ANNUAL REPORT
OCTOBER 31, 2000
[COVER GRAPHIC OMITTED: ACORN, COLUMN, GRADUATION CAP, HANDSHAKE]
GALAXY TAXABLE BOND FUNDS
GALAXY FUNDS
Galaxy Short-Term Bond Fund
Galaxy Intermediate Government Income Fund
Galaxy Corporate Bond Fund
Galaxy High Quality Bond Fund
[GRAPHIC OMITTED: GALAXY LOGO]
GALAXY
FUNDS
<PAGE>
<PAGE>
Chairman's Message
[BEGIN SIDEBAR]
MUTUAL FUNDS:
(BULLET) ARE NOT BANK DEPOSITS
(BULLET) ARE NOT FDIC INSURED
(BULLET) ARE NOT OBLIGATIONS OF OR GUARANTEED BY, ANY BANK
(BULLET) ARE SUBJECT TO INVESTMENT RISK INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
[END SIDEBAR]
Dear Shareholder:
Enclosed is the annual report for the Galaxy Taxable Bond Funds for the
fiscal year ended October 31, 2000. The report includes a Market Overview that
discusses the economic and market conditions that may have affected your
investments during this time. The Market Overview is followed by individual
reviews for the Galaxy Taxable Bond Funds that describe how Fleet Investment
Advisors Inc. ("FIA") managed each of the Funds' portfolios in this climate.
Financial statements and a list of portfolio holdings for each of the Funds as
of October 31, 2000 appear at the end of the report.
In the wake of continued economic strength that threatened higher
inflation, the Federal Reserve (the "Fed") raised short-term interest rates by
125 basis points (1.25%) during the first part of the reporting period. Besides
pushing bond yields higher, the hikes in short-term rates eventually caused
economic growth to slow enough to keep inflation at bay. With slower growth, and
the prospect of reduced supplies of Treasury issues, bond yields moved lower for
most of the second half of the period. In the meantime, volatility increased for
both stocks and bonds. While such volatility can be unnerving, even for
experienced investors, short-term fluctuations are quite normal and should not
deter you from the asset allocation strategy you've set to meet long-term
financial goals.
The Galaxy Funds have taken several steps to help you reach those goals.
With the completion of the reorganization of the Boston 1784 Funds into the
Galaxy Funds in June 2000, you now have a broader range of funds from which to
choose in diversifying your portfolio. As assets from the Boston 1784 Funds were
transferred to existing Galaxy Funds in connection with the reorganization, FIA
made the portfolio adjustments necessary in seeking to achieve each Fund's
investment objective. In implementing such adjustments, FIA sought to make the
most of current market conditions and to maximize each Fund's returns.
Going forward, Keith Banks, FIA's new Chief Investment Officer, will
oversee the portfolio management of the Galaxy Taxable Bond Funds and other
funds in the Galaxy family. Mr. Banks was the former managing director and head
of U.S. equities for J.P. Morgan Investment Management.
If you would like to know more about the expanded array of Galaxy Funds, or
you have questions about the information in this report, please contact the
Galaxy Information Center toll-free at 1-877-BUY-GALAXY (1-877-289-4252) or
visit us at www.galaxyfunds.com. You may also consult your financial advisor.
Sincerely,
/S/ SIGNATURE DWIGHT E.VICKS, JR.
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
<PAGE>
MARKET OVERVIEW
[BEGIN SIDEBAR]
"IMPROVING UPON AN ANNUALIZED RATE OF 5.5% FOR THE THIRD QUARTER OF 1999, THE
GROSS DOMESTIC PRODUCT ("GDP"), WHICH MEASURES THE OUTPUT OF U.S. GOODS AND
SERVICES, GREW BY 7.3% IN THE FOURTH QUARTER."
[END SIDEBAR]
BOND MARKET OVERVIEW
BY FLEET INVESTMENT ADVISORS INC.
Concerned that strong growth would cause higher inflation that could
eventually halt the current economic expansion, the Fed imposed hikes in
short-term interest rates totaling 125 basis points over the 12 months ended
October 31, 2000, to achieve a "soft landing" for the economy. Bond yields moved
higher through mid-January of 2000, causing bond prices to fall. Signs of slower
growth then combined with reduced supplies of Treasury issues to force a
substantial drop in yields. By the end of the reporting period, long-term
Treasury yields were about 40 basis points lower than when the period began.
During this time, we adjusted the mix of maturities in the Galaxy Taxable
Bond Funds to make the most of shifting yields. This strategy, plus a focus on
higher quality investments, helped enhance the Funds' total returns.
MULTIPLE RATE HIKES
When the reporting period started on November 1, 1999, the yield for
30-year Treasury bonds was 6.16%, and the annual rate of "headline" inflation
was about 2.6%. Improving upon an annualized rate of 5.5% for the third quarter
of 1999, the gross domestic product ("GDP"), which measures the output of U.S.
goods and services, grew by 7.3% in the fourth quarter.
Finding that two earlier hikes in short-term rates had not yet caused
growth to slow, the Fed raised rates another 25 basis points on November 16.
With expectations for further rate increases, long-term Treasury yields reached
6.48% by December 31, 1999.
As growth remained a relatively strong 4.8% in the first quarter of 2000,
upward pressure on inflation from tight employment and rising energy costs
forced the Fed to impose additional rate hikes of 25 basis points each in
February and March. Following the announcement by the U.S. Treasury in
mid-January that it would buy back its long-term debt, which increased investor
demand for these securities, intermediate- and long-term Treasury yields began
falling from a high of 6.74%. By spring, the Treasury yield curve became
"inverted" (with short-term yields higher than long-term yields) for the first
time in nearly 10 years.
Yields for long-term corporate bonds and issues of U.S. government agencies
remained relatively high, however, causing these sectors to underperform. The
widening in corporate yield spreads was partly a response to volatility in stock
prices and a potential for deterioration in corporate credit quality. Corporate
underperformance was particularly notable among lower-rated issues.
As growth remained a robust 5.6% in the second quarter of 2000, the Fed
raised short-term rates another 50 basis points in May. Growth then slowed to an
estimated rate of 2.7% in the third quarter, which allowed the Fed to put
further rate hikes on hold. After rising sharply in April and May, in
anticipation of additional Fed action, bond yields fell into September. After a
brief rise at the end of the third quarter, yields retreated again throughout
October. When the reporting period ended, the yield for 30-year Treasuries stood
at 5.78%.
In a reverse of first-quarter trends, short-term issues outperformed longer
maturities in the second quarter. By the third quarter, short- and long-term
yields had returned to a more typical relationship. After outperforming Treasury
bonds during the third quarter, on anticipation of an economic soft landing,
corporates underperformed in October - as rising energy prices, a weak euro, and
signs of a more significant slowdown in the economy raised concerns about
corporate earnings.
FOCUS ON QUALITY
In this market climate, the Galaxy Taxable Bond Funds benefited from an
increased emphasis on Treasury issues and higher-quality corporate bonds. When
we took profits in Treasuries during the reporting period to seize special
opportunities in corporates, we focused on top-rated issues in industries that
have traditionally been less vulnerable to a slowdown in growth. Strong yields
from asset-backed and mortgage-backed securities further enhanced the Funds'
total returns.
Shareholders also benefitted from adjustments in the maturity structures of
the Galaxy Short-Term Bond Fund, the Galaxy Intermediate Government Income Fund
and the Galaxy High Quality Bond Fund that let us make the most of changing
yields. The use of shorter maturities inthese portfolios helped to stabilize
share prices while rates were rising. The Galaxy Intermediate Government Income
Fund and the Galaxy High Quality Bond Fund further benefitted from
carefully-timed additions of intermediate- and long-term issues.
2
<PAGE>
[BEGIN SIDEBAR]
"IF THE FED BELIEVES GROWTH IS UNDER CONTROL, IT MAY SOON END THE LATEST CYCLE
OF RATE HIKES. "
[END SIDEBAR]
MODERATE GROWTH AND INFLATION AHEAD
Although it took more time for economic growth to slow than the Fed had
hoped, it is clear that a slowdown has occurred and may even last longer than
expected. We believe growth will remain healthy, however, with an increase in
GDP of 3.0% to 3.5% for 2001.
If the Fed believes growth is under control, it may soon end the latest
cycle of rate hikes. Although inflation has been as high as 3.7% in the past 12
months, and a tight labor market is keeping upward pressure on wages, continued
gains in productivity combined with slower growth should help inflation stay
within acceptable limits.
In this environment, bond yields could edge lower and the yield curve
should continue to move to its more typical shape. As we look for maturities
that offer the best value, we plan to remain focused on U.S. government
securities and top-rated corporate issues.
PERFORMANCE AT-A-GLANCE
AVERAGE ANNUAL TOTAL RETURNS - RETAIL A SHARES*
10 YEARS/
AS OF OCTOBER 31, 2000 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND***
-------------------------------------------------------------------------------
Short-Term Bond Fund
(INCEPTION DATE 12/30/91) 1.84% 3.53% 4.17% 4.68%
-------------------------------------------------------------------------------
Intermediate Government
Income Fund**
(INCEPTION DATE 9/1/88) 3.03 3.60 4.34 6.47
-------------------------------------------------------------------------------
High Quality Bond Fund
(INCEPTION DATE 12/14/90) 3.02 3.43 4.54 6.72
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS - PRIME A SHARES*
-------------------------------------------------------------------------------
AS OF OCTOBER 31, 2000 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
-------------------------------------------------------------------------------
High Quality Bond Fund
(INCEPTION DATE 11/1/98) 1.93% N/A N/A (0.41)%
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS - TRUST SHARES
10 YEARS/
AS OF OCTOBER 31, 2000 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND***
-------------------------------------------------------------------------------
Short-Term Bond Fund
(INCEPTION DATE 12/30/91) 6.04% 5.12% 5.21% 5.30%
-------------------------------------------------------------------------------
Intermediate Government
Income Fund
(INCEPTION DATE 9/1/88) 7.29 5.22 5.34 6.92
-------------------------------------------------------------------------------
Corporate Bond Fund
(INCEPTION DATE 12/12/94) 5.69 4.53 5.22 6.75
-------------------------------------------------------------------------------
High Quality Bond Fund
(INCEPTION DATE 12/14/90) 7.27 4.93 5.51 7.24
-------------------------------------------------------------------------------
* Return figures for Retail A Shares have been restated to include the
effect of the maximum 3.75% front-end sales charge which became effective
on December 1, 1995. Return figures for Prime A Shares include the effect
of the maximum 4.75% front-end sales charge.
** Retail A Shares of the Intermediate Government Income Fund were first
offered during the fiscal year ended October 31, 1992. The returns for
Retail A Shares for prior periods represent the returns for Trust Shares
of the Fund. Prior to November 1, 1993, the returns for Retail A Shares
and Trust Shares of the Fund were the same because each series had the
same expenses.
*** Return figures shown are average annual total returns for the 10 years
ended October 31, 2000 for the Intermediate Government Income Fund and for
the period from inception through October 31, 2000 for the Short-Term
Bond, Corporate Bond and High Quality Bond Funds.
3
<PAGE>
PERFORMANCE AT-A-GLANCE
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS - RETAIL B SHARES**
1 YEAR 1 YEAR 3 YEAR 3 YEAR LIFE OF FUND LIFE OF FUND
RETURNS RETURNS RETURNS RETURNS RETURNS RETURNS
BEFORE AFTER BEFORE AFTER BEFORE AFTER
CONTINGENT CONTINGENT CONTINGENT CONTINGENT CONTINGENT CONTINGENT
DEFERRED DEFERRED DEFERRED DEFERRED DEFERRED DEFERRED
AS OF SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
OCTOBER 31, 2000 DEDUCTED DEDUCTED* DEDUCTED DEDUCTED* DEDUCTED DEDUCTED*
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term
Bond Fund
(INCEPTION DATE 3/4/96) 5.02% 0.02% 4.14% 3.22% 4.19% 4.01%
---------------------------------------------------------------------------------------------------------------------------------
Intermediate
Government
Income Fund
(INCEPTION DATE 11/1/98) 6.22 1.22 N/A N/A 2.14 0.27
---------------------------------------------------------------------------------------------------------------------------------
High Quality
Bond Fund
(INCEPTION DATE 3/4/96) 6.37 1.37 4.14 3.24 4.52 4.34
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS - PRIME B SHARES**
1 YEAR 1 YEAR LIFE OF FUND LIFE OF FUND
RETURN BEFORE RETURN AFTER RETURN BEFORE RETURN AFTER
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
AS OF DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
OCTOBER 31, 2000 CHARGE DEDUCTED CHARGE DEDUCTED* CHARGE DEDUCTED CHARGE DEDUCTED*
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Quality Bond Fund
(INCEPTION DATE 11/1/98) 6.41% 1.41% 1.35% (0.49)%
--------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS - BKB SHARES
AS OF OCTOBER 31, 2000 LIFE OF FUND(DAGGER)
--------------------------------------------------------------
Short-Term Bond Fund
(INCEPTION DATE 6/19/00) 2.94%
--------------------------------------------------------------
Intermediate Government Income Fund
(INCEPTION DATE 6/19/00) 3.30
--------------------------------------------------------------
High Quality Bond Fund
(INCEPTION DATE 6/19/00) 3.43
--------------------------------------------------------------
(DAGGER) Unannualized total returns.
* As if shares were redeemed at end of period.
** Retail B Shares and Prime 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 and Prime B Shares automatically convert to Prime A Shares after
eight years.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUES WILL VARY WITH MARKET CONDITIONS SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
INVESTMENT ADVISOR AND/OR ITS AFFILIATES AND/OR THE ADMINISTRATOR IS PRESENTLY
WAIVING FEES AND/OR REIMBURSING EXPENSES AND MAY REVISE OR DISCONTINUE SUCH
PRACTICE AT ANY TIME. WITHOUT SUCH WAIVERS AND/OR REIMBURSEMENTS, PERFORMANCE
WOULD BE LOWER. TOTAL RETURN FIGURES IN THIS REPORT INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AND INCLUDE THE
DEDUCTION OF ANY SALES CHARGES, WHERE APPLICABLE, UNLESS OTHERWISE INDICATED.
4
<PAGE>
PORTFOLIO REVIEWS
[GRAPHIC OMITTED: GALAXY LOGO]
GALAXY
FUNDS
[BEGIN SIDEBAR]
THE TAXABLE BOND PORTFOLIO MANAGEMENT TEAM OF FLEET INVESTMENT ADVISORS, INC.
MANAGES THE SHORT-TERM BOND FUND.
[END SIDEBAR0
GALAXY SHORT-TERM BOND FUND
BY THE TAXABLE BOND PORTFOLIO
MANAGEMENT TEAM
As interest rates and yields fluctuated in the past 12 months, we employed
a relatively defensive investment strategy for the Galaxy Short-Term Bond Fund
that helped to increase its yield while protecting the price of Fund shares. For
the 12 months ended October 31, 2000, the Fund's Trust Shares earned a total
return of 6.04% and its Retail A Shares had a total return of 5.76% before
deducting the 3.75% maximum front-end sales charge. Over the same time, the
Fund's Retail B Shares had a total return of 5.02% before deducting the maximum
5.00% contingent deferred sales charge. For the period June 19, 2000 (date of
initial issuance) through October 31, 2000, BKB Shares of the Fund had a total
return of 2.94%. (Please see the chart on page 3 for total returns after
deducting the front-end sales charge and the chart on page 4 for total returns
after deducting the contingent deferred sales charge.)
During this 12-month period, the average short-term bond fund tracked by
Lipper Inc. ("Lipper") earned a total return of 5.76%, and the Lehman Brothers
One-to-Three-Year Government Bond Index had a total return of 6.13%.
On October 31, 2000, when the reporting period ended, the Fund's portfolio
had an average maturity near that of its benchmark, and the Fund's Trust Shares
had a 30-day Securities and Exchange Commission ("SEC") annualized yield of
5.91%. On the same date, Retail A Shares of the Fund had a 30-day SEC annualized
yield of 5.43%, Retail B Shares had a 30-day SEC annualized yield of 4.88%, and
BKB Shares had a 30-day SEC annualized yield of 5.94%.
CONTINUED EMPHASIS ON QUALITY
Anticipating a possible year-end flight to quality, we had increased the
Fund's position in Treasuries before the reporting period began. This increased
emphasis on quality benefited Fund returns in the final months of 1999, as
rising interest rates and concerns about potential Y2K computer problems made
bond prices more volatile. Of further help were a relatively strong position in
cash investments and a maturity structure that was somewhat shorter than that of
the Fund's market benchmark.
The overweighted Treasury position further improved total returns in the
first months of 2000, when the sector outperformed. As interest rates continued
to rise, which tends to dampen home-loan prepayments, the Fund's investments in
mortgage-backed securities also enhanced total returns. Of added help was our
continued emphasis on investments with very short maturities, whose prices tend
to be less sensitive to rising interest rates.
When the prices for corporate bonds and issues of U.S. government agencies
became more attractive, we increased positions in these sectors. Some of these
issues were floating-rate securities, which enhanced the effect of rising
yields. Once slower growth became more likely, we trimmed corporates somewhat
and generally increased the Fund's emphasis on longer maturities to lock in
yield and increase potential price gains if yields should fall.
As rates edged lower in the final months of the reporting period, these
strategies and the extra yield from mortgage-backed and asset-backed securities
improved returns. We further increased investments in mortgages, which remained
relatively attractive, while adding selectively to the asset-backed and
corporate sectors.
POSITIONED FOR SLOWER GROWTH
With slower growth likely to favor bonds with good credit quality, we plan
to stay focused on better-rated issues. The Fund remains slightly overweighted
in Treasury securities and agencies versus our typical investment strategy, and
somewhat underweighted in corporate issues. Within the corporate sector, we
continue to emphasize higher-quality debt with good liquidity. Because we
believe yields could still move lower, we have given greater attention to
fixed-rate securities.
5
<PAGE>
PORTFOLIO REVIEWS
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY SHORT-TERM BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 2000
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 34%
CERTIFICATE OF DEPOSIT 2%
CORPORATE NOTES AND BONDS 37%
MUNICIPAL SECURITIES 4%
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES 17%
FOREIGN BOND, REPURCHASE AGREEMENT & NET OTHER ASSETS AND LIABILITIES 6%
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY SHORT-TERM BOND FUND
GROWTH OF $10,000 INVESTMENT*
<TABLE>
<CAPTION>
LEHMAN BROTHERS GALAXY GALAXY GALAXY GALAXY
ONE TO THREE YEAR SHORT-TERM SHORT-TERM SHORT-TERM SHORT-TERM
GOVERNMENT BOND FUND BOND FUND BOND FUND BOND FUND
BOND INDEX RETAIL A SHARES TRUST SHARES RETAIL B SHARES BKB SHARES
<S> <C> <C> <C> <C> <C>
12/30/91 10000 9625 10000
12/30/92 10542 10521 10521
12/30/93 11150 11256 11256
12/30/94 11280 11179 11181
12/30/95 12276 12216 12249 10000
12/30/96 13010 12302 12850 10212
12/30/97 14055 12995 13592 10721
10/31/98 15113 13829 14501 11336
10/31/99 15562 14164 14888 11335
6/19/2000 15732 14592 15363 11727 10000
10/31/2000 16516 14980 15787 12012 10294
</TABLE>
* SINCE INCEPTION ON 12/30/91 FOR TRUST AND RETAIL A SHARES. SINCE INCEPTION
ON 3/4/96 FOR RETAIL B SHARES. SINCE INCEPTION ON 6/19/00 FOR BKB 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 2.00% CONTINGENT DEFERRED SALES CHARGE (APPLICABLE TO
SHARES REDEEMED DURING THE FIFTH YEAR AFTER PURCHASE) AS IF SHARES WERE
REDEEMED ON OCTOBER 31, 2000. THE LEHMAN BROTHERS ONE TO THREE YEAR GOVERNMENT
BOND INDEX IS AN UNMANAGED INDEX IN WHICH INVESTORS CANNOT INVEST. RESULTS FOR
THE INDEX DO NOT REFLECT INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES
INCURRED BY THE FUND.
[PHOTO OMITTED]
[BEGIN SIDEBAR]
MARIE SCHOFIELD BECAME MANAGER OF THE GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
IN DECEMBER OF 1996. SHE HAS MANAGED FIXED-INCOME INVESTMENTS SINCE 1975.
[END SIDEBAR]
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
BY MARIE SCHOFIELD
PORTFOLIO MANAGER
As bond yields trended lower over the past year, the Galaxy Intermediate
Government Income Fund benefited from a maturity structure that gave extra
attention to longer-term issues, which enhanced the Fund's income and price
gains. Of further help was a lighter weighting in the underperforming corporate
sector.
