The International Equity Fund may
enter into forward foreign currency exchange contracts whereby the Fund agrees
to buy or sell a specific currency at a specified price at a future date in an
attempt to hedge against fluctuations in the value of the underlyin g currency
of certain portfolio instruments. Forward foreign currency exchange contracts
are valued at the daily exchange rate of the underlying currency. Purchases and
sales of forward foreign currency exchange contracts having the same settlement
date and broker are offset and presented on a net basis in the Statement of
Assets and Liabilities. Gains or losses on the purchase or sale of forward
foreign currency exchange contracts having the same settlement date and broker
are recognized on the date of offset, otherwise gains or losses are recognized
on the settlement date.
Foreign Currency Translation: The books and records of the International
Equity Fund are maintained in U.S. dollars. Investment valuations and other
assets and liabilities initially expressed in foreign currencies are converted
each business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments and income and expenses are converted into U.S.
dollars based upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
Options: The Funds may engage in writing covered call options and may enter
into closing purchase transactions with respect to such options. During the year
ended October 31, 1998, the Equity Value Fund was party to the following option
contracts:
72
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
Number
of Contracts Premium
------------ -----------
<S> <C> <C>
Balance as of October 31, 1997 0 $ 0
Written 6,473 1,450,972
Closed and Expired (5,007) (1,103,665)
Exercised (1,466) (347,307)
------------ -----------
Balance as of October 31, 1998 0 0
</TABLE>
Dividends to Shareholders: Dividends from net investment income are determined
separately for each series of a Fund and are declared and paid quarterly, with
the exception of the International Equity Fund which declares and pays dividends
annually. Net realized capital gains, if any, are distributed at least annually.
Income dividends and capital gain dividends are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Federal Income Taxes: The Trust treats each Fund as a separate entity for
federal income tax purposes. Each Fund intends to qualify or continue to qualify
each year as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended. By so qualifying, each Fund will not be
subject to federal income taxes to the extent that it distributes substantially
all of its taxable or tax-exempt income, if any, for its tax year ending October
31. In addition, by distributing in each calendar year substantially all of its
net investment income, capital gains and certain other amounts, if any, each
Fund will not be subject to a federal excise tax. Therefore, no federal income
or excise tax provision is recorded. Withholding taxes on foreign dividends have
been paid or provided for in accordance with the applicable country's tax rules
and rates.
Expenses: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a Fund are charged to
the Fund, while expenses which are attributable to more than one fund of the
Trust are allocated among the respective funds.
In addition, expenses of a Fund not directly attributable to the operations of
a particular series of shares of the Fund are allocated to the separate series
based upon the relative net assets of each series. Operating expenses directly
attributable to a series of shares of a Fund are charged to the operations of
that series.
Organization Costs: Each Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under federal and state securities laws. All
such costs are amortized using the straight-line method over a period of five
years beginning with the commencement of each Fund's operations.
3. Investment Advisory, Administration, Shareholder Services,
Distribution and Other Fees
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor" or
"Fleet"), an indirect wholly-owned subsidiary of Fleet Financial Group, Inc.,
and affiliate of the Funds, 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
the Asset Allocation, Equity Income, Growth and Income, Equity Value, Strategic
Equity, Equity Growth, Small Cap Value and Small Company Equity Funds (See Note
4).
The Trust pays the Investment Advisor a fee, computed daily and paid monthly,
with respect to the International Equity Fund at the annual rate of 1.15% of the
first $50 million of the Fund's average daily net assets, plus 0.95% of the next
$50 million of such net assets, plus 0.85% of net assets in excess of $100
million.
The Investment Advisor has entered into a sub-advisory agreement with Oechsle
International Advisors, LLC ("Oechsle") with respect to the International Equity
Fund pursuant to which the Investment Advisor pays fees to Oechsle, computed
daily and paid quarterly, at the annual rate of 0.40% of the first $50 million
of the Fund's average daily net assets, plus 0.35% of net assets in excess of
$50 million.
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 with an October 31 fiscal year (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 the
combined average daily net assets of the Funds and
73
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS (continued)
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 pursuant to certain fee
arrangements. Pursuant to such fee arrangements, Investor Services Group
compensates the Trust's custodian bank, The Chase Manhattan Bank for its
services.