With these strategies, the Fund's Trust Shares had a total return of 7.29%
for the 12 months ended October 31, 2000. Over the same time, the Fund's Retail
A Shares had a total return of 7.01% before deducting the maximum 3.75%
front-end sales charge and its Retail B Shares had a total return of 6.22%
before deducting the maximum 5.00% contingent deferred sales charge. For the
period June 19, 2000 (date of initial issuance) through October 31, 2000,
BKB Shares of the Fund had a total return of 3.30%. (Please see the chart on
page 3 for total returns after deducting the front-end charge and the chart on
page 4 for total returns after deducting the contingent deferred sales charge.)
Those total returns compare with a return of 6.29% for the average
intermediate government bond fund tracked by Lipper, a total return of 6.46% for
the Lehman Brothers Intermediate Government/Credit Bond Index and a total return
of 7.30% for the Lehman Brothers Aggregate Bond Index. As of October 31, 2000,
the Fund's Trust Shares had a 30-day SEC annualized yield of 5.90%, its Retail A
Shares had a 30-day SEC annualized yield of 5.39%, its Retail B Shares had a
30-day SEC annualized yield of 4.84%, and its BKB Shares had a 30-day SEC
annualized yield of 5.79%.
INCREASED HOLDINGS IN LONG-TERM TREASURIES
As the fiscal year began, the Fund's investments were about one-half year
longer in duration than that of the its benchmarks, the Lehman Brothers
Aggregate Bond Index and the Lehman Brothers Intermediate Government/Credit Bond
Index. We were also using a barbell structure that gives added emphasis to both
long and short maturities. This allowed the Fund to benefit from the higher
yields available in long maturities, with the shorter maturities serving to
stabilize Fund valuation as yields continued to rise. Because corporates had
performed well in recent months, but were vulnerable to an expected economic
slowdown as the Fed continued to tighten monetary policy, we took profits and
increased investments in Treasuries and government agencies.
We further increased Treasuries early in the first quarter of 2000,
primarily in longer-term issues, and extended the Fund's duration to
three-quarters of a year long or about 118% of the average duration of its
benchmarks. This strategy significantly improved total returns as Treasuries,
6
<PAGE>
PORTFOLIO REVIEWS
especially long-term Treasuries, rallied in the weeks that followed. The
commencement of Treasury buybacks in the first quarter coincided with the peak
in yields as investors realized the supply of long-term risk-free Treasury
assets was set to decline dramatically due to growing budget surpluses. The
scramble for these issues drove long yields down and resulted in the first
inverted yield curve in ten years, which left short-term rates higher than
long-term rates.
The barbell structure and extended duration resulted in significant
outperformance for the Fund in the first half of the year. Further helping
returns was the Fund's underweighted position in corporates and triple-B issues
(versus the benchmarks). As yields continued to fall in the second quarter,
duration was shortened to about one-quarter year long versus the Lehman Brothers
Intermediate Government/Credit Bond Index and the Lehman Brothers Aggregate Bond
Index or about 106% of the benchmarks. Inflation measures were under pressure
this year with headline inflation increasing about 1% to 3.5% and core inflation
up 0.5% to 2.5% over last year. As a result, "real yields" looked less
attractive as they fell below 3%, a major consideration in our decision to
shorten duration.
A SHIFT IN MATURITIES
An increase in weightings for Treasuries and other government issues
occurred due to the acquisition of investments in connection with the Boston
1784 Funds reorganization. To maintain proper diversification, we reduced the
Fund's overweight in these sectors and increased the allocation to both the
mortgage and corporate sectors. The Fund benefited from these additions as the
corporate sector outperformed in the third quarter. The maturity structure was
also shifted during this time by reducing the barbell orientation and increasing
the emphasis on intermediate maturities. Here, the Fund benefited from a pick up
in yield, as we moved into higher yielding securities due to the inverted yield
curve. As a result, the Fund's duration was shortened further, remaining
slightly long at 103% of the duration of the benchmarks.
The unfolding economic slowdown will allow the yield curve to shift to a
more normal shape with short and intermediate rates falling more than long
rates. In conjunction with this expectation, we expect to move increasingly into
a more bulleted structure. Depending upon the speed and magnitude of the
slowdown, the Fed may be forced to remove the tightening bias and at some point
ease monetary policy, possibly during the first half of the year. Until such
time, we will maintain the Fund's duration slightly long to the benchmarks and
concentrate exposure in the highest quality sectors.
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 2000
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 49%
CORPORATE NOTES AND BONDS 12%
ASSET-BACKED SECURITIES 9%
MORTGAGE-BACKED SECURITIES 27%
FOREIGN BONDS, REPURCHASE AGREEMENT & NET OTHER ASSETS AND LIABILITIES 3%
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
GROWTH OF $10,000 INVESTMENT*
<TABLE>
<CAPTION>
LEHMAN BROTHERS GALAXY GALAXY GALAXY GALAXY
INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE
LEHMAN BROTHERS GOVERNMENT/ GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
AGGREGATE CREDIT INCOME FUND INCOME FUND INCOME FUND INCOME FUND
BOND INDEX BOND INDEX RETAIL A SHARES TRUST SHARES RETAIL B SHARES BKB SHARES
<S> <C> <C> <C> <C> <C> <C>
9/1/88 10000 10000 10000 10000
9/1/88 10200 10312 10390 10390
9/1/89 11190 11399 11451 11451
9/1/90 11896 12240 11687 11687
9/1/91 13777 13933 13482 13482
9/1/92 15132 15326 14958 14958
9/1/93 16928 16850 16014 16014
9/1/94 16307 16524 15307 15310
9/1/95 18859 18596 17274 17329
9/1/96 19961 19866 17221 18022
9/1/97 21736 21582 18483 19376
10/31/98 23766 23548 19721 20732 10000
10/31/99 23892 23781 20046 21038 9353
6/19/2000 25759 24200 20776 21841 9756 10000
10/31/2000 25636 25317 21451 22572 10053 10330
</TABLE>
* SINCE INCEPTION ON 9/1/88 FOR TRUST AND RETAIL A SHARES. SINCE INCEPTION
ON 11/1/98 FOR RETAIL B SHARES. SINCE INCEPTION ON 6/19/00 FOR BKB 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 4.00% CONTINGENT DEFERRED SALES CHARGE (APPLICABLE TO
SHARES REDEEMED DURING THE SECOND YEAR AFTER PURCHASE) AS IF SHARES WERE
REDEEMED ON OCTOBER 31, 2000. THE LEHMAN BROTHERS AGGREGATE BOND INDEX AND THE
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT BOND INDEX ARE UNMANAGED
INDICES IN WHICH INVESTORS CANNOT INVEST. RESULTS FOR THE INDICES DO NOT
REFLECT INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES INCURRED BY THE FUND.
7
<PAGE>
PORTFOLIO REVIEWS
[PHOTO OMITTED]
[BEGIN SIDEBAR]
DAVID LINDSAY HAS MANAGED THE GALAXY CORPORATE BOND FUND SINCE ITS INCEPTION IN
DECEMBER OF 1994. HE HAS MANAGED OTHER FIXED-INCOME PORTFOLIOS FOR FLEET
INVESTMENT ADVISORS INC. SINCE 1986.
[END SIDEBAR]
GALAXY CORPORATE BOND FUND
BY DAVID LINDSAY
PORTFOLIO MANAGER
Although economic growth remained strong for most of the 12 months ended
October 31, 2000, investors became increasingly concerned that an eventual
slowdown in growth would hurt corporate earnings. This, plus a federal budget
surplus that reduced supplies of government debt, helped Treasury bonds
outperform corporate securities for most of the reporting period.
With investors concerned about the economy, corporates with higher credit
quality outpaced lower-quality issues. By adding holdings in government debt and
emphasizing higher-quality corporates in sectors that would be less vulnerable
to a slowdown in growth, we helped the Galaxy Corporate Bond Fund perform well
versus its market benchmark and funds with similar investment objectives.
During the 12-month reporting period, Trust Shares of the Galaxy Corporate
Bond Fund earned a total return of 5.69%. That compares to total returns of
5.84% for the average intermediate investment-grade bond fund tracked by Lipper
and 6.46% for the Lehman Brothers Intermediate Government/Credit Bond Index. At
the end of the period the Fund's Trust Shares had a 30-day SEC annualized yield
of 6.18%.
FOCUS ON QUALITY AIDS TOTAL RETURNS
With strong growth at the start of the reporting period, corporate bonds,
especially lower-quality issues, performed well against Treasuries. The Fund's
substantial position in Yankee bonds, which also outperformed, helped offset the
effect of an overweighting in higher-quality corporates at this time. (Yankee
bonds are dollar-denominated obligations issued in the U.S. by foreign
entities.) Expecting higher interest rates to slow economic growth and corporate
earnings, we traded some corporates for Treasury bonds, issues of U.S.
government agencies, and additional Yankee bonds.
This strategy, and our continued emphasis on higher-quality corporates,
proved beneficial during the first months of 2000, when the demand for
higher-quality bonds increased. These positives also offset an emphasis on
shorter- and intermediate-term bonds, which underperformed longer-term issues.
In the spring, when the prices for corporate bonds had become quite
attractive, we traded some of the Fund's Treasury holdings for bonds of
industrial and telecommunications firms, whose earnings would likely be less
sensitive to a further rise in interest rates. We also reduced exposure to the
interest-sensitive financial sector at this time. Because a lowered risk of home
loan prepayments had made mortgage-backed securities relatively expensive, we
did not replace those that had paid down.
As expectations for an economic "soft landing" helped corporates outperform
in the third quarter of 2000, higher-quality corporates continued to outpace
lower-quality issues. We made further reductions in the debt of financial firms
and traded issues from the retail group and other sectors that could be
vulnerable to slower growth for issues of energy, utility, metal, and technology
firms. When corporate prices became less attractive, we added investments in
Treasuries. This benefited total returns in the final month of the reporting
period, when Treasuries again outperformed. At the end of the period, we were
trading positions in the telecommunications and food sectors for issues of
capital goods, consumer product, and banking firms.
PREPARED FOR SLOWER GROWTH
Our continued emphasis on Treasuries and high-quality corporates should
further benefit Fund returns as growth slows further. The reduction in issues of
financial firms and increased debt from sectors that are less sensitive to a
slowdown (such as the utility and industrial groups) should also aid Fund
performance. There should be additional benefit from a larger position in Yankee
bonds, which could outperform if foreign economies do better relative to U.S.
growth, as we expect.
8
<PAGE>
PORTFOLIO REVIEWS
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY CORPORATE BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 2000
FOREIGN BOND, REPURCHASE AGREEMENT & NET OTHER ASSETS AND LIABILITIES 2%
CORPORATE NOTES AND BONDS 68%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 24%
ASSET-BACKED SECURITIES 6%
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY CORPORATE BOND FUND
GROWTH OF $10,000 INVESTMENT*
LEHMAN BROTHERS
INTERMEDIATE GALAXY
GOVERNMENT/ CORPORATE
CREDIT BOND FUND
BOND INDEX TRUST SHARES
12/12/94 10000 10000
12/12/95 10967 11385
12/12/96 11658 11954
12/12/97 12665 12858
10/31/98 15113 14011
10/31/99 15263 13896
10/31/2000 16249 14686
* SINCE INCEPTION ON 12/12/94 THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT
BOND INDEX IS AN UNMANAGED INDEX IN WHICH INVESTORS CANNOT INVEST. RESULTS FOR
THE INDEX DO NOT REFLECT INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES
INCURRED BY THE FUND.
[PHOTO OMITTED]
[BEGIN SIDEBAR]
MARIE SCHOFIELD HAS MANAGED THE GALAXY HIGH QUALITY BOND FUND SINCE MARCH OF
1996. SHE HAS MANAGED FIXED-INCOME INVESTMENTS SINCE 1975.
[END SIDEBAR]
GALAXY HIGH QUALITY BOND FUND
BY MARIE SCHOFIELD
PORTFOLIO MANAGER
At a time when investors favored government bonds and corporate issues with
top credit ratings, the Galaxy High Quality Bond Fund benefited from its focus
on these sectors. Adjustments in the Fund's maturity structure that made the
most of changing yields further enhanced total returns and helped the Fund
outperform for the 12 months ended October 31, 2000.
The Fund's Trust Shares earned a total return of 7.27% for the 12 months
ended October 31, 2000. Over the same time, the Fund's Retail A Shares had a
total return of 7.04% before deducting the maximum 3.75% front-end sales charge,
and its Retail B Shares had a total return of 6.37% before deducting the maximum
5.00% contingent deferred sales charge. For the same reporting period, the
Fund's Prime A Shares had a total return of 7.00% before deducting the maximum
4.75% front-end sales charge and its Prime B Shares had a total return of 6.41%
before deducting the maximum 5.00% contingent deferred sales charge. For the
period June 19, 2000 (date of initial issuance) through October 31, 2000, BKB
Shares of the Fund had a total return of 3.43%. (Please see the charts on page 3
for total returns after deducting the applicable front-end charge and the charts
on page 4 for total returns after deducting the applicable contingent deferred
sales charge.)
Over the same 12-month period, the average A-rated corporate bond fund
tracked by Lipper had a total return of 5.52% for the 12-month period, and the
Lehman Brothers Government/Credit Bond Index had a total return of 8.78%.
On October 31, 2000, the Fund's Trust Shares had a 30-day SEC annualized
yield of 6.07%, and its Retail A Shares had a 30-day SEC annualized yield of
5.57%. On the same date, the Fund's Retail B Shares had a 30-day SEC annualized
yield of 5.15%, its Prime A Shares had a 30-day SEC annualized yield of 5.72%,
its Prime B Shares had a 30-day SEC annualized yield of 5.11%, and its BKB
Shares had a 30-day SEC annualized yield of 6.01%.
9
<PAGE>
PORTFOLIO REVIEWS
GREATER ATTENTION TO QUALITY
At the start of the reporting period in November 1999, the maturities of
investments in the Fund's portfolio were about three-quarters of a year longer
than the maturity represented by the Fund's benchmark or about 114% of benchmark
duration. During that time, we employed a barbell structure, which overweights
both long and short maturities at the expense of intermediate maturities. This
structure performs well in a flattening yield curve environment where short
rates rise more than long rates. This can occur as the Fed continues to hike
short-term interest rates and tighten monetary policy in order to cool the
economy. We took profits in corporates as the year closed due to our expectation
that rate hikes, together with rising energy prices and labor costs, would begin
to erode profit margins and lead to some deterioration in credit quality as the
economy slowed. As a result, our allocation to Treasuries continued to grow in
December and January, especially investments in longer-term issues, which left
the Fund's duration nearly one year long to that of its benchmark, the Lehman
Brothers Government/Credit Bond Index, or about 118% of benchmark duration.
While the Fed continued to tighten monetary policy by raising the overnight
Fed funds rate, long-term rates began to decline. The commencement of Treasury
buybacks in the first quarter coincided with the peak in yields as investors
realized the supply of long-term risk-free Treasury assets was set to decline
dramatically due to growing budget surpluses. The resulting buying frenzy, in
addition to extremely depressed sentiment levels, was the driving force behind
the climactic move to lower yields throughout the first half of the year. This
caused the yield curve to invert for the first time in ten years, leaving
short-term rates higher than long-term rates.
The barbell structure and long duration positioning resulted in significant
outperformance for the Fund in the first half of the reporting period. Further
helping returns was our neutral weighting in corporates and underweighting in
triple-B rated issues. Risk premiums in the corporate sector widened in sympathy
with equity market volatility and a possible turn in the credit cycle. This was
most evident in lower quality issues where rising default ratios and downgrades
sapped investor enthusiasm. The Fund's overall higher quality and liquidity
orientation certainly contributed to the attractive relative performance. With
the decline in yields, duration positioning was reduced in the second quarter to
about one-quarter year longer than that of the benchmark or about 106% of the
benchmark. Inflation measures were under pressure this year with headline
inflation up about 1% to 3.5% and core inflation up 0.5% to 2.5% over last year.
As a result, "real yields" looked less attractive as they fell below 3%, a major
consideration in our decision to shorten.
A CHANGE IN MATURITY STRUCTURE
An increase in weightings for government issues and mortgages and a further
shortening of the duration position occurred due to the acquisition of
investments in connection with the Boston 1784 Funds reorganization. To keep the
Fund properly diversified, we reduced the Fund's position in governments and
increased the allocation to intermediate-term corporates and triple-A rated
asset-backed issues. This proved beneficial in the third quarter, when these
sectors outperformed. The Fund's maturity structure also shifted from a barbell
orientation to a laddered structure with emphasis on intermediate maturities
where we felt relative value was greatest. The Fund's duration was held just
slightly longer than that of its benchmark. This re-positioning was a result of
our expectation that the Fed tightening cycle was ending and economic growth
would slow in the second half of the year. This would allow short and
intermediate rates to fall (relative to long rates) and reverse some of the
yield curve inversion.
We expect to move increasingly into a more bulleted structure, as the
economic slowdown takes hold and rates fall further. As the fiscal year ended,
we again scaled back the Fund's corporate positions and moved into intermediate
government agencies and Treasury strips. At some point, probably in the first
part of next year, the Fed's monetary policy may be eased should economic growth
fall below acceptable levels. Until that time, the Fund's duration will be held
slightly long to the benchmark and its portfolio will be concentrated in the
highest quality segments of the bond market.
10
<PAGE>
PORTFOLIO REVIEWS
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY HIGH QUALITY BOND FUND
DISTRIBUTION OF TOTAL NET ASSETS AS OF OCTOBER 31, 2000
MORTGAGE-BACKED SECURITIES 15%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 42%
CORPORATE NOTES AND BONDS 29%
ASSET-BACKED SECURITIES 9%
FOREIGN BONDS, REPURCHASE AGREEMENT & NET OTHER ASSETS AND LIABILITIES 5%
[GRAPHIC OMITTED: EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
GALAXY HIGH QUALITY BOND FUND
GROWTH OF $10,000 INVESTMENT*
<TABLE>
<CAPTION>
LEHMAN BROTHERS GALAXY HIGH GALAXY HIGH GALAXY HIGH GALAXY HIGH GALAXY HIGH GALAXY HIGH
GOVERNMENT/ QUALITY QUALITY QUALITY QUALITY QUALITY QUALITY
CREDIT BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
BOND INDEX RETAIL A SHARES TRUST SHARES RETAIL B SHARES PRIME A SHARES PRIME B SHARES BKB SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
12/14/90 10000 9625 10000
12/14/91 13517 10590 11003
12/14/92 14939 11684 12139
12/14/93 16975 13573 14037
12/14/94 16188 12490 12859
12/14/95 18803 14797 15259 10000
12/14/96 19817 15424 15939 10114
12/14/97 21563 16691 17271 10881
10/31/98 23779 18247 19084 11940 9524 10000
10/31/99 23623 17762 18602 11362 9269 9197
6/19/2000 19575 18379 19272 11809 9590 9588 10000
10/31/2000 25307 19012 19955 12192 9918 9903 10343
</TABLE>
* SINCE INCEPTION ON 12/14/90 FOR TRUST AND RETAIL A SHARES. SINCE INCEPTION
ON 3/4/96 FOR RETAIL B SHARES. SINCE INCEPTION ON 11/1/98 FOR PRIME A AND
PRIME B SHARES. SINCE INCEPTION ON 6/19/00 FOR BKB SHARES. PERFORMANCE FIGURES
FOR RETAIL A SHARES INCLUDE THE EFFECT OF THE MAXIMUM 3.75% FRONT-END SALES
CHARGE. PERFORMANCE FIGURES FOR PRIME A SHARES INCLUDE THE EFFECT OF THE
MAXIMUM 4.75% FRONT-END SALES CHARGE. PERFORMANCE FIGURES FOR RETAIL B AND
PRIME B SHARES REFLECT THE DEDUCTION OF THE 2.00% AND 4.00%, RESPECTIVELY,
CONTINGENT DEFERRED SALES CHARGES (APPLICABLE TO SHARES REDEEMED DURING THE
FIFTH AND SECOND YEARS AFTER PURCHASE, RESPECTIVELY), AS IF SHARES WERE
REDEEMED ON OCTOBER 31, 2000. THE LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX
IS AN UNMANAGED INDEX IN WHICH INVESTORS CANNOT INVEST. RESULTS FOR THE
INDICES DO NOT REFLECT INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES INCURRED
BY THE FUND.
11
<PAGE>
SHAREHOLDER SERVICES
[BEGIN SIDEBAR]
"A WELL-BALANCED ASSET ALLOCATION PLAN MAY HELP TO CONTROL YOUR RISK WHILE
PURSUING YOUR GOALS."
[END SIDEBAR]
AUTOMATIC INVESTMENT PROGRAM
The Golden Rule of investing is "pay yourself first." That is easy to do with
Galaxy's Automatic Investment Program. For as little as $50 per month deducted
directly from your checking, savings or bank money market account, you can
consistently and conveniently add to your Galaxy investment. When you establish
an Automatic Investment Program, the $2,500 initial investment requirement for
Galaxy is waived. Of course, such a program does not assure a profit and does
not protect against loss in a declining market.
DIVERSIFICATION
A fundamental investment practice is "diversification." A well-balanced asset
allocation plan may help to control your risk while pursuing your goals. Many
mutual funds offer a low-cost way to diversify your investments while you
benefit from professional management. Galaxy's comprehensive array of investment
choices can be used in combination to match the needs of nearly everyone.
EXCHANGE PRIVILEGES
As your investment needs change, you can conveniently exchange your shares in
one Fund for shares in another Fund at no cost (as long as you exchange within
the same share class).
CONSOLIDATED STATEMENTS
If you hold your shares directly with the Galaxy Funds, you will receive a
consolidated statement from Galaxy on a quarterly basis. If your shares are held
in a brokerage account, your Galaxy Funds will appear on your brokerage
statement.
YOUR FINANCIAL ADVISOR
Your financial advisor can discuss the Galaxy Funds with you and how they may
help you to achieve your financial goals. Please see your financial advisor if
you have any questions about this report or if you have any questions about your
account.
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 services. Call toll-free 1-877-BUY-GALAXY (1-877-289-4252) for
information on initial purchases and current performance.
-----------------------------------------------------------------------------
CERTAIN SHAREHOLDER SERVICES MAY NOT BE AVAILABLE TO TRUST, PRIME A AND PRIME B
SHARE INVESTORS. PLEASE CONSULT YOUR FUND PROSPECTUS.
SHARES OF THE FUNDS ARE DISTRIBUTED THROUGH PROVIDENT DISTRIBUTORS, INC., MEMBER
NASD AND SIPC.
12
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
CORPORATE NOTES AND BONDS - 36.94%
FINANCE - 9.28%
$6,675,000 Donaldson Lufkin &
Jenrette, Inc., MTN
5.63%, 02/15/16.................. $ 6,583,219
420,000 Equitable Cos., Inc.
6.75%, 12/01/00.................. 419,702
2,000,000 IBM Credit Corp., MTN
7.00%, 01/28/02.................. 2,010,000
1,000,000 National Rural Utilities
Cooperative
Finance Corp.
7.38%, 02/10/03.................. 1,012,500
1,500,000 Wells Fargo & Co.
6.86%, 09/15/01 (B).............. 1,502,940
-------------
11,528,361
-------------
AUTOMOBILE FINANCE - 8.98%
1,000,000 Associates Corp.
of North America
Senior Note
5.50%, 02/15/02.................. 986,250
2,500,000 Associates Corp.
of North America
Senior Note
5.75%, 11/01/03.................. 2,428,125
1,600,000 General Electric Capital Corp.,
Series A
7.00%, 03/01/02.................. 1,608,000
255,000 General Electric Capital Corp.,
Series A, MTN
6.81%, 11/03/03.................. 255,956
515,000 General Electric Capital Corp.,
Series A, MTN
7.25%, 05/03/04.................. 523,369
500,000 General Motors Acceptance Corp.
5.63%, 02/15/01.................. 498,125
5,000,000 General Motors
Acceptance Corp., MTN
5.48%, 12/16/02.................. 4,856,250
-------------
11,156,075
-------------
CONSUMER STAPLES - 6.77%
5,000,000 Campbell Soup Co.
6.15%, 12/02/02.................. 4,968,750
1,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A).............. 957,500
2,500,000 Unilever Capital Corp.
6.75%, 11/01/03.................. 2,490,625
-------------
8,416,875
-------------
BASIC MATERIALS - 4.83%
1,000,000 International Paper Co.
8.00%, 07/08/03 (A).............. 1,017,500
5,000,000 Praxair, Inc.
6.70%, 04/15/01.................. 4,981,250
-------------
5,998,750
-------------
PAR VALUE VALUE
---------- ---------
COMMUNICATIONS - 2.79%
$1,000,000 Sprint Capital Corp.
5.88%, 05/01/04.................. $ 955,000
1,500,000 US West Communications
7.63%, 06/09/03 (A).............. 1,516,875
1,000,000 Vodafone Group Plc
6.86%, 12/19/01 (A) (B).......... 1,001,380
-------------
3,473,255
-------------
UTILITIES - 2.02%
2,500,000 Public Service Electric & Gas,
Series A, MTN
7.19%, 09/06/02.................. 2,515,625
-------------
INDUSTRIAL - 1.59%
2,000,000 Caterpillar
Financial Services Corp.,
Series F, MTN
5.47%, 09/12/01.................. 1,980,000
-------------
ENERGY - 0.68%
800,000 Phillips Petroleum Co.
8.50%, 05/25/05.................. 845,000
-------------
Total Corporate Notes and Bonds.. 45,913,941
-------------
(Cost $46,229,341)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 34.49%
U.S. TREASURY NOTES - 13.15%
6,000,000 6.38%, 09/30/01.................. 6,004,680
2,000,000 6.63%, 03/31/02.................. 2,013,120
3,500,000 6.63%, 05/31/02.................. 3,528,980
1,000,000 5.88%, 09/30/02.................. 998,920
2,000,000 5.50%, 03/31/03.................. 1,980,960
1,750,000 6.75%, 05/15/05.................. 1,814,802
-------------
16,341,462
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.29%
2,000,000 5.75%, 04/15/03.................. 1,970,240
181,254 8.95%, 05/25/03.................. 182,046
170,000 6.50%, 08/15/04.................. 169,954
1,500,000 7.13%, 02/15/05.................. 1,533,420
672,346 6.50%, 03/01/12 , Pool # 313409.. 660,439
813,254 6.00%, 01/01/14 , Pool # 482523.. 783,262
2,474,363 8.00%, 05/01/15 , Pool # 357074.. 2,518,431
2,465,808 7.50%, 08/01/15 , Pool # 253390.. 2,482,748
-------------
10,300,540
-------------
FEDERAL HOME LOAN BANK - 6.10%
7,500,000 6.88%, 08/15/03.................. 7,584,375
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.96%
$ 47,131 8.00%, 01/01/02, Pool # 200064... $ 46,864
1,200,000 6.25%, 07/15/04.................. 1,189,500
1,744,606 7.50%, 09/01/15, Pool # E81452... 1,757,132
51,891 7.00%, 05/01/19, Pool # D29158... 51,964
637,492 6.50%, 11/15/23, Pool # 002008... 630,116
-------------
3,675,576
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.40%
1,227,460 6.50%, 09/15/13, Pool # 476201... 1,210,582
789,456 7.00%, 11/15/13, Pool # 780921... 789,701
208,062 7.00%, 04/15/29, Pool # 458548... 205,070
712,626 7.00%, 04/15/29, Pool # 458549... 702,379
78,304 7.00%, 08/15/29, Pool # 509742... 77,178
-------------
2,984,910
-------------
FEDERAL FARM CREDIT BANK - 1.60%
2,000,000 6.10%, 09/24/01 , MTN............ 1,990,320
-------------
Total U.S. Government and
Agency Obligations .............. 42,877,183
-------------
(Cost $43,037,188)
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 17.18%
216,947 Centrex Auto Trust
Series 1996-A, Class A
6.75%, 10/15/04 (A).............. 216,922
112,125 CIT RV Owner Trust
Series 1995-A, Class A
6.25%, 01/15/11.................. 112,169
5,000,000 DaimlerChrysler Auto Trust
Series 2000-A, Class A-3
7.09%, 12/06/03.................. 5,026,550
895,000 Discover Card Master Trust I
Series 1998-4, Class A
5.75%, 10/16/03.................. 889,406
1,500,000 Discover Card Master Trust I
Series 1999-1, Class A
5.30%, 08/15/04.................. 1,472,340
2,500,000 Ford Credit Auto Owner Trust
Series 2000-D, Class A-3
7.15%, 12/15/03.................. 2,510,925
849,302 Norwest Asset Securities Corp.
Series 1997-17, Class A1, CMO
6.75%, 11/25/27.................. 842,933
5,000,000 PNC Student Loan Trust I,
Series 1997-2, Class A-5
6.53%, 01/25/03.................. 4,983,125
553,960 Prudential Home
Mortgage Securities
Series 1993-38, Class A-3, CMO
6.15%, 09/25/23.................. 544,609
640,752 Prudential Home
Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11.................. 635,741
PAR VALUE VALUE
---------- ---------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (CONTINUED)
$ 11,503 Reliance Auto Receivables Corp.
Series 1996-A, Class A
6.10%, 07/15/02 (A).............. $ 11,491
649,359 Ryland Mortgage Securities Corp.
Series 1993-3, Class A, CMO
6.71%, 08/25/08.................. 645,300
1,000,000 Sears Credit Account
Master Trust
Series 1996-4, Class A
6.45%, 10/16/06.................. 995,620
2,500,000 Standard Credit Card
Master Trust
Series 1993-2, Class A
5.95%, 10/07/04.................. 2,449,200
24,107 University Support Services, Inc.
Series 1993-A, Class B
8.98%, 08/20/08 (B).............. 24,336
-------------
Total Asset-Backed and
Mortgage-Backed
Securities ...................... 21,360,667
-------------
(Cost $21,336,948)
MUNICIPAL SECURITIES - 3.65%
CALIFORNIA - 3.21%
4,000,000 Carondelet Health Systems Revenue
6.25%, 07/01/01
Insured: MBIA.................... 3,992,440
-------------
PENNSYLVANIA - 0.44%
545,000 Pennsylvania Housing
Finance Agency,
Single Family Mortgages,
Series C
7.00%, 10/01/06
Insured: FHA..................... 545,681
-------------
TOTAL MUNICIPAL SECURITIES ...... 4,538,121
-------------
(Cost $4,544,555)
CERTIFICATE OF DEPOSIT - 2.01%
2,500,000 Mercantile Safe Deposit & Trust
7.40%, 04/03/02.................. 2,503,125
-------------
TOTAL CERTIFICATE OF DEPOSIT .... 2,503,125
-------------
(Cost $2,500,000)
FOREIGN BOND - 0.76%
1,000,000 Nestle Holdings Plc
5.00%, 12/08/03.................. 948,100
-------------
TOTAL FOREIGN BOND .............. 948,100
-------------
(Cost $947,460)
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
REPURCHASE AGREEMENT - 4.30%
$5,339,000 Repurchase Agreement with:
State Street Bank
6.55%, 11/01/2000,
dated 10/31/2000
Repurchase Price $5,339,971
(Collateralized by
U.S. Treasury Bond
8.75%, Due 5/15/2017;
Total Par $4,095,000
Market Value $5,447,742)......... $ 5,339,000
-------------
TOTAL REPURCHASE AGREEMENT ...... 5,339,000
-------------
(Cost $5,339,000)
TOTAL INVESTMENTS - 99.33%....................... 123,480,137
-------------
(Cost $123,934,492)
NET OTHER ASSETS AND LIABILITIES - 0.67%......... 828,321
-------------
NET ASSETS - 100.00%............................. $ 124,308,458
=============
---------------------------------------------
(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. On October 31, 2000, these securities amounted to $4,721,668 or
3.80% of net assets.
(B) Floating rate note. Interest rate shown reflects rate in effect on
October 31, 2000.
CMO Collateralized Mortgage Obligation
FHA Federal Housing Authority
MBIA Municipal Bond Investors Assurance
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 48.56%
U.S. TREASURY NOTES - 18.16%
$ 463,000 6.63%, 07/31/01.................. $ 464,070
2,500,000 5.75%, 10/31/02.................. 2,492,575
7,500,000 5.50%, 02/28/03.................. 7,431,750
2,630,000 5.50%, 05/31/03.................. 2,603,647
2,700,000 5.75%, 08/15/03.................. 2,690,712
1,500,000 6.00%, 08/15/04.................. 1,506,570
3,000,000 7.50%, 02/15/05.................. 3,184,350
4,750,000 6.50%, 05/15/05.................. 4,880,198
19,475,000 6.75%, 05/15/05.................. 20,196,159
5,550,000 5.88%, 11/15/05.................. 5,571,534
3,720,000 7.00%, 07/15/06.................. 3,922,628
3,000,000 6.50%, 10/15/06.................. 3,094,740
770,000 6.25%, 02/15/07.................. 785,639
5,500,000 6.63%, 05/15/07.................. 5,727,095
8,000,000 6.13%, 08/15/07.................. 8,116,000
1,710,000 5.63%, 05/15/08.................. 1,686,248
5,000,000 6.00%, 08/15/09.................. 5,053,450
9,500,000 6.50%, 02/15/10.................. 9,947,545
3,900,000 5.75%, 08/15/10.................. 3,897,543
-------------
93,252,453
-------------
U.S. GOVERNMENT-BACKED BONDS - 9.47%
4,830,000 A.I.D. Israel, Series 2-D
5.63%, 09/15/03.................. 4,746,006
7,590,000 A.I.D. Israel, Series 8-C
6.63%, 08/15/03.................. 7,648,367
2,500,000 International Bank of
Reconstruction & Development
7.00%, 06/16/03.................. 2,534,375
3,000,000 International Bank of
Reconstruction & Development
7.00%, 01/27/05.................. 3,052,500
6,200,000 Private Export Funding Corp.,
Series B
6.49%, 07/15/07.................. 6,184,500
5,000,000 Private Export Funding Corp.,
Series C
6.31%, 09/30/04.................. 4,962,500
1,740,000 Private Export Funding Corp.,
Series WW
6.62%, 10/01/05.................. 1,746,525
3,800,000 Private Export Funding Corp.,
Series ZZ
7.11%, 04/15/07.................. 3,909,250
2,452,194 Small Business Administration
Participation Certificates,
Series SBIC-PS 1955-10B
7.25%, 05/10/05.................. 2,332,649
2,000,000 U.S. Department of Housing &
Urban Development, Series 95-A
8.24%, 08/01/02.................. 2,057,500
4,000,000 U.S. Department of Housing &
Urban Development, Series 97-A
6.21%, 08/01/01.................. 3,990,000
5,500,000 U.S. Department of Housing &
Urban Development, Series 97-A
6.36%, 08/01/04.................. 5,472,500
-------------
48,636,672
-------------
PAR VALUE VALUE
---------- ---------
U.S. TREASURY BONDS - 8.57%
$ 500,000 11.13%, 08/15/03................. $ 565,430
1,200,000 11.88%, 11/15/03................. 1,394,952
1,850,000 12.00%, 08/15/13................. 2,531,189
2,200,000 11.25%, 02/15/15................. 3,300,000
2,000,000 9.88%, 11/15/15.................. 2,760,260
2,960,000 8.75%, 05/15/17.................. 3,803,926
4,735,000 8.88%, 08/15/17.................. 6,155,453
3,000,000 8.50%, 02/15/20.................. 3,844,830
3,000,000 8.75%, 05/15/20.................. 3,935,790
1,500,000 8.75%, 08/15/20.................. 1,971,345
3,500,000 7.88%, 02/15/21.................. 4,259,605
3,750,000 8.13%, 08/15/21.................. 4,685,813
1,500,000 6.88%, 08/15/25.................. 1,671,180
1,100,000 6.00%, 02/15/26.................. 1,102,783
1,500,000 6.38%, 08/15/27.................. 1,582,470
500,000 5.25%, 11/15/28.................. 454,700
-------------
44,019,726
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.42%
4,000,000 6.51%, 08/15/01, MTN (D)......... 3,800,000
805,000 5.13%, 02/13/04.................. 772,550
1,500,000 7.13%, 02/15/05.................. 1,533,420
1,000,000 6.58%, 03/01/06, MTN............. 982,460
5,250,000 6.00%, 05/15/08.................. 5,058,270
4,885,000 5.25%, 01/15/09.................. 4,450,870
970,000 7.13%, 01/15/30.................. 1,012,069
-------------
17,609,639
-------------
FEDERAL HOME LOAN BANK - 3.37%
7,000,000 6.88%, 04/16/01 (D).............. 7,003,500
4,900,000 6.88%, 07/18/02.................. 4,930,625
3,000,000 6.58%, 01/07/03.................. 2,984,430
350,000 7.66%, 07/20/04.................. 363,181
2,000,000 7.73%, 04/05/10.................. 2,045,000
-------------
17,326,736
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.07%
3,500,000 5.75%, 07/15/03.................. 3,442,355
1,000,000 7.34%, 11/03/06.................. 992,410
7,410,000 6.63%, 09/15/09.................. 7,363,688
4,000,000 6.75%, 09/15/29.................. 3,979,360
-------------
15,777,813
-------------
U.S. TREASURY STRIPS (A) - 2.44%
17,500,000 4.99%, 02/15/10
Interest only, (B) .............. 10,188,150
1,000,000 5.26%, 08/15/10
Interest only, (B) .............. 565,470
5,000,000 1.78%, 11/15/17
Interest only, (B) .............. 1,808,050
-------------
12,561,670
-------------
FEDERAL FARM CREDIT BANK - 0.06%
350,000 7.35%, 03/24/05, MTN............. 360,395
-------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS ..................... 249,545,104
-------------
(Cost $249,467,382)
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
MORTGAGE-BACKED SECURITIES - 27.17%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 11.83%
$ 28,946 8.50%, 10/15/04, Pool # 004216... $ 29,441
39,348 8.50%, 01/15/06, Pool # 007946... 39,791
4,532,205 6.50%, 07/15/09, Pool # 780357... 4,492,729
294,841 6.50%, 06/15/11, Pool # 423829... 291,801
85,557 6.50%, 08/15/12, Pool # 455428... 84,514
18,740 6.50%, 06/15/13, Pool # 462795... 18,482
391,562 6.50%, 07/15/13, Pool # 468077... 386,178
785,007 6.50%, 09/15/13, Pool # 464192... 774,213
298,446 6.50%, 09/15/13, Pool # 476619... 294,342
434,102 6.50%, 09/15/13, Pool # 487907... 428,133
389,417 7.00%, 09/15/13, Pool # 484233... 389,538
1,738,726 6.50%, 10/15/13, Pool # 477500... 1,714,819
413,117 6.50%, 10/15/13, Pool # 481575... 407,436
38,601 6.50%, 11/15/13, Pool # 434062... 38,070
72,649 5.50%, 12/15/13, Pool # 495780... 68,676
305,923 5.50%, 01/15/14, Pool # 464491... 289,192
460,199 5.50%, 02/15/14, Pool # 464568... 435,030
446,886 5.50%, 03/15/14, Pool # 487579... 422,445
341,402 5.50%, 03/15/14, Pool # 501523... 322,731
63,353 5.50%, 04/15/14, Pool # 496599... 59,889
465,671 5.50%, 04/15/14, Pool # 505596... 440,203
425,380 5.50%, 04/15/14, Pool # 506448... 402,116
598,191 5.50%, 05/15/14, Pool # 480524... 565,476
448,876 5.50%, 05/15/14, Pool # 505667... 424,327
521,700 5.50%, 06/15/14, Pool # 434398... 493,168
427,559 5.50%, 06/15/14, Pool # 507142... 404,175
532,259 6.50%, 07/15/14, Pool # 494014... 523,940
581,623 9.00%, 11/15/17, Pool # 780171... 610,338
615,536 6.75%, 07/20/21,
Pool # 008809 (D) ............... 621,310
2,167,422 7.38%, 04/20/22,
Pool # 008956 (D) ............... 2,183,331
592,538 7.00%, 10/15/23, Pool # 360196... 585,872
1,191,007 7.50%, 02/15/27, Pool # 443052... 1,195,473
3,512,485 7.00%, 12/15/28, Pool # 483886... 3,462,011
287,564 7.00%, 01/15/29, Pool # 499333... 283,432
1,385,666 6.50%, 02/15/29, Pool # 485951... 1,337,597
3,092,293 7.00%, 02/15/29, Pool # 486937... 3,047,826
3,207,536 6.00%, 03/15/29, Pool # 464632... 3,022,076
8,466,560 6.50%, 03/15/29, Pool # 498474... 8,172,855
9,435,849 6.50%, 03/15/29, Pool # 498475... 9,108,519
3,310,370 6.00%, 04/15/29, Pool # 499445... 3,118,964
954,245 6.50%, 04/15/29, Pool # 506494... 921,142
5,663,610 7.50%, 09/15/29, Pool # 508805... 5,683,036
3,087,346 7.50%, 09/15/29, Pool # 508811... 3,097,936
-------------
60,692,573
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.00%
51,637 6.50%, 01/25/01,
Pool # 1996-9, CMO .............. 50,830
138,400 8.00%, 07/01/07, Pool # 125136... 140,407
806,520 6.60%, 11/01/07, Pool # 375483... 795,577
946,928 6.57%, 12/01/07, Pool # 375567... 932,700
1,142,623 6.58%, 12/01/07, Pool # 380013... 1,125,748
1,469,341 6.12%, 10/01/08, Pool # 380999... 1,411,026
1,905,895 5.00%, 05/01/09, Pool # 326584... 1,782,476
1,362 8.00%, 12/01/09, Pool # 313180... 1,379
PAR VALUE VALUE
---------- ---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$1,339,140 6.00%, 04/01/11, Pool # 398072... $ 1,300,640
1,234,721 6.50%, 05/01/11, Pool # 250554... 1,212,854
5,093,062 6.00%, 04/01/13, Pool # 251656... 4,905,230
3,643,607 6.00%, 04/01/13, Pool # 418044... 3,509,231
124,657 6.00%, 06/01/13, Pool # 421167... 120,060
1,778,307 6.50%, 06/01/13, Pool # 430204... 1,741,621
489,672 6.00%, 06/01/14, Pool # 484967... 471,310
3,041,847 6.00%, 06/01/14, Pool # 495200... 2,927,777
639,040 6.00%, 06/01/14, Pool # 500131... 615,076
4,672,032 7.79%, 02/01/19, Pool # 160103... 4,754,141
1,083,236 10.00%, 10/01/20, Pool # 190942.. 1,146,199
1,206,369 10.00%, 12/01/20, Pool # 303416.. 1,276,489
1,414,635 6.75%, 04/25/21,
Pool # 0096-4, CMO .............. 1,403,572
6,592,092 8.00%, 12/01/29, Pool # 535031... 6,674,493
465,945 8.00%, 02/01/30, Pool # 525961... 471,621
2,082,475 8.00%, 02/01/30, Pool # 529898... 2,107,839
943,040 8.00%, 02/01/30, Pool # 531766... 954,526
486,939 8.00%, 03/01/30, Pool # 533977... 492,870
995,483 8.00%, 04/01/30, Pool # 526425... 1,007,608
2,587,249 8.00%, 04/01/30, Pool # 536553... 2,618,762
4,396,695 8.50%, 04/01/30, Pool # 535270... 4,492,850
865,363 8.00%, 05/01/30, Pool # 534205... 875,903
-------------
51,320,815
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.33%
54,244 7.00%, 10/01/03, Pool # N97059... 54,085
4,365,845 6.70%, 07/15/06,
Pool # 1233-G, CMO .............. 4,341,265
910,939 7.00%, 12/01/10, Pool # E00407... 909,509
6,291,777 5.00%, 12/01/13, Pool # E73815... 5,857,330
1,080,000 6.75%, 02/15/20,
Pool # 1663AD, CMO .............. 1,047,935
5,000,000 6.00%, 04/15/22,
Pool # 2118QC, CMO .............. 4,748,400
5,412,161 6.50%, 10/15/23,
Pool # 001990, CMO .............. 5,351,274
5,051,105 7.50%, 10/01/29, Pool # C32288... 5,047,923
-------------
27,357,721
-------------
TOTAL MORTGAGE-BACKED SECURITIES 139,371,109
-------------
(Cost $140,990,911)
CORPORATE NOTES AND BONDS - 11.70%
FINANCE - 4.71%
1,000,000 American Express Co.,
Senior Note
6.75%, 06/23/04.................. 993,750
3,000,000 Bank One Wisconsin, Bank Note
6.35%, 03/19/01.................. 2,996,250
1,000,000 Chase Manhattan Corp.,
Subordinate Note
6.50%, 08/01/05.................. 972,500
3,000,000 General Electric Capital Corp.,
Series A, MTN
6.75%, 09/11/03.................. 3,007,500
1,500,000 General Electric Capital Corp.,
Series A, MTN
7.50%, 05/15/05.................. 1,535,625
2,000,000 General Electric Capital Corp.,
Series A, MTN
7.38%, 01/19/10.................. 2,062,500
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
FINANCE (CONTINUED)
$1,650,000 National Rural Utilities
5.50%, 01/15/05.................. $ 1,567,500
3,000,000 NationsBank Texas,
National Association, MTN
6.35%, 03/15/01.................. 2,996,250
2,775,000 Star Bank, N.A.,
Subordinated Note
6.38%, 03/01/04.................. 2,709,094
3,000,000 Wachovia Corp., Senior Note
7.45%, 07/15/05.................. 3,037,500
2,245,000 Wells Fargo & Co.