Retail A Shares, Retail B Shares and Trust Shares of the Funds each bear
series specific transfer agent charges based upon the number of shareholder
accounts for each series. In addition, Trust Shares also bear additional
transfer agency fees in order to compensate Investor Services Group for payments
made to Fleet Bank, an affiliate of the Investment Advisor, for performing
certain sub-account 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 year
ended October 31, 1998, transfer agent charges for each series were as follows:
<TABLE>
<CAPTION>
Retail A Retail B Trust
-------- -------- -----
<S> <C> <C> <C>
Asset Allocation $ 306,531 $ 58,029 $450,148
Equity Income 260,019 -- 19,341
Growth and Income 400,486 92,530 345,555
Equity Value 359,416 42,115 336,666
Strategic Equity 9,315 1,259 63
Equity Growth 430,739 57,607 592,507
Small Cap Value 186,085 -- 67,179
Small Company Equity 327,013 43,806 503,818
International Equity 183,109 -- 224,005
</TABLE>
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 (the "Services Plan") with
respect to Retail A 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 0.50% of the averag e 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 0.30% 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 Funds. Under the 12b-1 Plan, the Trust may pay
(i) the Distributor or another person for expenses and activities primarily
intended to result in the sale of Retail B Shares, (ii) institutions for
shareholder liaison services and (iii) institutions for administrative support
services. Currently, payments under the 12b-1 Plan for distribution services are
being made solely to broker-dealer affiliates of Fleet Bank and payments under
the 12b-1 Plan for shareholder liaison and administrative support services are
being made solely to Fleet Bank and its affilitates. Payments for distribution
expenses may not exceed an annual rate of 0.65% of the average daily net assets
attributable to each Fund's outstanding Retail B Shares. The fees paid 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 Retail B Shares owned of
record or beneficially by customers of institutions. The Trust 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 0.30% of the
average daily net asset value of Retail B Shares of the Fund owned of record or
beneficially by customers of institutions. For the year ended October 31, 1998,
the Funds accrued fees under the Services Plan and 12b-1 Plan as follows:
<TABLE>
<CAPTION>
Services 12b-1 Plan
-------- ----------
Plan Services Distribution
---- -------- ------------
<S> <C> <C> <C>
Asset Allocation $763,611 $134,888 $292,256
Equity Income 599,940 -- --
Growth andIncome 472,627 124,879 306,933
Equity Value 667,247 61,137 132,464
Strategic Equity 4,356 600 1,300
Equity Growth 841,650 85,165 184,524
Small Cap Value 250,077 -- --
Small Company Equity 343,948 45,132 97,785
International Equity 191,712 -- --
</TABLE>
Certain officers of the Trust may be officers of the Administrator. Such
officers receive no compensation from the Trust for serving in their respective
roles. No officer, director or employee of the Investment Advisor serves as an
officer, trustee or employee of the Trust. Effective March 5, 1998, each Trustee
is entitled to receive for services as a trustee of the Trust, The Galaxy VIP
Fund ("VIP") and Galaxy Fund II ("Galaxy II") an aggregate fee of $40,000 per
annum plus certain other fees for
74
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS (continued)
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/VIP/Galaxy 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 year ended October 31, 1998 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
Pursuant to procedures adopted by the Board of Trustees and in accordance with
the Investment Company Act of 1940, as amended, certain funds placed a portion
of their portfolio transactions with Quick & Reilly Institutional Trading, a
division of Fleet Securities, Inc., an affiliate of the Funds' Advisor. The
commissions paid to Quick & Reilly Institutional Trading for the period February
1, 1998 through October 31, 1998 were as follows:
<TABLE>
<S> <C> <C> <C>
Asset Allocation $130,968 Equity Value $298,078
Equity Income 108,651 Strategic Equity 26,480
Growth & Income 118,050 Equity Growth 56,784
</TABLE>
4. Waiver of Fees and Reimbursement of Expenses
Fleet 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 waivers and/or expense reimbursements at any time. For
the year ended October 31, 1998, the Investment Advisor and/or its affiliates
and/or the Administrator waived fees and/or reimbursed expenses with respect to
the Funds as follows:
<TABLE>
<CAPTION>