7.20%, 05/01/03.................. 2,264,644
-------------
24,143,113
-------------
CONSUMER STAPLES - 2.58%
3,500,000 Colgate-Palmolive Co.,
Series C, MTN
5.27%, 12/01/03.................. 3,346,875
805,000 Massachusetts Institute of
Technology, MTN
7.25%, 11/02/96.................. 778,838
5,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (C).............. 4,787,500
2,000,000 Procter & Gamble Co.
6.88%, 09/15/09.................. 1,987,500
2,500,000 Stanford University
5.85%, 03/15/09.................. 2,340,825
-------------
13,241,538
-------------
UTILITIES - 2.05%
5,125,000 Baltimore Gas & Electric,
First Mortgage
6.50%, 02/15/03.................. 5,067,344
2,500,000 Potomac Electric Power Co.,
First Mortgage
6.25%, 10/15/07.................. 2,425,000
3,000,000 Public Service
Electric & Gas, MTN,
Series A
7.19%, 09/06/02.................. 3,018,750
-------------
10,511,094
-------------
COMMUNICATIONS - 0.98%
2,500,000 QWest Corp.
7.63%, 06/09/03 (C).............. 2,528,125
2,500,000 WorldCom, Inc., Senior Note
6.13%, 08/15/01.................. 2,484,375
-------------
5,012,500
-------------
CONSUMER CYCLICAL - 0.49%
2,500,000 Wal-Mart Stores, Inc.
6.88%, 08/10/09.................. 2,490,625
-------------
INDUSTRIAL - 0.40%
1,950,000 Emerson Electric Co.
7.88%, 06/01/05.................. 2,025,563
-------------
PAR VALUE VALUE
---------- ---------
TECHNOLOGY - 0.26%
$1,320,000 Hewlett-Packard Co.
7.15%, 06/15/05.................. $ 1,323,300
-------------
BANKS - 0.24%
1,300,000 U.S. Bank, N.A. Minnesota,
Bank Note
5.63%, 11/30/05.................. 1,213,875
-------------
TOTAL CORPORATE NOTES AND BONDS . 59,961,608
-------------
(Cost $60,057,103)
ASSET-BACKED SECURITIES - 9.49%
2,000,000 American Express
Credit Account Master Trust
Series 1999-1, Class A
5.60%, 11/15/06.................. 1,936,860
3,000,000 Chase Credit Card Master Trust
Series 1998-6, Class A
6.88%, 09/15/04 (D).............. 3,008,430
4,600,000 Chase Credit Card Master Trust
Series 1999-3, Class A
6.66%, 01/15/07.................. 4,592,778
6,000,000 Chemical Master
Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03.................. 5,983,080
1,400,000 Daimler-Benz Vehicle Owner Trust
Series 1998-A, Class A-4
5.22%, 12/20/03.................. 1,375,052
2,500,000 Discover Card Master Trust I
Series1995-3, Class A
6.83%, 03/16/05 (D).............. 2,506,250
4,600,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A-4
6.40%, 10/15/02.................. 4,582,750
4,000,000 Ford Credit Auto Owner Trust
Series 2000-E, Class A-5
6.77%, 10/15/04.................. 4,010,147
2,500,000 Ford Credit Auto Owner Trust
Series 2000-F, Class A-2
6.56%, 05/17/04.................. 2,495,018
500,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06.................. 482,810
360,000 Premier Auto Trust
Series 1999-2, Class A-4
5.59%, 02/09/04.................. 353,473
1,400,000 Premier Auto Trust
Series 1999-3, Class A-4
6.43%, 03/08/04.................. 1,393,868
1,067,919 Prudential Home
Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11.................. 1,059,568
2,561,207 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26.................. 2,501,979
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
ASSET-BACKED SECURITIES (CONTINUED)
$1,719,085 Sallie Mae Student Loan Trust
Series 1997-2, Class A-1
6.88%, 10/25/05.................. $ 1,709,381
1,718,533 Sallie Mae Student Loan Trust
Series 1999-3, Class A-1
6.84%, 01/25/07 (D).............. 1,720,105
4,000,000 Standard Credit Card
Master Trust
Series 1993-2, Class A
5.95%, 10/07/04.................. 3,918,720
5,000,000 USAA Auto Owner Trust
Series 2000-1, Class A4
6.98%, 06/15/05.................. 5,049,425
-------------
TOTAL ASSET-BACKED SECURITIES ... 48,679,694
-------------
(Cost $48,602,175)
FOREIGN BONDS - 1.92%
2,250,000 Government of Canada
5.63%, 02/19/03.................. 2,205,225
2,475,000 Province of Manitoba
7.50%, 02/22/10.................. 2,575,168
2,600,000 Province of Ontario
6.00%, 02/21/06.................. 2,518,750
2,700,000 Province of Quebec,
Senior Subordinated Notes
5.75%, 02/15/09.................. 2,480,625
-------------
TOTAL FOREIGN BONDS ............. 9,779,768
-------------
(Cost $9,681,147)
PAR VALUE VALUE
---------- ---------
REPURCHASE AGREEMENT - 1.25%
$6,385,000 Repurchase Agreement with:
State Street Bank
6.55%, 11/01/2000,
dated 10/31/2000
Repurchase Price $6,386,162
(Collateralized by
U.S. Treasury Bond
8.75%, Due 05/15/2017;
Total Par $4,900,000
Market Value $6,518,666.......... $ 6,385,000
-------------
TOTAL REPURCHASE AGREEMENT ...... 6,385,000
-------------
(Cost $6,385,000)
TOTAL INVESTMENTS - 100.09%...................... 513,722,283
-------------
(Cost $515,183,718)
NET OTHER ASSETS AND LIABILITIES - (0.09)%....... (454,857)
-------------
NET ASSETS - 100.00%............................. $ 513,267,426
=============
------------------------------------------------
(A) Discount yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of the
payment representing interest only or principal only.
(C) 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. On October 31, 2000, these securities amounted to $7,315,625 or
1.43% of net assets.
(D) Floating rate note. Interest rate shown reflects rate in effect at
October 31, 2000.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
CORPORATE NOTES AND BONDS - 67.88%
FINANCE - 20.78%
$ 500,000 Associates Corp. of
North America,
Senior Note
6.00%, 04/15/03.................. $ 491,250
500,000 Associates Corp. of
North America,
Senior Note
6.88%, 08/01/03.................. 500,625
1,000,000 Bank One Wisconsin, Bank Note
6.35%, 03/19/01.................. 998,750
175,000 Barclays Bank Plc, Yankee
7.40%, 12/15/09 (C).............. 174,125
250,000 CitiGroup, Inc.
6.63%, 09/15/05.................. 245,625
1,000,000 CitiGroup, Inc.
6.88%, 06/01/25.................. 1,000,000
1,000,000 Commercial Credit Co.
6.20%, 11/15/01.................. 996,250
720,000 Commercial Credit Co.
6.45%, 07/01/02.................. 716,400
250,000 Ford Motor Credit Co.
6.70%, 07/16/04.................. 244,375
1,000,000 Ford Motor Credit Co.,
Senior Unsubordinated Note
6.50%, 02/28/02.................. 995,000
1,000,000 General Electric Capital Corp.
6.70%, 10/01/02.................. 1,001,250
200,000 General Motors Acceptance Corp.
9.63%, 12/15/01.................. 205,750
500,000 General Motors Acceptance Corp.
5.88%, 01/22/03.................. 488,750
760,000 General Motors Acceptance Corp.,
Senior Unsubordinated Note
6.75%, 02/07/02.................. 759,050
1,000,000 Hartford Financial
Services Group
6.38%, 11/01/02.................. 988,750
1,000,000 IBM Credit Corp., MTN
7.00%, 01/28/02.................. 1,005,000
1,000,000 International Bank of
Reconstruction & Development
7.00%, 01/27/05.................. 1,017,500
500,000 National City Bank of Kentucky,
Subordinated Bank Note
6.30%, 02/15/11.................. 448,125
1,000,000 National Rural Utilities
Cooperative Finance Corp.
7.38%, 02/10/03.................. 1,012,500
500,000 National Rural Utilities
Cooperative Finance Corp.,
Collateral Trust
6.13%, 05/15/05.................. 484,375
450,000 Norwest Financial, Inc.,
Senior Note
6.13%, 08/01/03.................. 439,875
2,400,000 Paccar Financial Corp.,
Series H, Senior MTN
5.86%, 03/15/01.................. 2,391,000
PAR VALUE VALUE
---------- ---------
FINANCE (CONTINUED)
$1,020,000 Pitney Bowes Credit Corp.
6.63%, 06/01/02.................. $ 1,018,725
500,000 SunTrust Bank, Atlanta,
Subordinated Note
7.25%, 09/15/06.................. 501,875
500,000 Wells Fargo & Co.
6.50%, 09/03/02.................. 498,125
-------------
18,623,050
-------------
CONSUMER STAPLES - 11.44%
1,275,000 Becton Dickinson & Co.,
Debenture
6.70%, 08/01/28.................. 1,093,312
1,000,000 Coca-Cola Enterprises, Inc.
7.88%, 02/01/02.................. 1,010,000
500,000 Coca-Cola Enterprises, Inc.,
Debenture
7.13%, 08/01/17.................. 469,375
1,000,000 Diageo Capital Plc, Yankee
6.00%, 03/27/03 (C).............. 977,300
1,000,000 Diageo Capital Plc, Yankee
6.13%, 08/15/05 (C).............. 962,500
1,000,000 Hershey Foods Corp., Debenture
7.20%, 08/15/27.................. 951,250
750,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A).............. 718,125
1,000,000 PepsiCo, Inc., MTN
5.75%, 01/02/03.................. 976,250
250,000 Procter & Gamble Co.
6.60%, 12/15/04.................. 249,062
1,000,000 Procter & Gamble Co.
6.88%, 09/15/09.................. 993,750
968,000 Sysco Corp., Debenture
6.50%, 08/01/28.................. 850,630
1,000,000 Unilever Capital Corp.
6.75%, 11/01/03.................. 996,250
-------------
10,247,804
-------------
UTILITIES - 10.92%
500,000 AT&T Corp.
5.63%, 03/15/04.................. 471,250
500,000 AT&T Corp.
6.50%, 03/15/29.................. 393,750
350,000 Dominion Resources Inc.,
Series B, Senior Notes
7.63%, 07/15/05.................. 353,527
455,000 GTE California, Inc.,
Series B, Debenture
6.75%, 03/15/04.................. 449,881
925,000 GTE Corp., Debenture
6.46%, 04/15/08.................. 881,062
1,000,000 GTE Southwest, Inc., Debenture
6.00%, 01/15/06.................. 948,750
1,000,000 Hydro-Quebec, Yankee
8.88%, 03/01/26 (C).............. 1,153,750
2,000,000 MCI WorldCom, Inc.
6.13%, 04/15/02.................. 1,975,000
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
UTILITIES (CONTINUED)
$1,000,000 PacifiCorp, Series H, MTN
6.38%, 05/15/08.................. $ 917,500
1,000,000 Potomac Electric Power Co.,
First Mortgage
6.25%, 10/15/07.................. 970,000
1,000,000 Public Service
Electric & Gas, MTN,
Series A
7.19%, 09/06/02.................. 1,006,250
305,000 Sprint Capital Corp.
6.90%, 05/01/19.................. 260,013
-------------
9,780,733
-------------
CONSUMER CYCLICAL - 6.90%
500,000 DaimlerChrysler N.A.
Holding Corp.
7.13%, 04/10/03.................. 500,000
500,000 DaimlerChrysler N.A.
Holding Corp., MTN
7.75%, 05/27/03.................. 506,875
1,000,000 McDonald's Corp., MTN
5.95%, 01/15/08.................. 947,500
1,000,000 New York Times Co.
7.63%, 03/15/05.................. 1,036,250
300,000 Seagram Co., Ltd., Yankee
6.50%, 04/01/03 (C).............. 301,875
300,000 Southwest Airlines Co.
8.00%, 03/01/05.................. 308,250
1,005,000 Tele-Communications, Inc.,
Senior Note
8.25%, 01/15/03.................. 1,036,406
500,000 Tele-Communications, Inc.,
Senior Note
7.25%, 08/01/05.................. 502,500
1,000,000 Time Warner Entertainment Co.,
Debenture
8.38%, 03/15/23.................. 1,047,500
-------------
6,187,156
-------------
INDUSTRIAL - 5.66%
1,000,000 Burlington Northern
Santa Fe Corp.
6.13%, 03/15/09.................. 911,250
500,000 Crown Cork & Seal Co., Inc.
8.38%, 01/15/05.................. 363,750
500,000 Emerson Electric Co.
7.88%, 06/01/05.................. 519,375
1,000,000 Emerson Electric Co.
5.85%, 03/15/09.................. 922,500
1,000,000 Honeywell International, Inc.
7.50%, 03/01/10.................. 1,032,500
1,500,000 Minnesota Mining &
Manufacturing Co.,
Debenture
6.38%, 02/15/28.................. 1,318,125
-------------
5,067,500
-------------
PAR VALUE VALUE
---------- ---------
BASIC MATERIALS - 3.93%
$ 300,000 Alcoa, Inc.
7.25%, 08/01/05.................. $ 303,750
200,000 Alcoa, Inc.
7.38%, 08/01/10.................. 202,250
1,000,000 International Paper Co.
7.63%, 08/01/04.................. 1,010,000
1,000,000 Mead Corp., Debenture
6.84%, 03/01/37.................. 958,750
1,000,000 Weyerhaeuser Co., Debenture
8.38%, 02/15/07.................. 1,047,500
-------------
3,522,250
-------------
ENERGY - 3.50%
500,000 Atlantic Richfield Co.,
Debenture
10.88%, 07/15/05................. 581,875
500,000 Coastal Corp.
7.75%, 06/15/10.................. 506,875
1,000,000 Conoco, Inc., Senior Note
6.95%, 04/15/29.................. 932,500
575,000 Phillips Petroleum Co.
8.50%, 05/25/05.................. 607,344
500,000 Tosco Corp.
8.13%, 02/15/30.................. 507,500
-------------
3,136,094
-------------
TECHNOLOGY - 2.99%
220,000 Hewlett-Packard Co.
7.15%, 06/15/05.................. 220,550
1,000,000 International Business
Machines Corp.,
Debenture
6.22%, 08/01/27.................. 986,250
500,000 Loral Corp., Senior Note
7.63%, 06/15/04.................. 503,750
1,000,000 Raytheon Co.
6.50%, 07/15/05.................. 967,500
-------------
2,678,050
-------------
COMMUNICATIONS - 1.76%
200,000 Deutsche Telekom
International Finance
7.75%, 06/15/05.................. 204,680
350,000 Deutsche Telekom
International Finance
8.25%, 06/15/30.................. 359,187
1,000,000 U.S. West Communications Corp.
7.63%, 06/09/03 (A).............. 1,011,250
-------------
1,575,117
-------------
TOTAL CORPORATE NOTES AND BONDS . 60,817,754
-------------
(Cost $62,417,833)
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.00%
U.S. TREASURY BONDS - 6.17%
$1,000,000 11.63%, 11/15/02................. $ 1,106,560
1,000,000 12.00%, 08/15/13................. 1,368,210
860,000 8.75%, 05/15/17.................. 1,105,195
500,000 8.88%, 08/15/17.................. 649,995
750,000 8.88%, 02/15/19.................. 986,258
300,000 6.13%, 08/15/29.................. 310,779
-------------
5,526,997
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.66%
1,000,000 6.63%, 10/15/07.................. 1,005,000
52,406 7.50%, 11/01/07, Pool #188629.... 52,930
1,075,000 6.38%, 06/15/09.................. 1,053,339
68,730 5.00%, 08/01/10, Pool #006893
Series A-1, CMO.................. 65,417
744,985 7.50%, 06/01/13, Pool #457543.... 752,435
1,684,426 6.00%, 11/01/23, Pool #050940.... 1,592,827
571,119 6.50%, 03/01/28, Pool #412263.... 549,165
-------------
5,071,113
-------------
U.S. TREASURY NOTES - 5.40%
500,000 6.00%, 09/30/02.................. 500,680
1,510,000 6.75%, 05/15/05.................. 1,565,915
2,000,000 5.63%, 05/15/08.................. 1,972,220
750,000 6.00%, 08/15/09.................. 758,018
40,000 5.75%, 08/15/10.................. 39,975
-------------
4,836,808
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.16%
5,758 8.75%, 08/01/01, Pool #220011.... 5,786
24,301 7.00%, 06/01/04, Pool #189683.... 24,261
1,215,000 6.25%, 07/15/04.................. 1,204,369
980,000 6.88%, 01/15/05.................. 992,564
30,351 7.50%, 08/01/08, Pool #181313.... 30,579
900,000 6.63%, 09/15/09.................. 894,375
117,474 7.00%, 02/01/17, Pool #289284.... 115,771
126,614 7.00%, 10/01/22, Pool #C00184.... 124,912
131,634 7.00%, 02/01/23, Pool #C00213.... 129,743
212,621 6.00%, 09/01/23, Pool #D41208.... 201,258
-------------
3,723,618
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.62%
39,310 9.00%, 09/15/04, Pool #003669.... 40,099
33,955 9.00%, 12/15/08, Pool #027562.... 35,142
81,675 8.00%, 05/15/22, Pool #319062.... 83,257
465,910 6.00%, 05/20/28, Pool #002589.... 436,940
466,186 6.00%, 03/15/29, Pool #487061.... 439,232
633,020 6.50%, 03/15/29, Pool #464613.... 611,061
696,105 7.50%, 09/15/29, Pool #466172.... 698,492
-------------
2,344,223
-------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS ..................... 21,502,759
-------------
(Cost $21,620,035)
PAR VALUE VALUE
---------- ---------
ASSET-BACKED SECURITIES - 5.84%
$ 500,000 American Express
Credit Account Master
Trust Series 1999-1, Class A
5.60%, 11/15/06.................. $ 484,215
2,000,000 Chemical Master
Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03.................. 1,994,360
400,000 Daimler-Benz Vehicle Owner Trust
Series 1998-A, Class A-4
5.22%, 12/22/03.................. 392,872
600,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A-4
6.40%, 10/15/02.................. 597,750
808,511 Guaranteed Export
Trust Certificates
Series 1993-D, Class A-3
5.23%, 05/15/05.................. 777,682
600,000 Premier Auto Trust
Series 1999-2, Class A-4
5.59%, 02/09/04.................. 589,122
400,000 Premier Auto Trust
Series 1999-3, Class A-4
6.43%, 03/08/04.................. 398,248
-------------
TOTAL ASSET-BACKED SECURITIES ... 5,234,249
-------------
(Cost $5,236,295)
FOREIGN BOND (B) - 0.54%
500,000 Heinz (H.J.) Co.
5.75%, 02/03/03.................. 486,800
-------------
TOTAL FOREIGN BOND............... 486,800
-------------
(Cost $493,780)
REPURCHASE AGREEMENT - 0.59%
529,000 Repurchase Agreement with:
State Street Bank
6.55%, 11/01/2000,
dated 10/31/2000
Repurchase Price $529,096
(Collateralized by
U.S. Treasury Note
5.88%, Due 11/30/2001;
Total Par $530,000
Market Value $540,615)........... 529,000
-------------
TOTAL REPURCHASE AGREEMENT ...... 529,000
-------------
(Cost $529,000)
TOTAL INVESTMENTS - 98.85%....................... 88,570,562
-------------
(Cost $90,296,943)
NET OTHER ASSETS AND LIABILITIES - 1.15%......... 1,029,381
-------------
NET ASSETS - 100.00%............................. $ 89,599,943
=============
-----------------------------------------------------------------
(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. On October 31, 2000, these securities amounted to $1,729,375 or
1.93% of net assets.
(B) Euro-Dollar Bond
(C) U.S. Dollar-Denominated
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 42.16%
U.S. TREASURY BONDS - 18.62%
$2,250,000 12.00%, 08/15/13................. $ 3,078,472
4,000,000 13.25%, 05/15/14................. 5,912,880
3,000,000 11.25%, 02/15/15................. 4,500,000
2,000,000 9.88%, 11/15/15.................. 2,760,260
2,890,000 8.75%, 05/15/17.................. 3,713,968
6,760,000 8.88%, 08/15/17.................. 8,787,932
3,550,000 9.00%, 11/15/18.................. 4,707,051
5,000,000 8.13%, 08/15/19.................. 6,178,100
5,500,000 8.75%, 05/15/20.................. 7,215,615
10,260,000 7.88%, 02/15/21.................. 12,486,728
1,000,000 8.13%, 05/15/21.................. 1,247,940
3,500,000 8.13%, 08/15/21.................. 4,373,425
8,750,000 8.00%, 11/15/21.................. 10,817,187
5,975,000 6.38%, 08/15/27.................. 6,303,505
7,340,000 6.13%, 11/15/27.................. 7,506,031
4,250,000 5.50%, 08/15/28.................. 4,001,077
5,285,000 5.25%, 11/15/28.................. 4,806,179
1,550,000 5.25%, 02/15/29.................. 1,412,980
12,565,000 6.13%, 08/15/29.................. 13,016,460
-------------
112,825,790
-------------
U.S. TREASURY NOTES - 6.64%
15,000,000 6.63%, 06/30/01.................. 15,079,177
2,100,000 6.25%, 02/28/02.................. 2,102,499
2,500,000 5.75%, 10/31/02.................. 2,492,575
80,000 5.50%, 05/31/03.................. 79,198
850,000 7.25%, 05/15/04.................. 886,490
1,260,000 6.75%, 05/15/05.................. 1,306,658
1,575,000 7.00%, 07/15/06.................. 1,660,790
2,800,000 6.00%, 08/15/09.................. 2,829,932
4,125,000 6.50%, 02/15/10.................. 4,319,329
9,490,000 5.75%, 08/15/10.................. 9,484,021
-------------
40,240,669
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.23%
4,000,000 4.89%, 08/15/01, MTN N (C)....... 3,800,000
475,000 5.75%, 04/15/03.................. 467,932
4,000,000 7.13%, 02/15/05.................. 4,089,120
5,000,000 5.75%, 06/15/05.................. 4,850,350
3,000,000 6.63%, 10/15/07.................. 3,015,000
5,100,000 6.00%, 05/15/08.................. 4,913,748
4,199,000 6.38%, 06/15/09.................. 4,114,390
5,000,000 7.25%, 01/15/10.................. 5,189,750
5,700,000 6.25%, 05/15/29.................. 5,336,625
970,000 7.13%, 01/15/30.................. 1,012,069
875,000 7.25%, 05/15/30.................. 927,500
-------------
37,716,484
-------------
PAR VALUE VALUE
---------- ---------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.59%
$2,000,000 7.00%, 02/15/03.................. $ 2,025,000
5,000,000 6.25%, 07/15/04.................. 4,956,250
10,655,000 6.88%, 01/15/05.................. 10,791,597
3,500,000 5.75%, 03/15/09.................. 3,285,625
2,295,000 6.63%, 09/15/09.................. 2,280,656
4,500,000 6.75%, 09/15/29.................. 4,476,780
-------------
27,815,908
-------------
U.S. TREASURY STRIPS (A) - 2.82%
9,000,000 4.86%, 05/15/08
Interest only, (B) .............. 5,823,090
16,500,000 4.99%, 02/15/10
Interest only, (B) .............. 9,605,970
5,000,000 3.91%, 02/15/19
Principal only, (B) ............. 1,687,000
-------------
17,116,060
-------------
U.S. GOVERNMENT-BACKED BONDS - 1.99%
6,000,000 A.I.D. Israel, Series 8-C
6.63%, 08/15/03.................. 6,046,140
4,000,000 Private Export Funding Corp.,
Series B
6.49%, 07/15/07.................. 3,990,000
2,000,000 Private Export Funding Corp.,
Series H
6.45%, 09/30/04.................. 1,995,000
-------------
12,031,140
-------------
FEDERAL HOME LOAN BANK - 1.27%
980,000 6.88%, 07/18/02.................. 986,125
1,070,000 5.13%, 09/15/03.................. 1,033,962
6,000,000 5.80%, 09/02/08.................. 5,689,140
-------------
7,709,227
-------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS ..................... 255,455,278
-------------
(Cost $255,694,920)
CORPORATE NOTES AND BONDS - 28.03%
FINANCE - 7.70%
2,000,000 Associates Corp.
of North America,
Series H, MTN
7.40%, 05/03/02.................. 2,017,500
1,000,000 Associates Corp.
of North America,
Subordinated Note
6.50%, 08/15/02.................. 997,500
3,750,000 Bank of New York,
Subordinated Note
7.88%, 11/15/02.................. 3,834,375
2,000,000 Bank One Wisconsin, Bank Note
6.35%, 03/19/01.................. 1,997,500
1,000,000 Chase Manhattan Corp.,
Subordinated Note
6.50%, 08/01/05.................. 972,500
3,000,000 Comerica Bank,
Subordinated Note
7.25%, 06/15/07.................. 2,988,750
3,525,000 First USA Bank,
Subordinated Note
7.65%, 08/01/03.................. 3,591,094
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
FINANCE (CONTINUED)
$3,540,000 Ford Motor Credit Co.
7.60%, 08/01/05.................. $ 3,566,550
250,000 General Electric Capital Corp.
8.30%, 09/20/09.................. 269,375
2,000,000 General Electric Capital Corp.,
Series A, MTN
7.50%, 05/15/05.................. 2,047,500
3,000,000 General Electric Capital Corp.,
Series A, MTN
7.38%, 01/19/10.................. 3,093,750
3,500,000 National Rural Utilities
5.50%, 01/15/05.................. 3,325,000
1,025,000 National Rural Utilities
Cooperative Finance Corp.
6.20%, 02/01/08.................. 964,781
3,000,000 Star Bank, N.A.,
Subordinated Note
6.38%, 03/01/04.................. 2,928,750
2,000,000 SunTrust Bank, Atlanta,
Subordinated Note
7.25%, 09/15/06.................. 2,007,500
1,300,000 SunTrust Bank of
Central Florida,
Subordinated Note
6.90%, 07/01/07.................. 1,272,375
1,400,000 U.S. Bank, N.A. Minnesota,
Bank Note
5.63%, 11/30/05.................. 1,307,250
3,400,000 US West Capital Funding, Inc.
6.88%, 08/15/01.................. 3,400,000
1,000,000 Wachovia Corp., Senior Note
6.93%, 10/15/03.................. 1,000,000
2,000,000 Wachovia Corp., Senior Note
7.45%, 07/15/05.................. 2,025,000
3,000,000 Wells Fargo & Co., Senior Note
7.20%, 05/01/03.................. 3,026,250
-------------
46,633,300
-------------
COMMUNICATIONS - 4.95%
3,300,000 AT&T Corp.
6.00%, 03/15/09.................. 2,899,875
1,775,000 AT&T Corp.
6.50%, 03/15/29.................. 1,397,813
6,500,000 GTE Florida, Inc.,
Series A, Debenture
6.31%, 12/15/02.................. 6,435,000
1,000,000 Lucent Technologies, Inc.
5.50%, 11/15/08.................. 846,250
1,000,000 Sprint Capital Corp.
5.88%, 05/01/04.................. 955,000
2,000,000 Sprint Capital Corp.
6.90%, 05/01/19.................. 1,705,000
3,300,000 Telecom de Puerto Rico Co.
6.15%, 05/15/02.................. 3,245,903
2,500,000 Time Warner, Inc.
6.63%, 05/15/29.................. 2,156,250
1,100,000 US West Corp.
7.63%, 06/09/03 (D).............. 1,112,375
PAR VALUE VALUE
---------- ---------
COMMUNICATIONS (CONTINUED)
$1,950,000 Verizon Communications,
Debenture
6.46%, 04/15/08.................. $ 1,857,375
2,795,000 WorldCom, Inc.
6.13%, 04/15/02.................. 2,760,063
2,080,000 WorldCom, Inc.
7.88%, 05/15/03.................. 2,116,400
2,500,000 WorldCom, Inc., Senior Note
6.13%, 08/15/01.................. 2,484,375
-------------
29,971,679
-------------
CONSUMER STAPLES - 4.71%
800,000 Abbott Laboratories
6.40%, 12/01/06.................. 789,000
1,750,000 Becton Dickinson & Co.,
Senior Debenture
6.70%, 08/01/28.................. 1,500,625
1,650,000 Coca-Cola Enterprises, Inc.,
Debenture
7.13%, 08/01/17.................. 1,548,937
1,900,000 Colgate-Palmolive Co.,
Series C, MTN
5.27%, 12/01/03.................. 1,812,030
3,050,000 Hershey Foods Corp., Debenture
7.20%, 08/15/27.................. 2,901,312
805,000 Massachusetts Institute
of Technology
7.25%, 11/02/96.................. 778,837
4,800,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (D).............. 4,596,000
250,000 Procter & Gamble Co., Debenture
8.50%, 08/10/09.................. 272,812
3,600,000 Procter & Gamble Co.,
Unsubordinated Note
6.88%, 09/15/09.................. 3,577,500
3,000,000 Sara Lee Corp., Series B, MTN
7.40%, 03/22/02.................. 3,022,500
2,500,000 Stanford University,
Series A, MTN
6.88%, 02/01/24.................. 2,378,125
3,000,000 Sysco Corp., Senior Note
7.00%, 05/01/06.................. 3,026,250
2,675,000 Sysco Corp., Debenture
6.50%, 08/01/28.................. 2,350,656
-------------
28,554,584
-------------
INDUSTRIAL - 3.66%
5,070,000 Burlington Northern
Santa Fe Corp.,
Series H
9.25%, 10/01/06.................. 5,526,300
1,500,000 Burlington Northern
Santa Fe Corp.,
Debenture
7.00%, 12/15/25.................. 1,333,125
1,500,000 Caterpillar Financial
Services Corp.,
Series F, MTN
5.47%, 09/12/01.................. 1,485,000
2,225,000 Emerson Electric Co.
7.88%, 06/01/05.................. 2,311,219
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
INDUSTRIAL (CONTINUED)
$ 500,000 Emerson Electric Co.
5.85%, 03/15/09.................. $ 461,250
2,000,000 Illinois Tool Works, Inc.
5.75%, 03/01/09.................. 1,830,000
1,580,000 Lockheed Martin Corp.
7.95%, 12/01/05.................. 1,625,425
3,000,000 Lockheed Martin Corp.
8.20%, 12/01/09.................. 3,153,750
2,000,000 Minnesota Mining &
Manufacturing Co.,
Debenture
6.38%, 02/15/28.................. 1,757,500
2,500,000 Norfolk Southern Corp.,
Senior Note
8.63%, 05/15/10.................. 2,681,250
-------------
22,164,819
-------------
ENERGY - 3.49%
1,900,000 Atlantic Richfield Co.
5.90%, 04/15/09.................. 1,767,000
3,535,000 Coastal Corp.
7.75%, 06/15/10.................. 3,583,606
3,000,000 Conoco, Inc., Senior Note
5.90%, 04/15/04.................. 2,895,000
1,560,000 Conoco, Inc., Senior Note
6.35%, 04/15/09.................. 1,489,800
3,000,000 Enron Corp.
7.88%, 06/15/03.................. 3,056,250
3,050,000 Phillips Petroleum Co.
8.75%, 05/25/10.................. 3,335,938
3,000,000 Tosco Corp.
8.13%, 02/15/30.................. 3,045,000
2,000,000 Union Oil Co. of California
6.38%, 02/01/04.................. 1,950,000
-------------
21,122,594
-------------
UTILITIES - 1.23%
1,275,000 Dominion Resources, Inc.,
Series B, Senior Note
7.63%, 07/15/05.................. 1,287,847
3,395,000 Hydro-Quebec
8.63%, 05/20/02 (E).............. 3,470,369
2,750,000 Potomac Electric Power Co.,
First Mortgage
6.25%, 10/15/07.................. 2,667,500
-------------
7,425,716
-------------
BASIC MATERIALS - 0.96%
5,695,000 International Paper Co.
8.13%, 07/08/05 (D).............. 5,837,375
-------------
PAR VALUE VALUE
---------- ---------
CONSUMER CYCLICAL - 0.77%
$1,650,000 McDonald's Corp., Series E, MTN
5.95%, 01/15/08.................. $ 1,563,375
3,000,000 Wal-Mart Stores, Inc.
7.55%, 02/15/30.................. 3,123,750
-------------
4,687,125
-------------
TECHNOLOGY - 0.56%
880,000 Hewlett-Packard Co.
7.15%, 06/15/05.................. 882,200
2,500,000 IBM Corp.
7.25%, 11/01/02.................. 2,521,875
-------------
3,404,075
-------------
TOTAL CORPORATE NOTES AND BONDS . 169,801,267
-------------
(Cost $171,752,678)
MORTGAGE-BACKED SECURITIES - 14.98%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.21%
505,982 6.50%, 05/01/06, Pool # 348137... 500,416
764,773 6.60%, 11/01/07, Pool # 375483... 754,397
897,929 6.57%, 12/01/07, Pool # 375567... 884,438
1,083,614 6.58%, 12/01/07, Pool # 380013... 1,067,610
1,469,341 6.12%, 10/01/08, Pool # 380999... 1,411,026
2,469,442 6.50%, 05/01/11, Pool # 250554... 2,425,708
756,364 6.00%, 03/01/13, Pool # 417118... 728,470
727,952 6.00%, 04/01/13, Pool # 412825... 701,105
1,622,741 6.00%, 05/01/13, Pool # 424339... 1,562,894
1,223,196 6.00%, 12/25/16,
Series G22, Class G ............. 1,157,828
1,414,635 6.75%, 04/25/21, Pool # 0096-4... 1,403,572
3,986,500 6.50%, 06/01/28, Pool # 431718... 3,833,259
991,927 6.00%, 06/01/29, Pool # 500303... 929,932
975,456 6.00%, 07/01/29, Pool # 501225... 914,490
2,237,730 8.00%, 02/01/30, Pool # 526338... 2,264,986
762,544 8.00%, 02/01/30, Pool # 529898... 771,832
1,987,155 7.00%, 03/01/30, Pool # 534267... 1,946,776
1,988,034 7.50%, 03/01/30, Pool # 530327... 1,984,912
2,936,144 8.00%, 03/01/30, Pool # 533977... 2,971,906
8,924,251 8.00%, 04/01/30, Pool # 537033... 9,032,949
2,323,707 8.50%, 04/01/30, Pool # 533999... 2,374,526
3,991,203 8.50%, 04/01/30, Pool # 535270... 4,078,491
-------------
43,701,523
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.51%
215,604 6.50%, 03/15/13, Pool # 458165... 212,640
65,640 6.50%, 03/15/13, Pool # 463723... 64,737
219,854 6.50%, 04/15/13, Pool # 466013... 216,831
247,161 6.50%, 04/15/13, Pool # 473476... 243,763
266,092 6.50%, 05/15/13, Pool # 433742... 262,434
99,893 6.50%, 05/15/13, Pool # 450021... 98,520
116,505 6.50%, 05/15/13, Pool # 476292... 114,903
309,450 6.50%, 10/15/13, Pool # 434017... 305,195
1,672,515 6.50%, 10/15/13, Pool # 471586... 1,649,518
116,420 6.50%, 10/15/13, Pool # 484576... 114,819
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 892,543 6.50%, 11/15/13, Pool # 454228... $ 880,271
734,215 6.50%, 11/15/13, Pool # 477529... 724,119
258,814 6.50%, 07/15/14, Pool # 513006... 254,769
786,904 6.50%, 08/15/14, Pool # 510894... 774,605
762,697 6.75%, 07/20/22,
Pool # 008022 (C) ............... 769,493
1,267,404 7.00%, 11/15/22, Pool # 330551... 1,253,539
1,036,421 7.00%, 10/15/23, Pool # 369348... 1,024,762
90,143 8.00%, 06/15/25, Pool # 410041... 91,721
150,559 8.00%, 10/15/25, Pool # 399781... 153,194
63,783 8.00%, 01/15/26, Pool # 417061... 64,880
103,469 8.00%, 02/15/26, Pool # 423487... 105,248
2,305,094 7.50%, 04/15/26, Pool # 345614... 2,314,453
38,555 8.00%, 05/15/26, Pool # 423253... 39,218
41,775 8.00%, 05/15/26, Pool # 432681... 42,493
4,025,667 7.00%, 06/15/26, Pool # 780518... 3,970,314
318,679 8.00%, 06/15/26, Pool # 345638... 324,157
45,259 7.50%, 02/15/27, Pool # 433448... 45,429
879,997 8.00%, 03/15/27, Pool # 442009... 894,843
879,415 6.50%, 06/15/28, Pool # 476350... 848,909
934,026 6.50%, 01/15/29, Pool # 482909... 901,624
2,977,364 7.00%, 01/15/29, Pool # 499333... 2,934,579
3,237,019 7.00%, 02/15/29, Pool # 486937... 3,190,471
22,705 6.50%, 03/15/29, Pool # 464613... 21,917
1,456,392 7.00%, 08/15/29, Pool # 509742... 1,435,449
1,106,544 7.00%, 09/15/29, Pool # 510394... 1,090,632
397,565 7.00%, 09/15/29, Pool # 517865... 391,848
1,386,617 7.50%, 09/15/29, Pool # 466158... 1,391,373
501,645 7.00%, 10/15/29, Pool # 510559... 494,431
220,386 7.00%, 02/15/30, Pool # 516433... 217,217
1,489,316 7.00%, 02/15/30, Pool # 528631... 1,467,900
993,093 7.50%, 03/15/30, Pool # 515605... 996,499
994,989 7.50%, 03/15/30, Pool # 529283... 998,402
-------------
33,392,119
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.76%
346,074 7.75%, 09/01/05, Pool # 140661... 349,483
1,881,636 7.00%, 12/01/14,
Pool # E79780, Gold ............. 1,870,459
3,000,000 6.00%, 04/15/22, Pool # 2118QC... 2,849,040
2,234,836 6.00%, 11/01/28,
Pool # C00680, Gold ............. 2,097,260
3,451,455 8.00%, 06/01/30,
Pool # C39573, Gold ............. 3,497,808
-------------
10,664,050
-------------
STRUCTURED MORTGAGE PRODUCT - 0.50%
834,407 Prudential Home Mortgage
Securities
Series 1993-38, Class A-3, CMO
6.15%, 09/25/23.................. 820,322
2,264,518 Rural Housing Trust
Series 1987-1,
Class 1-D, CMO
6.33%, 04/01/26.................. 2,212,151
-------------
3,032,473
-------------
TOTAL MORTGAGE-BACKED SECURITIES 90,790,165
-------------
(Cost $90,852,868)
PAR VALUE VALUE
---------- ---------
ASSET-BACKED SECURITIES - 9.58%
$2,050,000 American Express Credit Account
Master Trust
Series 1999-1, Class A
5.60%, 11/15/06.................. $ 1,985,282
3,000,000 Chemical Master
Credit Card Trust
Series 1995-3, Class A
6.23%, 04/15/05.................. 2,974,680
700,000 Chemical Master
Credit Card Trust I
Series 1996-2, Class A
5.98%, 09/15/08.................. 674,625
3,000,000 Citibank Credit Card
Issuance Trust
Series 2000-A1, Class A1
6.90%, 10/17/07.................. 3,008,553
3,000,000 Citibank Credit Card
Master Trust
Series 1998-9, Class A
5.30%, 01/09/06.................. 2,882,790
3,295,000 Citibank Credit Card
Master Trust
Series 1999-7, Class A
6.65%, 11/15/06.................. 3,278,525
6,000,000 Citibank Credit Card
Master Trust I
Series 1998-6
5.85%, 04/10/03.................. 5,968,080
6,000,000 DaimlerChrysler Auto Trust
Series 2000-C, Class A4
6.85%, 11/06/05.................. 6,028,106
2,000,000 Discover Card Master Trust
Series 1999-3, Class A
6.73%, 09/16/04.................. 2,001,240
6,500,000 Ford Credit Auto Owner Trust
Series 1999-D, Class A5
6.52%, 09/15/03.................. 6,483,750
3,000,000 Ford Credit Auto Owner Trust
Series 2000-A, Class A4
7.09%, 11/17/03.................. 3,015,000
1,800,000 Ford Credit Auto Owner Trust
Series 2000-C, Class A4
7.24%, 02/15/04.................. 1,816,308
3,000,000 Ford Credit Auto Owner Trust
Series 2000-F, Class A2
6.56%, 05/15/04.................. 2,994,021
3,000,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06.................. 2,896,860
4,000,000 MBNA Master Credit Card Trust
Series 1999-J, Class A
7.00%, 02/15/12.................. 4,019,900
3,000,000 MBNA Master Credit Card Trust
Series 1999-M, Class A
6.60%, 04/16/07.................. 2,988,345
5,000,000 USAA Auto Owner Trust
Series 2000-1, Class A4
6.98%, 06/15/05.................. 5,049,425
-------------
TOTAL ASSET-BACKED SECURITIES ... 58,065,490
-------------
(Cost $57,745,656)
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
PAR VALUE VALUE
---------- ---------
FOREIGN BONDS - 3.67%
$2,750,000 Government of Canada
5.63%, 02/19/03 (F).............. $ 2,695,275
1,500,000 Heinz (H.J.) Co.