Fund Fees Waived Expenses Reimbursed
------ ----------- -------------------
<S> <C> <C>
Growth and Income $ -- $150,727
Strategic Equity 37,227 2,915
Small Cap Value -- 115,022
Small Company Equity -- 27,376
International Equity 950,363 --
</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 N-Series 1 Shares (Trust
Shares), Class N-Series 2 Shares (Retail A Shares) and Class N-Series 3 Shares
(Retail B Shares) - Asset Allocation Fund; Class I-Series 1 Shares (Trust
Shares), Class I-Series 2 Shares (Retail A Shares) and Class I - Series 3 Shares
(Retail B Shares) - Equity Income Fund; Class U-Series 1 Shares (Trust Shares),
Class U-Series 2 Shares (Retail A Shares) and Class U-Series 3 Shares (Retail B
Shares) - Growth and Income Fund; Class C Shares (Trust Shares), Class C-Special
Series 1 Shares (Retail A Shares) and Class C-Special Series 2 Shares (Retail B
Shares) - Equity Value Fund; Class AA Series 1 Shares (Trust Shares), Class AA -
Series 2 Shares (Retail A Shares) and Class AA - Series 3 Shares (Retail B
Shares) - Strategic Equity Fund; Class H-Series 1 Shares (Trust Shares), Class
H-Series 2 Shares (Retail A Shares) and Class H-Series 3 Shares (Retail B
Shares) - Equity Growth Fund; Class X-Series 1 Shares (Trust Shares), Class
X-Series 2 Shares (Retail A Shares) and Class X - Series 3 Shares (Retail B
Shares) - Small Cap Value Fund; Class K-Series 1 Shares (Trust Shares), Class
K-Series 2 Shares (Retail A Shares) and Class K-Series 3 Shares (Retail B
Shares) - Small Company Equity Fund; and Class G-Series 1 Shares (Trust Shares),
Class G-Series 2 Shares (Retail A Shares) and Class G - Series 3 Shares (Retail
B Shares) International Equity Fund.
Each share represents an equal proportionate interest in the respective Fund,
bears the same fees and expenses (except that Retail A Shares bear the expense
of payments under the Services Plan, Retail B Shares bear the expense of
payments under the 12b-1 Plan and Trust Shares, Retail A Shares and Retail B
Shares each bear series specific transfer agent charges) and is 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.
75
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS (continued)
6. Purchases and Sales of Securities
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
-------------------------------- --------------------------------
Fund U.S. Government Other U.S. Government Other
- ---- --------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Asset Allocation............................................... $ 309,821,923 $ 310,335,764 $ 263,251,631 $ 202,109,558
Equity Income.................................................. -- 127,977,140 -- 130,637,345
Growth and Income ............................................. -- 241,014,416 -- 177,275,805
Equity Value................................................... -- 449,698,309 -- 393,989,626
Strategic Equity............................................... -- 65,992,340 -- 6,154,357
Equity Growth ................................................. -- 651,261,900 -- 625,876,608
Small Cap Value................................................ -- 140,453,164 -- 80,394,468
Small Company Equity........................................... -- 328,769,490 -- 319,493,157
International Equity........................................... -- 239,971,336 -- 177,838,698
</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 October 31, 1998 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Appreciation (Depreciation) Net Cost
- ---- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Asset Allocation............................................... $ 97,537,226 $ (8,372,719) $ 89,164,507 $510,379,609
Equity Income.................................................. 80,623,078 (7,692,637) 72,930,441 261,818,899
Growth and Income.............................................. 91,580,075 (28,889,733) 62,690,342 462,060,761
Equity Value................................................... 102,226,457 (18,977,756) 83,248,701 429,568,353
Strategic Equity............................................... 7,177,441 (2,630,996) 4,546,445 63,896,205
Equity Growth.................................................. 386,366,836 (32,534,372) 353,832,464 809,441,919
Small Cap Value................................................ 44,620,905 (51,289,926) (6,669,021) 299,530,183
Small Company Equity .......................................... 54,304,345 (62,810,533) (8,506,188) 341,404,486
International Equity .......................................... 85,905,648 (26,539,662) 59,365,986 354,456,771
</TABLE>
At October 31, 1998, the Small Company Equity Fund had capital loss
carryforwards of $33,481,372, which expire in 2006.
7. Foreign Securities
Each Fund may purchase securities of foreign issuers. Investing in securities
of foreign issuers involves special risks not typically associated with
investing in securities of U.S. issuers. The risks include possible revaluation
of currencies, less complete financial information about companies and possible
future adverse political and economic developments. Moreover, securities of many
foreign issuers and their markets may be less liquid and their prices more
volatile than those of securities of comparable U.S. issuers.
8. Results of Special Meeting of Shareholders of the International Equity
Fund (unaudited)
At a Special Meeting of Shareholders of the International Equity Fund held on
September 25, 1998, shareholders of the Fund approved a new sub-advisory
agreement between Fleet Investment Advisors Inc. and Oechsle International
Advisors, LLC with respect to the Fund in connection with the reorganization and
recapitalization of Oechsle International Advisors, L.P., the Fund's former
sub-advisor.
The results of the shareholder vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
19,805,848 76,604 125,287
</TABLE>
76
<PAGE>
- ---------------
THE GALAXY FUND
- ---------------
NOTES TO FINANCIAL STATEMENTS (continued)
Tax Information (unaudited)
During the fiscal year ended October 31, 1998, the following Funds made
distributions from long-term capital gains:
<TABLE>
<CAPTION>
Long-Term Gains
Fund Paid
---- ----------
<S> <C>
Asset Allocation Fund............. $ 25,199,210
Equity Income Fund................ 22,294,742
Growth and Income Fund............ 58,511,405
Equity Value Fund................. 63,210,976
Equity Growth Fund................ 137,714,044
Small Cap Value Fund.............. 32,216,325
Small Company Equity Fund......... 40,330,366
International Equity Fund......... 5,248,116
</TABLE>
During the fiscal year ended October 31, 1998, the Funds earned income from
direct obligations of the U.S. Government as follows:
<TABLE>
<CAPTION>
U.S. Government
Fund Income
---- ---------------
<S> <C>
Asset Allocation Fund............... 15.47%
Equity Income Fund.................. 3.54
Growth and Income Fund.............. 0.15
Equity Value Fund................... 0.07
Strategic Equity Fund............... 10.02
Equity Growth Fund.................. 0.14
Small Cap Value Fund................ 0.39
Small Company Equity Fund........... 0.00
International Equity Fund........... 0.08
</TABLE>
Appropriate tax information detailing U.S. Government income percentages on a
calendar year basis will accompany your year-end tax statement. As each state's
rules on the exemption of this income differ, please consult your tax advisor
regarding specific tax treatment.
77
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Shareholders and the Board of Trustees of
The Galaxy Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Asset Allocation
Fund, Equity Income Fund, Growth and Income Fund, Equity Value Fund, Strategic
Equity Fund, Equity Growth Fund, Small Cap Value Fund, Small Company Equity Fund
and International Equity Fund (nine series of The Galaxy Fund) at October 31,
1998, the results of their operations, the changes in their net assets, and
their financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of The Galaxy Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
December 23, 1998 PricewaterhouseCoopers LLP
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce
McConnel, III, Esq.
Secretary
Jylanne Dunne
Vice President &
Assistant Treasurer
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
This report is submitted for the general information of shareholders of The
Galaxy Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for the Fund, which
contains more information concerning the Fund's investment policies, as well as
fees and expenses and other pertinent information. Read the prospectus carefully
before you invest.
Shares of the Funds are not bank deposits or obligations of, or guaranteed or
endorsed by, Fleet Financial Group, Inc. or any of its affiliates, Fleet
Investment Advisors Inc., or any Fleet Bank. Shares of the Funds are not
federally insured by, guaranteed by, obligations of or otherwise supported by
the U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other governmental agency. Investment return and principal
value will vary as a result of market conditions or other factors so that shares
of the funds, when redeemed, may be worth more or less than their original cost.
An investment in the Funds involves investment risks, including the possible
loss of the principal amount invested.
[recycle symbol]
This report was printed on recycled paper.
<PAGE>
[Galaxy Funds Logo]
4400 Computer Drive
P.O. Box 5108
Westborough, MA 01581-5108
ANEQU (11/98) Date of first use: January 1, 1999
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