5.75%, 02/03/03 (E).............. 1,460,400
2,230,000 Inter-American Development Bank
7.00%, 06/16/03 (F).............. 2,260,663
3,000,000 International Bank of
Reconstruction & Development
7.00%, 01/27/05 (F).............. 3,052,500
2,525,000 Province of Manitoba,
Series EM, Unsubordinated Note
7.50%, 02/22/10 (F).............. 2,627,192
3,395,000 Province of Ontario,
Senior Unsubordinated Note
7.38%, 01/27/03 (F).............. 3,445,925
7,300,000 Province of Quebec,
Senior Unsubordinated Note
5.75%, 02/15/09 (F).............. 6,706,875
-------------
TOTAL FOREIGN BONDS ............. 22,248,830
-------------
(Cost $22,260,850)
PAR VALUE VALUE
---------- ---------
REPURCHASE AGREEMENT - 0.49%
$2,936,000 Repurchase Agreement with:
State Street Bank
6.55%, 11/01/2000,
dated 10/31/2000
Repurchase Price $2,936,534
(Collateralized by
U.S. Treasury Note
7.00%, Due 07/15/2006;
Total Par $2,790,000
Market Value $2,999,894)......... $ 2,936,000
-------------
TOTAL REPURCHASE AGREEMENT ...... 2,936,000
-------------
(Cost $2,936,000)
TOTAL INVESTMENTS - 98.91%....................... 599,297,030
-------------
(Cost $601,242,972)
NET OTHER ASSETS AND LIABILITIES - 1.09%......... 6,616,369
-------------
NET ASSETS - 100.00%............................. $ 605,913,399
=============
---------------------------------------
(A) Discount yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of the
payment representing interest only or principal only.
(C Floating rate note. Interest rate shown reflects rate in effect at
October 31, 2000.
(D) 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. On October 31, 2000, these securities amounted to $11,545,750 or
1.91% of net assets.
(E) Euro-Dollar Bond
(F) U.S. Dollar-Denominated
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<CAPTION>
INTERMEDIATE
SHORT-TERM GOVERNMENT CORPORATE HIGH QUALITY
BOND FUND INCOME FUND BOND FUND BOND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.................................. $ 118,595,492 $ 508,798,718 $ 89,767,943 $ 598,306,972
Repurchase agreements................................ 5,339,000 6,385,000 529,000 2,936,000
Net unrealized depreciation on investments........... (454,355) (1,461,435) (1,726,381) (1,945,942)
------------- ------------- ------------- -------------
Total investments at value......................... 123,480,137 513,722,283 88,570,562 599,297,030
Cash................................................... 7,178 13,792 3,532 21,797
Receivable for investments sold........................ -- -- 99,096 4,021,858
Receivable for shares sold............................. 51,964 148,743 130,526 340,615
Interest and dividends receivable...................... 1,368,586 6,098,564 1,411,059 9,423,233
------------- ------------- ------------- -------------
Total Assets....................................... 124,907,865 519,983,382 90,214,775 613,104,533
------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable...................................... 305,583 2,028,370 253,255 1,969,468
Payable for investments purchased...................... -- 3,711,326 84,439 3,445,887
Payable for shares repurchased......................... 190,611 625,648 179,926 1,353,713
Advisory fee payable (Note 3).......................... 52,894 240,181 41,757 284,881
Payable to Fleet affiliates (Note 3)................... 3,003 9,930 3,232 25,654
Payable to Administrator (Note 3)...................... 9,715 46,912 10,173 52,665
Trustees' fees and expenses payable (Note 3)........... 2,743 13,544 3,999 10,980
Accrued expenses and other payables.................... 34,858 40,045 38,051 47,886
------------- ------------- ------------- -------------
Total Liabilities.................................. 599,407 6,715,956 614,832 7,191,134
------------- ------------- ------------- -------------
NET ASSETS................................................ $ 124,308,458 $ 513,267,426 $ 89,599,943 $ 605,913,399
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
OCTOBER 31, 2000
<TABLE>
<CAPTION>
INTERMEDIATE
SHORT-TERM GOVERNMENT CORPORATE HIGH QUALITY
BOND FUND INCOME FUND BOND FUND BOND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Par value (Note 5)..................................... $ 12,613 $ 51,606 $ 8,835 $ 58,529
Paid-in capital in excess of par value................. 133,796,936 554,319,606 94,777,725 627,532,485
Undistributed net investment income.................... 10,416 284,447 4,954 69,744
Accumulated net realized (loss) on investments sold.... (9,057,152) (39,926,798) (3,465,190) (19,801,417)
Unrealized depreciation of investments................. (454,355) (1,461,435) (1,726,381) (1,945,942)
------------- ------------- ------------- -------------
TOTAL NET ASSETS.......................................... $ 124,308,458 $ 513,267,426 $ 89,599,943 $ 605,913,399
============= ============= ============= =============
Retail A Shares:
Net Assets............................................. $ 20,393,852 $ 47,548,207 $ -- $ 33,429,355
Shares of beneficial interest outstanding.............. 2,069,294 4,780,629 -- 3,229,142
NET ASSET VALUE and redemption price per share......... $ 9.86 $ 9.95 $ -- $ 10.35
Sales charge - 3.75% of offering price................. 0.38 0.39 -- 0.40
------------- ------------- ------------- -------------
Maximum offering price per share....................... $ 10.24 $ 10.34 $ -- $ 10.75
============= ============= ============= =============
Retail B Shares:
Net Assets............................................. $ 839,705 $ 1,765,080 N/A $ 5,774,688
Shares of beneficial interest outstanding.............. 85,202 177,466 N/A 557,815
------------- ------------- ------------- -------------
NET ASSET VALUE and offering price per share*.......... $ 9.86 $ 9.95 N/A $ 10.35
============= ============= ============= =============
Trust Shares:
Net Assets............................................. $ 83,876,437 $ 451,501,456 $ 89,599,943 $ 558,788,763
Shares of beneficial interest outstanding.............. 8,510,561 45,395,701 8,835,332 53,977,307
------------- ------------- ------------- -------------
NET ASSET VALUE, offering and redemption price per share $ 9.86 $ 9.95 $ 10.14 $ 10.35
============= ============= ============= =============
Prime A Shares:
Net Assets............................................. -- -- N/A $ 33,795
Shares of beneficial interest outstanding.............. -- -- N/A 3,264
NET ASSET VALUE and redemption price per share......... -- -- N/A $ 10.35
Sales charge - 4.75% of offering price................. -- -- N/A 0.52
------------- ------------- ------------- -------------
Maximum offering price per share....................... -- -- N/A $ 10.87
============= ============= ============= =============
Prime B Shares:
Net Assets............................................. -- -- N/A $ 261,729
Shares of beneficial interest outstanding.............. -- -- N/A 25,282
------------- ------------- ------------- -------------
NET ASSET VALUE and offering price per share*.......... -- -- N/A $ 10.35
============= ============= ============= =============
BKB Shares:
Net Assets............................................. $ 19,198,464 $ 12,452,683 N/A $ 7,625,069
Shares of beneficial interest outstanding.............. 1,947,998 1,252,038 N/A 736,559
------------- ------------- ------------- -------------
NET ASSET VALUE, offering and redemption price per share $ 9.86 $ 9.95 N/A $ 10.35
============= ============= ============= =============
</TABLE>
--------------------------------------------------------------
* Redemption price per share is equal to the Net Asset Value per share less any
applicable contingent deferred sales charge.
29
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
INTERMEDIATE
SHORT-TERM GOVERNMENT CORPORATE HIGH QUALITY
BOND FUND INCOME FUND BOND FUND BOND FUND
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2)................................. $ 5,199,351 $ 24,684,013 $ 5,862,561 $ 27,568,200
-------------- ------------- ------------- -------------
Total investment income......................... 5,199,351 24,684,013 5,862,561 27,568,200
-------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fee (Note 3).................. 611,074 2,802,040 642,998 3,051,530
Administration fee (Note 3)....................... 56,947 262,665 60,936 284,931
Custodian fee..................................... 22,395 40,365 20,844 48,334
Fund accounting fee (Note 3)...................... 55,739 91,763 52,092 98,555
Professional fees (Note 3)........................ 35,199 30,978 19,536 37,588
Transfer agent fee (Note 3)....................... 42,426 129,250 45,895 389,522
Shareholder services and 12b-1 fees (Note 3)...... 44,873 85,480 -- 107,926
Trustees' fees and expenses (Note 3).............. 2,221 10,073 3,577 9,122
Amortization of organization costs (Note 2)....... -- -- 448 --
Reports to shareholders........................... 16,216 29,450 28,440 48,103
Miscellaneous..................................... 40,676 55,616 12,150 83,452
-------------- ------------- ------------- -------------
Total expenses before reimbursement/waiver...... 927,766 3,537,680 886,916 4,159,063
-------------- ------------- ------------- -------------
Less: reimbursement/waiver (Note 4)............. (206,646) (756,962) (173,466) (827,191)
-------------- ------------- ------------- -------------
Total expenses net of reimbursement/waiver...... 721,120 2,780,718 713,450 3,331,872
-------------- ------------- ------------- ------------,
NET INVESTMENT INCOME................................ 4,478,231 21,903,295 5,149,111 24,236,328
-------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2 & 6):
Net realized (loss) on investments sold........... (510,764) (2,882,294) (722,205) (3,929,042)
Net change in unrealized appreciation
of investments*................................. 1,195,272 8,711,539 598,236 11,034,381
-------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................... 684,508 5,829,245 (123,969) 7,105,339
-------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $ 5,162,739 $ 27,732,540 $ 5,025,142 $ 31,341,667
============== ============= ============= =============
</TABLE>
---------------------------------------------------------
* Net change in unrealized appreciation of investments does not include
unrealized depreciation in connection with the acquisition of the
Boston 1784 Funds (see Note 9).
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
SHORT-TERM BOND FUND INCOME FUND
-------------------------- ----------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
2000 1999 2000 1999
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD............................. $ 56,903,078 $ 68,224,850 $ 292,417,679 $306,627,909
------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income...................................... 4,478,231 3,035,700 21,903,295 16,672,797
Net realized gain (loss) on investments sold............... (510,764) 51,351 (2,882,294) (3,699,849)
Net change in unrealized appreciation
(depreciation) of investments ........................ 1,195,272 (1,554,809) 8,711,539 (15,849,529)
------------ ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from operations ............................ 5,162,739 1,532,242 27,732,540 (2,876,581)
------------ ------------ ------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
RETAIL A SHARES:
Net investment income.................................... (1,178,804) (1,268,353) (2,901,993) (3,300,117)
------------ ------------ ------------- ------------
RETAIL B SHARES:
Net investment income.................................... (45,593) (35,835) (69,431) (27,129)
------------ ------------ ------------- ------------
TRUST SHARES:
Net investment income.................................... (3,037,024) (1,693,636) (19,066,951) (13,345,551)
------------ ------------ ------------- ------------
BKB SHARES:
Net investment income.................................... (418,520) -- (282,902) --
------------ ------------ ------------- ------------
Total Dividends to shareholders............................ (4,679,941) (2,997,824) (22,321,277) (16,672,797)
------------ ------------ ------------- ------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (1)........... 66,922,582 (9,856,190) 215,438,484 5,339,148
------------ ------------ ------------- ------------
Net increase (decrease) in net assets...................... 67,405,380 (11,321,772) 220,849,747 (14,210,230)
------------ ------------ ------------- ------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)................ $124,308,458 $ 56,903,078 $ 513,267,426 $292,417,679
============ ============ ============= ============
(A) Undistributed net investment income....................... $ 10,416 $ 201,761 $ 284,447 $ 418,658
============ ============ ============= ============
</TABLE>
----------------------------------------------------------------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on page 33 - 34.
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
CORPORATE BOND FUND HIGH QUALITY BOND FUND
--------------------------- ---------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD............................. $79,382,000 $83,564,654 $287,566,327 $268,441,362
----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income...................................... 5,149,111 4,640,572 24,236,328 15,219,378
Net realized loss on investments sold...................... (722,205) (559,771) (3,929,042) (1,517,657)
Net change in unrealized appreciation
(depreciation) of investments 598,236 (4,858,917) 11,034,381 (21,199,859)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations 5,025,142 (778,116) 31,341,667 (7,498,138)
----------- ----------- ----------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
RETAIL A SHARES:
Net investment income.................................... N/A N/A (2,167,004) (2,585,461)
Net realized gain on investments......................... N/A N/A -- (406,430)
----------- ----------- ------------ ------------
Total Dividends........................................ N/A N/A (2,167,004) (2,991,891)
----------- ----------- ------------ ------------
RETAIL B SHARES:
Net investment income.................................... N/A N/A (310,534) (313,178)
Net realized gain on investments......................... N/A N/A -- (48,125)
----------- ----------- ------------ -----------
Total Dividends........................................ N/A N/A (310,534) (361,303)
----------- ----------- ------------ ------------
TRUST SHARES:
Net investment income.................................... (5,409,494) (4,640,572) (21,835,257) (12,365,223)
Net realized gain on investments......................... -- -- -- (1,827,182)
----------- ----------- ------------ ------------
Total Dividends........................................ (5,409,494) (4,640,572) (21,835,257) (14,192,405)
----------- ----------- ------------ ------------
PRIME A SHARES:
Net investment income.................................... N/A N/A (937) (1,308)
Net realized gain on investments......................... N/A N/A -- (411)
----------- ----------- ------------ ------------
Total Dividends........................................ N/A N/A (937) (1,719)
----------- ----------- ------------ ------------
PRIME B SHARES:
Net investment income.................................... N/A N/A (13,849) (10,096)
Net realized gain on investments......................... N/A N/A -- (494)
----------- ----------- ------------ ------------
Total Dividends........................................ N/A N/A (13,849) (10,590)
----------- ----------- ------------ ------------
BKB SHARES:
Net investment income.................................... N/A N/A (187,125) --
Net realized gain on investments......................... N/A N/A -- --
----------- ----------- ------------ ------------
Total Dividends........................................ N/A N/A (187,125) --
----------- ----------- ------------ ------------
Total Dividends to shareholders............................ (5,409,494) (4,640,572) (24,514,706) (17,557,908)
----------- ----------- ------------ ------------
NET INCREASE FROM SHARE TRANSACTIONS (1)...................... 10,602,295 1,236,034 311,520,111 44,181,011
----------- ----------- ------------ ------------
Net increase (decrease) in net assets...................... 10,217,943 (4,182,654) 318,347,072 19,124,965
----------- ----------- ------------ ------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)................ $89,599,943 $79,382,000 $605,913,399 $287,566,327
=========== =========== ============ ============
(A) Undistributed net investment income....................... $ 4,954 $ 260,383 $ 69,744 $ 280,469
=========== =========== ============ ============
</TABLE>
---------------------------------------------------------------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on page 35.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
--------------------------
YEARS ENDED OCTOBER 31,
--------------------------------------
2000 1999
---------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
RETAIL A SHARES:
Sold ............................................................. 1,870,282 $ 18,332,555 2,649,070 $ 26,400,028
Issued to shareholders in reinvestment of dividends............... 100,699 985,283 111,011 1,090,190
Repurchased....................................................... (2,401,242) (23,529,002) (3,137,758) (31,264,721)
-------------- ------------ ------------ ------------
Net decrease in shares outstanding............................. (430,261) $ (4,211,164) (377,677) $ (3,774,503)
============== ============ ============ ============
RETAIL B SHARES:
Sold ............................................................. 39,239 $ 385,612 31,480 $ 314,056
Issued to shareholders in reinvestment of dividends............... 3,709 36,233 2,980 29,447
Repurchased....................................................... (40,101) (391,961) (59,672) (596,974)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. 2,847 $ 29,884 (25,212) $ (253,471)
============== ============ ============ ============
TRUST SHARES:
Sold ............................................................. 722,435 $ 7,073,517 513,395 $ 5,131,414
Issued in connection with acquisition (Note 9).................... 11,061,444 108,194,361 -- --
Issued to shareholders in reinvestment of dividends............... 119,604 1,171,436 77,948 765,143
Repurchased....................................................... (6,580,694) (64,377,825) (1,172,148) (11,724,773)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. 5,322,789 $ 52,061,489 (580,805) $ (5,828,216)
============== ============ ============ ============
BKB SHARES:
Sold ............................................................. 89,665 $ 874,213 N/A N/A
Issued in connection with acquisition (Note 9).................... 2,139,391 20,925,840 N/A N/A
Issued to shareholders in reinvestment of dividends............... 37,415 367,676 N/A N/A
Repurchased....................................................... (318,473) (3,125,356) N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 1,947,998 $ 19,042,373 N/A N/A
============== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
GALAXY TAXABLE BOND FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
INCOME FUND
--------------------------
YEARS ENDED OCTOBER 31,
--------------------------------------
2000 1999
---------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
RETAIL A SHARES:
Sold ............................................................. 727,407 $ 7,106,776 991,566 $ 10,176,855
Issued to shareholders in reinvestment of dividends............... 233,635 2,287,887 254,097 2,559,568
Repurchased....................................................... (1,908,768) (18,681,570) (1,884,668) (19,108,917)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. (947,726) $ (9,286,907) (639,005) $ (6,372,494)
============== ============ ============ ============
RETAIL B SHARES:
Sold ............................................................. 103,897 $ 1,017,002 143,750 $ 1,457,973
Issued to shareholders in reinvestment of dividends............... 6,546 64,247 2,260 22,337
Repurchased....................................................... (43,079) (422,731) (35,908) (362,484)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. 67,364 $ 658,518 110,102 $ 1,117,826
============== ============ ============ ============
TRUST SHARES:
Sold ............................................................. 4,754,155 $ 46,237,557 4,284,192 $ 43,486,208
Issued in connection with acquisition (Note 9).................... 23,087,034 227,157,843 -- --
Issued to shareholders in reinvestment of dividends............... 386,986 3,791,756 349,318 3,528,720
Repurchased....................................................... (6,666,272) (65,420,940) (3,631,847) (36,421,112)
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 21,561,903 $211,766,216 1,001,663 $ 10,593,816
============== ============ ============ ============
PRIME A SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. N/A N/A N/A N/A
============== ============ ============ ============
PRIME B SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. N/A N/A N/A N/A
============== ============ ============ ============
BKB SHARES:
Sold ............................................................. 18,730 $ 164,371 N/A N/A
Issued in connection with acquisition (Note 9).................... 1,590,993 15,654,093 N/A N/A
Issued to shareholders in reinvestment of dividends............... 21,243 210,316 N/A N/A
Repurchased....................................................... (378,928) (3,728,123) N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 1,252,038 $ 12,300,657 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BOND FUND
--------------------------
YEARS ENDED OCTOBER 31,
--------------------------------------
2000 1999
---------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
RETAIL A SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. N/A N/A N/A N/A
============== ============ ============ ============
RETAIL B SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. N/A N/A N/A N/A
============== ============ ============ ============
TRUST SHARES:
Sold ............................................................. 2,978,094 $ 29,826,808 1,552,757 $ 16,506,253
Issued in connection with acquisition (Note 9).................... -- -- -- --
Issued to shareholders in reinvestment of dividends............... 250,577 2,518,842 225,160 2,407,438
Repurchased....................................................... (2,163,149) (21,743,355) (1,674,792) (17,677,657)
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 1,065,522 $ 10,602,295 103,125 $ 1,236,034
============== ============ ============ ============
PRIME A SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. N/A N/A N/A N/A
============== ============ ============ ============
PRIME B SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. N/A N/A N/A N/A
============== ============ ============ ============
BKB SHARES:
Sold ............................................................. N/A N/A N/A N/A
Issued in connection with acquisition (Note 9).................... N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends............... N/A N/A N/A N/A
Repurchased....................................................... N/A N/A N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. N/A N/A N/A N/A
============== ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIGH QUALITY BOND FUND
--------------------------
YEARS ENDED OCTOBER 31,
--------------------------------------
2000 1999
---------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
RETAIL A SHARES:
Sold ............................................................. 564,025 $ 5,742,399 1,977,732 $ 21,457,219
Issued to shareholders in reinvestment of dividends............... 188,937 1,924,737 251,778 2,682,994
Repurchased....................................................... (1,710,958) (17,391,998) (2,138,328) (22,644,891)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. (957,996) $ (9,724,862) 91,182 $ 1,495,322
============== ============ ============ ============
RETAIL B SHARES:
Sold ............................................................. 110,687 $ 1,124,346 329,766 $ 3,562,927
Issued to shareholders in reinvestment of dividends............... 22,692 230,997 26,426 282,560
Repurchased....................................................... (214,813) (2,182,371) (200,809) (2,119,911)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. (81,434) $ (827,028) 155,383 $ 1,725,576
============== ============ ============ ============
TRUST SHARES:
Sold ............................................................. 10,026,402 $102,157,244 7,573,939 $ 80,582,877
Issued in connection with acquisition (Note 9).................... 28,577,262 292,464,740 -- --
Issued to shareholders in reinvestment of dividends............... 952,843 9,712,483 881,636 9,324,509
Repurchased....................................................... (8,782,952) (89,698,719) (4,636,948) (49,305,977)
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 30,773,555 $314,635,748 3,818,627 $ 40,601,409
============== ============ ============ ============
PRIME A SHARES:
Sold ............................................................. 2,302 $ 23,773 4,700 $ 52,116
Issued to shareholders in reinvestment of dividends............... 40 397 6 70
Repurchased....................................................... (647) (6,579) (3,137) (33,508)
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 1,695 $ 17,591 1,569 $ 18,678
============== ============ ============ ============
PRIME B SHARES:
Sold ............................................................. 907 $ 9,150 33,422 $ 359,496
Issued to shareholders in reinvestment of dividends............... 1,176 11,970 897 9,403
Repurchased....................................................... (8,310) (83,968) (2,810) (28,862)
-------------- ------------ ------------ ------------
Net increase (decrease) in shares outstanding.................. (6,227) $ (62,848) 31,509 $ 340,037
============== ============ ============ ============
BKB SHARES:
Sold ............................................................. 7,621 $ 78,057 N/A N/A
Issued in connection with acquisition (Note 9).................... 1,055,977 10,807,053 N/A N/A
Issued to shareholders in reinvestment of dividends............... 15,725 161,973 N/A N/A
Repurchased....................................................... (342,764) (3,565,573) N/A N/A
-------------- ------------ ------------ ------------
Net increase in shares outstanding............................. 736,559 $ 7,481,510 N/A N/A
============== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34-35
<PAGE>
SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS
-------------------------------------- ------------------------------------
NET
NET REALIZED AND TOTAL DIVIDEND DIVIDENDS
ASSET VALUE, NET UNREALIZED FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME (A) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DIVIDENDS
----------- ---------- -------------- ---------- ---------- ------------- ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 9.86 $ 0.52(4) $ 0.03 $ 0.55 $(0.55) $ -- $ (0.55)
10/31/99 10.10 0.49 (0.25) 0.24 (0.48) -- (0.48)
10/31/98 10.01 0.51 0.11 0.62 (0.53) -- (0.53)
10/31/97 9.99 0.53 0.02 0.55 (0.53) -- (0.53)
10/31/96 10.06 0.52 (0.07) 0.45 (0.52) -- (0.52)
RETAIL B
10/31/00 9.86 0.45(4) 0.03 0.48 (0.48) -- (0.48)
10/31/99 10.10 0.42 (0.25) 0.17 (0.41) -- (0.41)
10/31/98 10.01 0.45 0.11 0.56 (0.47) -- (0.47)
10/31/97 9.99 0.46 0.03 0.49 (0.47) -- (0.47)
10/31/96(1) 10.09 0.31 (0.10) 0.21 (0.31) -- (0.31)
TRUST
10/31/00 9.86 0.54(4) 0.03 0.57 (0.57) -- (0.57)
10/31/99 10.10 0.51 (0.25) 0.26 (0.50) -- (0.50)
10/31/98 10.01 0.54 0.11 0.65 (0.56) -- (0.56)
10/31/97 9.99 0.54 0.02 0.56 (0.54) -- (0.54)
10/31/96 10.06 0.55 (0.07) 0.48 (0.55) -- (0.55)
BKB
10/31/00(2) 9.78 0.20(4) 0.08 0.28 (0.20) -- (0.20)
</TABLE>
-------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996
(2) The Fund began issuing BKB Shares on June 19, 2000.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) The selected per share data was calculated using the weighted average share
outstanding method for the period.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Retail
A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and 1996
were $0.50, $0.47, $0.49, $0.51 and $0.50, respectively. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or its affiliates and/or the Administrator for Retail B Shares
for the years ended October 31, 2000, 1999, 1998 and 1997 and the period
ended October 31, 1996 were $0.43, $0.39, $0.42, $0.44 and $0.29,
respectively. Net investment income per share before reimbursement/waiver of
fees by the Investment Advisor and/or its affiliates and/or the
Administrator for Trust Shares for the years ended October 31, 2000, 1999,
1998, 1997 and 1996 were $0.52, $0.49, $0.52, $0.52 and $0.53, respectively.
Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for BKB
Shares for the period ended October 31, 2000 was $0.19.
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------
RATIO OF RATIO OF RATIO OF
NET INVESTMENT OPERATING OPERATING
INCOME EXPENSES EXPENSES
NET INCREASE NET ASSET NET ASSETS, INCLUDING INCLUDING EXCLUDING PORTFOLIO
(DECREASE) IN NET VALUE, TOTAL END OF PERIOD REIMBURSMENT/ REIMBURSMENT/ REIMBURSMENT/ TURNOVER
ASSET VALUE END OF PERIOD RETURN(3) (IN 000'S) WAIVER WAIVER WAIVER RATE
----------------- ------------- --------- ------------- -------------- ------------ ------------ ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ -- $ 9.86 5.76% $ 20,394 5.31% 1.06% 1.29% 110%
10/31/99 (0.24) 9.86 2.43% 24,653 4.86% 1.10% 1.30% 151%
10/31/98 0.09 10.10 6.42% 29,067 5.07% 1.11% 1.31% 133%
10/31/97 0.02 10.01 5.64% 27,961 5.29% 1.00% 1.21% 173%
10/31/96 (0.07) 9.99 4.63% 33,388 5.22% 1.11% 1.35% 214%
RETAIL B
10/31/00 -- 9.86 5.02% 840 4.61% 1.76% 2.01% 110%
10/31/99 (0.24) 9.86 1.71% 812 4.17% 1.79% 2.08% 151%
10/31/98 0.09 10.10 5.73% 1,087 4.40% 1.78% 1.99% 133%
10/31/97 0.02 10.01 4.99% 905 4.56% 1.75% 2.01% 173%
10/31/96(1) (0.10) 9.99 2.12%** 260 4.73%* 1.77%* 1.98%* 214%**
TRUST
10/31/00 -- 9.86 6.04% 83,876 5.56% 0.81% 1.04% 110%
10/31/99 (0.24) 9.86 2.67% 31,438 5.10% 0.86% 1.06% 151%
10/31/98 0.09 10.10 6.68% 38,071 5.33% 0.85% 1.05% 133%
10/31/97 0.02 10.01 5.77% 49,837 5.43% 0.86% 1.07% 173%
10/31/96 (0.07) 9.99 4.91% 58,227 5.49% 0.84% 1.08% 214%
BKB
10/31/00(2) 0.08 9.86 2.94%** 19,198 5.54%* 0.83%* 1.23%* 110%**
</TABLE>
-------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996
(2) The Fund began issuing BKB Shares on June 19, 2000.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) The selected per share data was calculated using the weighted average share
outstanding method for the period.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Retail
A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and 1996
were $0.50, $0.47, $0.49, $0.51 and $0.50, respectively. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or its affiliates and/or the Administrator for Retail B Shares
for the years ended October 31, 2000, 1999, 1998 and 1997 and the period
ended October 31, 1996 were $0.43, $0.39, $0.42, $0.44 and $0.29,
respectively. Net investment income per share before reimbursement/waiver of
fees by the Investment Advisor and/or its affiliates and/or the
Administrator for Trust Shares for the years ended October 31, 2000, 1999,
1998, 1997 and 1996 were $0.52, $0.49, $0.52, $0.52 and $0.53, respectively.
Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for BKB
Shares for the period ended October 31, 2000 was $0.19.
SEE NOTES TO FINANCIAL STATEMENTS.
36-37
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS
-------------------------------------- ------------------------------------
NET
NET REALIZED AND TOTAL DIVIDENDS DIVIDENDS
ASSET VALUE, NET UNREALIZED FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME (A) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DIVIDENDS
------------ ---------- -------------- ---------- ---------- ------------- ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 9.86 $ 0.55(4) $ 0.11 $ 0.66 $ (0.57) $ -- $(0.57)
10/31/99 10.50 0.54 (0.65) (0.11) (0.53) -- (0.53)
10/31/98 10.18 0.57 0.34 0.91 (0.59) -- (0.59)
10/31/97 10.06 0.59 0.12 0.71 (0.59) -- (0.59)
10/31/96 10.28 0.57 (0.22) 0.35 (0.57) -- (0.57)
RETAIL B
10/31/00 9.85 0.48(4) 0.11 0.59 (0.49) -- (0.49)
10/31/99(1) 10.50 0.47 (0.66) (0.19) (0.46) -- (0.46)
TRUST
10/31/00 9.85 0.58(4) 0.11 0.69 (0.59) -- (0.59)
10/31/99 10.50 0.56 (0.65) (0.09) (0.56) -- (0.56)
10/31/98 10.18 0.59 0.35 0.94 (0.62) -- (0.62)
10/31/97 10.06 0.62 0.12 0.74 (0.62) -- (0.62)
10/31/96 10.28 0.60 (0.22) 0.38 (0.60) -- (0.60)
BKB
10/31/00(2) 9.84 0.21(4) 0.11 0.32 (0.21) -- (0.21)
--------------------------------
</TABLE>
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on November 1, 1998.
(2) The Fund began issuing BKB Shares on June 19, 2000.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) The selected per share data was calculated using the weighted average shares
outstanding method for the period.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Retail
A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and 1996
were $0.58, $0.52, $0.55, $0.57 and $0.55, respectively. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or its affiliates and/or the Administrator for Retail B Shares
for the years ended October 31, 2000 and 1999 were $0.35 and $0.42,
respectively. Net investment income per share before reimbursement/waiver of
fees by the Investment Advisor and/or its affiliates and/or the
Administrator for Trust Shares for the years ended October 31, 2000, 1999,
1998, 1997 and 1996 were $0.40, $0.54, $0.57, $0.60 and $0.58, respectively.
Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for BKB
Shares for the period ended October 31, 2000 was $0.22.
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------
RATIO OF RATIO OF RATIO OF
NET INVESTMENT OPERATING OPERATING
NET INCREASE INCOME EXPENSES EXPENSES
(DECREASE) NET ASSET NET ASSETS, INCLUDING INCLUDING EXCLUDING PORTFOLIO
IN NET VALUE, TOTAL END OF PERIOD REIMBURSMENT/ REIMBURSMENT/ REIMBURSMENT/ TURNOVER
ASSET VALUE END OF PERIOD RETURN(3) (IN 000'S) WAIVER WAIVER WAIVER RATE
------------ ------------- --------- ------------- -------------- ------------- ------------- ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 0.09 $ 9.95 7.01% $ 47,548 5.63% 0.97% 1.18% 99%
10/31/99 (0.64) 9.86 (1.11)% 56,454 5.28% 0.97% 1.17% 184%
10/31/98 0.32 10.50 9.22% 66,865 5.49% 1.01% 1.21% 205%
10/31/97 0.12 10.18 7.33% 65,626 5.90% 1.02% 1.22% 128%
10/31/96 (0.22) 10.06 3.58% 79,741 5.69% 1.04% 1.24% 235%
RETAIL B
10/31/00 0.10 9.95 6.22% 1,765 4.89% 1.71% 2.09% 99%
10/31/99(1) (0.65) 9.85 (1.78)% 1,084 4.61% 1.64% 2.14% 184%
TRUST
10/31/00 0.10 9.95 7.29% 451,501 5.90% 0.70% 0.90% 99%
10/31/99 (0.65) 9.85 (0.86)% 234,880 5.53% 0.72% 0.92% 184%
10/31/98 0.32 10.50 9.52% 239,763 5.77% 0.73% 0.93% 205%
10/31/97 0.12 10.18 7.63% 209,215 6.19% 0.74% 0.94% 128%
10/31/96 (0.22) 10.06 3.88% 213,750 5.98% 0.75% 0.95% 235%
BKB
10/31/00(2) 0.11 9.95 3.30%** 12,453 5.83%* 0.81%* 1.05%* 99%**
--------------------------------
</TABLE>
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on November 1, 1998.
(2) The Fund began issuing BKB Shares on June 19, 2000.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) The selected per share data was calculated using the weighted average shares
outstanding method for the period.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Retail
A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and 1996
were $0.58, $0.52, $0.55, $0.57 and $0.55, respectively. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or its affiliates and/or the Administrator for Retail B Shares
for the years ended October 31, 2000 and 1999 were $0.35 and $0.42,
respectively. Net investment income per share before reimbursement/waiver of
fees by the Investment Advisor and/or its affiliates and/or the
Administrator for Trust Shares for the years ended October 31, 2000, 1999,
1998, 1997 and 1996 were $0.40, $0.54, $0.57, $0.60 and $0.58, respectively.
Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for BKB
Shares for the period ended October 31, 2000 was $0.22.
SEE NOTES TO FINANCIAL STATEMENTS.
38-39
<PAGE>
CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS
-------------------------------------- ------------------------------------
NET
NET REALIZED AND TOTAL DIVIDENDS DIVIDENDS
ASSET VALUE, NET UNREALIZED FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME (A) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DIVIDENDS
------------ ---------- -------------- ---------- ---------- ------------- ---------
TRUST
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 10.22 $ 0.61 $ (0.05) $ 0.56 $ (0.64) $ -- $ (0.64)
10/31/99 10.90 0.59 (0.68) (0.09) (0.59) -- (0.59)
10/31/98 10.63 0.62 0.30 0.92 (0.65) -- (0.65)
10/31/97 10.53 0.66 0.11 0.77 (0.66) (0.01) (0.67)
10/31/96 10.74 0.64 (0.13) 0.51 (0.64) (0.08) (0.72)
</TABLE>
-----------------------------------------------------
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for the
the years ended October 31, 2000, 1999, 1998, 1997 and 1996 were $0.60,
$0.57, $0.60, $0.64 and $0.62, respectively.
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------
RATIO OF RATIO OF RATIO OF
NET INVESTMENT OPERATING OPERATING
NET INCREASE INCOME EXPENSES EXPENSES
(DECREASE) NET ASSET NET ASSETS, INCLUDING INCLUDING EXCLUDING PORTFOLIO
IN NET VALUE, TOTAL END OF PERIOD REIMBURSMENT/ REIMBURSMENT/ REIMBURSMENT/ TURNOVER
ASSET VALUE END OF PERIOD RETURN(3) (IN 000'S) WAIVER WAIVER WAIVER RATE
------------ ------------- --------- ------------- -------------- ------------- ------------- ---------
TRUST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ (0.08) $ 10.14 5.69% $ 89,600 6.01% 0.83% 1.03% 75%
10/31/99 (0.68) 10.22 (0.82)% 79,382 5.62% 0.85% 1.05% 206%
10/31/98 0.27 10.90 8.96% 83,565 5.80% 0.82% 1.02% 155%
10/31/97 0.10 10.63 7.56% 91,728 6.27% 0.80% 1.00% 37%
10/31/96 (0.21) 10.53 5.00% 107,728 6.13% 0.85% 1.05% 84%
</TABLE>
-----------------------------------------------------
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for the
the years ended October 31, 2000, 1999, 1998, 1997 and 1996 were $0.60,
$0.57, $0.60, $0.64 and $0.62, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
40-41
<PAGE>
HIGH QUALITY BOND FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS
-------------------------------------- ------------------------------------
NET
NET REALIZED AND TOTAL DIVIDENDS DIVIDENDS
ASSET VALUE, NET UNREALIZED FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME (A) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DIVIDENDS
------------ ---------- -------------- ---------- ---------- ------------- ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 10.25 $ 0.59 $ 0.11 $ 0.70 $ (0.60) $ -- $ (0.60)
10/31/99 11.20 0.57 (0.86) (0.29) (0.57) (0.09) (0.66)
10/31/98 10.70 0.58 0.50 1.08 (0.58) -- (0.58)
10/31/97 10.47 0.60 0.23 0.83 (0.60) -- (0.60)
10/31/96 10.63 0.59 (0.16) 0.43 (0.59) -- (0.59)
RETAIL B
10/31/00 10.25 0.52 0.11 0.63 (0.53) -- (0.53)
10/31/99 11.20 0.50 (0.86) (0.36) (0.50) (0.09) (0.59)
10/31/98 10.70 0.51 0.51 1.02 (0.52) -- (0.52)
10/31/97 10.47 0.53 0.24 0.77 (0.54) -- (0.54)
10/31/96(1) 10.72 0.36 (0.25) 0.11 (0.36) -- (0.36)
TRUST
10/31/00 10.25 0.61 0.11 0.72 (0.62) -- (0.62)
10/31/99 11.20 0.58 (0.86) (0.28) (0.58) (0.09) (0.67)
10/31/98 10.70 0.59 0.50 1.09 (0.59) -- (0.59)
10/31/97 10.47 0.61 0.23 0.84 (0.61) -- (0.61)
10/31/96 10.63 0.62 (0.16) 0.46 (0.62) -- (0.62)
A PRIME
10/31/00 10.25 0.57 0.12 0.69 (0.59) -- (0.59)
10/31/99(2) 11.20 0.60 (0.89) (0.29) (0.57) (0.09) (0.66)
B PRIME
10/31/00 10.24 0.51 0.12 0.63 (0.52) -- (0.52)
10/31/99(2) 11.20 0.49 (0.87) (0.38) (0.49) (0.09) (0.58)
BKB
10/31/00(3) 10.23 0.23 0.12 0.35 (0.23) -- (0.23)
</TABLE>
--------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) The Fund began offering Prime A Shares and Prime B Shares on November 1,
1998.
(3) The Fund began issuing BKB Shares on June 19, 2000.
(4) Calculation does not include the effect of any sales charge for Retail A
Shares, Retail B Shares, Prime A Shares and Prime B Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for
Retail A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and
1996 were $0.56, $0.55, $0.56, $0.58 and $0.57, respectively. Net
investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for
Retail B Shares for the years ended October 31, 2000, 1999, 1998 and 1997
and the period ended October 31, 1996 were $0.50, $0.47, $0.49, $0.51 and
$0.34, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for Trust Shares for the years ended
October 31, 2000, 1999, 1998, 1997 and 1996 were $0.59, $0.56, $0.56, $0.59
and $0.60, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for Prime A Shares for the the years
ended October 31, 2000 and 1999 were $0.52 and $0.54, respectively. Net
investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Prime
B Shares for the the years ended October 31, 2000 and 1999 were $0.48 and
$0.45, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for BKB Shares for the period ended
October 31, 2000 was $0.35.
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------
RATIO OF RATIO OF RATIO OF
NET INVESTMENT OPERATING OPERATING
NET INCREASE INCOME EXPENSES EXPENSES
(DECREASE) NET ASSET NET ASSETS, INCLUDING INCLUDING EXCLUDING PORTFOLIO
IN NET VALUE, TOTAL END OF PERIOD REIMBURSMENT/ REIMBURSMENT/ REIMBURSMENT/ TURNOVER
ASSET VALUE END OF PERIOD RETURN(3) (IN 000'S) WAIVER WAIVER WAIVER RATE
------------ ------------- --------- ------------- -------------- ------------- ------------- ---------
RETAIL A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/00 $ 0.10 $ 10.35 7.04% $ 33,429 5.76% 1.01% 1.23% 104%
10/31/99 (0.95) 10.25 (2.66)% 42,906 5.32% 0.99% 1.20% 226%
10/31/98 0.50 11.20 10.35% 45,879 5.30% 1.00% 1.20% 253%
10/31/97 0.23 10.70 8.22% 27,950 5.73% 1.01% 1.21% 182%
10/31/96 (0.16) 10.47 4.24% 30,984 5.66% 1.07% 1.28% 163%
RETAIL B
10/31/00 0.10 10.35 6.37% 5,775 5.13% 1.65% 1.91% 104%
10/31/99 (0.95) 10.25 (3.25)% 6,550 4.72% 1.59% 1.88% 226%
10/31/98 0.50 11.20 9.73% 5,420 4.69% 1.61% 1.81% 253%
10/31/97 0.23 10.70 7.59% 1,998 5.07% 1.69% 1.95% 182%
10/31/96(1) (0.25) 10.47 1.14%** 646 5.34%* 1.60%* 1.81%* 163%
TRUST
10/31/00 0.10 10.35 7.27% 558,789 5.99% 0.78% 0.99% 104%
10/31/99 (0.95) 10.25 (2.52)% 237,772 5.46% 0.84% 1.04% 226%
10/31/98 0.50 11.20 10.50% 217,143 5.43% 0.87% 1.07% 253%
10/31/97 0.23 10.70 8.36% 182,398 5.88% 0.87% 1.09% 182%
10/31/96 (0.16) 10.47 4.46% 149,075 5.88% 0.85% 1.06% 163%
A PRIME
10/31/00 0.10 10.35 7.00% 34 5.74% 1.05% 1.52% 104%
10/31/99(2) (0.95) 10.25 (2.68)% 16 5.35% 0.96% 1.52% 226%
B PRIME
10/31/00 0.11 10.35 6.41% 262 5.07% 1.71% 2.00% 104%
10/31/99(2) (0.96) 10.24 (3.46)% 323 4.60% 1.71% 2.07% 226%
BKB
10/31/00(3) 0.12 10.35 3.43%** 7,625 5.97%* 0.80%* 1.09%* 104%**
</TABLE>
--------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) The Fund began offering Prime A Shares and Prime B Shares on November 1,
1998.
(3) The Fund began issuing BKB Shares on June 19, 2000.
(4) Calculation does not include the effect of any sales charge for Retail A
Shares, Retail B Shares, Prime A Shares and Prime B Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for
Retail A Shares for the years ended October 31, 2000, 1999, 1998, 1997 and
1996 were $0.56, $0.55, $0.56, $0.58 and $0.57, respectively. Net
investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for
Retail B Shares for the years ended October 31, 2000, 1999, 1998 and 1997
and the period ended October 31, 1996 were $0.50, $0.47, $0.49, $0.51 and
$0.34, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for Trust Shares for the years ended
October 31, 2000, 1999, 1998, 1997 and 1996 were $0.59, $0.56, $0.56, $0.59
and $0.60, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for Prime A Shares for the the years
ended October 31, 2000 and 1999 were $0.52 and $0.54, respectively. Net
investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or its affiliates and/or the Administrator for Prime
B Shares for the the years ended October 31, 2000 and 1999 were $0.48 and
$0.45, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or its
affiliates and/or the Administrator for BKB Shares for the period ended
October 31, 2000 was $0.35.
SEE NOTES TO FINANCIAL STATEMENTS.
42-43
<PAGE>
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
thirty-seven managed investment portfolios. The accompanying financial
statements and financial highlights are those of the Short-Term Bond,
Intermediate Government Income, Corporate Bond and High Quality Bond Funds
(individually, a "Fund", collectively, the "Funds") only.
The Short-Term Bond, Intermediate Government Income and High Quality Bond
Funds are authorized to issue six series of shares (Trust Shares, Retail A
Shares, Retail B Shares, Prime A Shares, Prime B Shares and BKB Shares). The
Corporate Bond Fund is authorized to issue two series of shares (Trust Shares
and Retail A Shares). Currently, the High Quality Bond Fund offers all six
series of shares, the Short-Term Bond and Intermediate Government Income Funds
offer Trust Shares, Retail A Shares, Retail B Shares and BKB Shares, and the
Corporate Bond Fund offers Trust Shares only. Trust Shares, Retail A Shares,
Retail B Shares, Prime A Shares, Prime B Shares and BKB Shares are substantially
the same except that (i) Retail A Shares are subject to a maximum 3.75%
front-end sales charge, (ii) Prime A Shares are subject to a maximum 4.75%
front-end sales charge, (iii) Retail B Shares and Prime B Shares are subject to
a maximum 5.00% contingent deferred sales charge, and (iv) each series of shares
bears the following series specific expenses: distribution fees and/or
shareholder servicing fees and transfer agency charges. Six years after
purchase, Retail B Shares will convert automatically to Retail A Shares and
eight years after purchase, Prime B Shares will automatically convert to Prime A
Shares. BKB Shares of the Short-Term Bond, Intermediate Government Income and
High Quality Bond Funds will convert to Retail A Shares of the same Fund on the
first anniversary of the closing of the reorganization of the Boston 1784 Funds
into the Trust provided that prior thereto the Board of Trustees of the Trust
has determined that such conversion is in the best interest of the holders of
such BKB Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies in conformity with generally accepted
accounting principles consistently followed by the Funds in the preparation of
their financial statements.
PORTFOLIO VALUATION: Investment securities are valued by an independent
pricing service approved by the Trust's Board of Trustees. When, in the judgment
of the service, quoted bid prices are readily available and are representative
of the bid side of the market, investments are valued at the mean between quoted
bid prices and asked prices. Other investments are carried at fair value as
determined by the service based on methods which include consideration of yields
or prices of bonds of comparable quality, coupon maturity and type; indications
as to values from dealers; and general market conditions. Short-term obligations
that mature in 60 days or less are valued at amortized cost, which approximates
fair value. All other securities and other assets are appraised at their fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis. Investment income and realized and unrealized
gains and losses are allocated to the separate series of a Fund based upon the
relative net assets of each series.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are
determined separately for each series and are declared daily and paid monthly.
Net realized capital gains, if any, are distributed at least annually.
Income dividends and capital gain dividends are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
FEDERAL INCOME TAXES: The Trust treats each Fund as a separate entity for
federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
By so qualifying, each Fund will not be subject to federal income taxes to the
extent that it distributes substantially all of its taxable or tax-exempt
income, if any, for its tax year ending October 31. In addition, by distributing
in each calendar year substantially all of its net investment income, capital
gains and certain other amounts, if any, each Fund will not be subject to a
federal excise tax. Therefore, no federal income or excise tax provision is
recorded.
REPURCHASE AGREEMENTS: Each Fund may engage in repurchase agreement
transactions with institutions that the Trust's investment advisor has
determined are creditworthy. Each repurchase agreement transaction is recorded
at cost plus accrued interest. Each Fund requires that the securities
collateralizing a repurchase agreement transaction be transferred to the Trust's
custodian in a manner that is intended to enable the Fund to obtain those
securities in the event of a counterparty default. The value of the collateral
securities is monitored daily to ensure that the value of the collateral,
including accrued interest, equals or exceeds the repurchase price. Repurchase
agreement transactions involve certain risks in the event of default or
insolvency of the
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS
counterparty, including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities, and a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a Fund are charged to
the Fund, while expenses which are attributable to more than one fund of the
Trust are allocated among the respective funds.
In addition, expenses of a Fund not directly attributable to the operations
of a particular series of shares of the Fund are allocated to the separate
series based upon the relative net assets of each series. Operating expenses
directly attributable to a series of shares of a Fund are charged to the
operations of that series.
ORGANIZATION COSTS: Each Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under federal and state securities laws. All
such costs are deferred and amortized using the straight-line method over a
period of five years beginning with the commencement of each Fund's operations.
In the event that any of the initial shares purchased by a Fund's sponsor are
redeemed during such period by any holder thereof, the Fund involved will be
reimbursed by such holder for any unamortized organization costs in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
3. INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION, SHAREHOLDER SERVICES AND
OTHER FEES
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor"), an
indirect wholly-owned subsidiary of FleetBoston Financial Corporation, are
parties to an investment advisory agreement under which the Investment Advisor
provides services for a fee, computed daily and paid monthly, at the annual rate
of 0.75% of the average daily net assets of each Fund (See Note 4).
The Trust and PFPC Inc. (formerly known as First Data Investor Services
Group, Inc.), a member of PNC Financial Services Group (formerly known as PNC
Bank Corp.), are parties to an administration agreement under which PFPC Inc.
(the "Administrator")provides services for a fee, computed daily and paid
monthly, at the annual rate of 0.09% of the first $2.5 billion of the combined
average daily net assets of the Funds and the other funds offered by the Trust
(whose financial statements are provided in separate reports), 0.085% of the
next $2.5 billion of combined average daily net assets, 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, 0.0575% of the next $3 billion of combined average
daily net assets and 0.0525% of combined average daily net assets in excess of
$21 billion. Prior to December 1,1999, the services described above were
provided by First Data Investor Services Group, Inc., a wholly-owned subsidiary
of First Data Corp. On that date, PFPC Trust Co., a wholly-owned susidiary of
PNC Bank Corp., acquired all of the outstanding stock of First Data Investor
Services Group, Inc. As part of that transaction, PFPC Inc., also an indirect
wholly-owned subsidiary of PNC Bank Corp., was merged into First Data Investor
Services Group, Inc., which then changed its name to PFPC Inc.
In addition, PFPC Inc. also provides certain fund accounting, custody,
administration and transfer agency services in accordance with certain fee
arrangements. Pursuant to these fee arrangements, PFPC Inc. compensates the
Trust's custodian bank, The Chase Manhattan Bank, for its services.
Provident Distributors, Inc. (the "Distributor"), serves as the distributor
of the Trust's shares. Prior to December 1, 1999, First Data Distributors, Inc.
a wholly-owned subsidiary of First Data Investor Services Group, Inc., acted as
the exclusive distributor of the Trust's shares.
The Trust has adopted a shareholder services plan (the "Services Plan")
with respect to Retail A Shares and Trust Shares of the Funds. Currently, the
Services Plan has not been implemented with respect to the Funds' Trust Shares.
The Services Plan provides compensation to institutions (including and currently
limited to Fleet Bank and its affiliates) which provide administrative and
support services to their customers who beneficially own Retail A Shares at an
aggregate annual rate not to exceed 0.30% of the average daily net asset value
of the outstanding Retail A Shares of each Fund beneficially owned by such
customers. The Trust, under the direction of the Board of Trustees, is currently
limiting fees payable under the Services Plan with respect to each Fund to an
aggregate annual rate not to exceed 0.15% of the average daily net asset value
of the outstanding Retail A Shares beneficially owned by such customers.
The Trust has adopted a distribution and services plan (the "12b-1 Plan")
with respect to Retail B Shares of the Short-Term Bond, Intermediate Government
Income and High Quality Bond Funds. Under the 12b-1 Plan, the Trust may pay (i)
the Distributor or another person for expenses and activities primarily intended
to result in the sale of Retail B Shares, (ii) institutions for shareholder
liaison services and (iii) institutions for administrative support services.
Currently, payments under the 12b-1 Plan for distribution services are being
made solely to broker-dealer affiliates of Fleet Bank and payments under the
12b-1 Plan for shareholder liaison and administrative support services are being
made solely to Fleet Bank and its affiliates. Payments for distribution expenses
may not exceed an annual rate of 0.65% of the average daily net assets
attributable to each of the Funds' outstanding Retail B Shares. The fees paid
for shareholder liaison services and administrative support services may not
exceed the annual rates of 0.15% and 0.15%, respectively, of the
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
average daily net assets attributable to each of the Funds' outstanding Retail B
Shares owned of record or beneficially by customers of institutions. The Trust,
under the direction of the Board of Trustees, is currently limiting each Fund's
payments for shareholder liaison and administrative support services under the
12b-1 Plan to an aggregate fee of not more than 0.15% of the average daily net
asset value of Retail B Shares owned of record or beneficially by the customers
of institutions. For the year ended October 31, 2000, the Funds paid fees under
the Services Plan and 12b-1 Plan as follows:
SERVICES 12B-1 PLAN
FUND PLAN SERVICES DISTRIBUTION
---- -------- -------- ------------
Short-Term Bond ................... $ 30,165 $ 1,279 $ 5,986
Intermediate Government Income .... 70,180 2,071 9,075
High Quality Bond ................. 55,581 8,412 38,817
The Trust has adopted a distribution plan (the "Prime A Shares Plan") with
respect to Prime A Shares of the Short-Term Bond, Intermediate Government Income
and High Quality Bond Funds. Under the Prime A Shares Plan, the Trust may pay
the Distributor or another person for expenses and activities primarily intended
to result in the sale of Prime A Shares. Payments by the Trust under the Prime A
Shares Plan may not exceed the annual rate of 0.30% of the average daily net
assets attributable to each Fund's outstanding Prime A Shares. The Trust, under
the direction of the Board of Trustees, is currently limiting the Funds'
payments under the Prime A Shares Plan to an annual rate of not more than 0.25%
of the average daily net asset value of each Fund's outstanding Prime A Shares.
The Trust has adopted a distribution and services plan (the "Prime B Shares
Plan") with respect to Prime B Shares of the Short-Term Bond, Intermediate
Government Income and High Quality Bond Funds. Under the Prime B Shares Plan,
the Trust may pay (i) the Distributor or another person for expenses and
activities primarily intended to result in the sale of Prime B Shares, (ii)
institutions for shareholder liaison services, and (iii) institutions for
administrative support services. Payments for distribution expenses may not
exceed an annual rate of 0.75% of the average daily net assets attributable to
each Fund's outstanding Prime B Shares. The fees paid to institutions for
shareholder liaison services and/or administrative support services may not
exceed the annual rates of 0.25% and 0.25%, respectively, of the average daily
net assets attributable to each Fund's outstanding Prime B Shares owned of
record or beneficially by customers of institutions. The Trust, under the
direction of the Board of Trustees, is currently limiting each Fund's payments
for shareholder liaison and administrative support services under the Prime B
Shares Plan to an aggregate fee of not more than 0.25% of the average daily net
asset value of Prime B Shares owned of record or beneficially by customers of
institutions. For the year ended October 31, 2000, the Funds paid fees under the
Prime A Shares Plan and Prime B Shares Plan as follows:
PRIME A PRIME B SHARES PLAN
FUND SHARES PLAN SERVICES DISTRIBUTION
---- ----------- -------- ------------
High Quality Bond ........ $ 40 $ 669 $ 2,011
The Trust has adopted a shareholder services plan (the "BKB Plan") with
respect to BKB Shares of the Short-Term Bond, Intermediate Government Income and
High Quality Bond Funds. The BKB Plan provides compensation to institutions
(including Fleet Bank and its affiliates) which provide shareholder liaison
and/or administrative support services to their customers who beneficially own
BKB Shares at an aggregate annual rate not to exceed 0.30% of the average daily
net asset value of the outstanding BKB 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 BKB Plan with respect to each Fund to
an aggregate annual rate not to exceed 0.15% of the average daily net asset
value of the outstanding BKB Shares beneficially owned by such customers. For
the period ended October 31, 2000, the Funds paid fees under the BKB Plan as
follows:
BKB
FUND PLAN
---- -------
Short-Term Bond .................. $ 7,443
Intermediate Government Income ... 4,154
High Quality Bond ................ 2,396
Retail A Shares, Retail B Shares, Trust Shares, Prime A Shares, Prime B
Shares and BKB 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 PFPC Inc. for payments made to Fleet Bank, an affiliate of the
Investment Advisor, for performing certain sub-accounting and administrative
functions on a per account basis with respect to Trust Shares held by defined
contribution plans. These additional fees are based on the number of underlying
participant accounts. For the year ended October 31, 2000, transfer agent
charges for each series were as follows:
FUND RETAIL A RETAIL B TRUST BKB
---- -------- -------- -------- -------
Short-Term Bond ......... $25,468 $ 1,808 $ 7,743 $ 7,407
Intermediate
Government Income ..... 74,260 5,565 45,699 3,726
Corporate Bond .......... N/A N/A 45,895 N/A
High Quality Bond ....... 65,315 13,275 307,203 3,391
FUND PRIME A PRIME B
---- ------- -------
High Quality Bond ....... $ 61 $ 277
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Certain officers of the Trust are officers of the Investment Advisor or
PFPC Inc. Such officers receive no compensation from the Trust for serving in
their respective roles. Effective September 8, 2000, each Trustee is entitled to
receive for services as a Trustee of the Trust, The Galaxy VIPFund ("VIP") and
Galaxy Fund ("Galaxy II") an aggregate fee of $54,000 per annum plus certain
other fees for attending or participating in meetings as well as reimbursement
for expenses incurred in attending meetings. For the period May 28, 1999 until
September 7, 2000, each Trustee was entitled to receive for services as a
Trustee of the Trust, VIP and Galaxy II an aggregate fee of $45,000 per annum
plus certain other fees for attending or participating in meetings as well as
reimbursement for expenses incurred in attending meetings. Prior to May 28,
1999, each Trustee was entitled to receive for services as a Trustee of the
Trust, VIP and Galaxy II an aggregate fee of $40,000 per annum plus certain
other fees for attending or participating in meetings as well as reimbursement
for expenses incurred in attending meetings. The Chairman of the Boards of
Trustees and the President and Treasurer of the Trust, VIP, and Galaxy II are
also entitled to additional fees for their services in these capacities. These
fees are allocated among the funds of the Trust, VIP, and Galaxy II based on
their relative net assets.
Each Trustee is eligible to participate in The Galaxy Fund/The Galaxy VIP
Fund/Galaxy Fund II Deferred Compensation Plan (the "Plan"), an unfunded,
non-qualified deferred compensation plan. The Plan allows each trustee to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
Expenses for the year ended October 31, 2000 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Investment Advisor and/or its affiliates and/or the Administrator
voluntarily agreed to waive a portion of their fees and/or reimburse the Funds
for certain expenses so that total expenses would not exceed certain expense
limitations established for each Fund. The respective parties, at their
discretion, may revise or discontinue the voluntary fee waivers and expense
reimbursements at any time. For the year ended October 31, 2000, fees waived
and/or expenses reimbursed with respect to the Funds were as follows:
EXPENSES
FUND FEES WAIVED REIMBURSED
---- ----------- ----------
Short-Term Bond .............. $ 199,014 $ 7,632
Intermediate Government
Income ................... 749,767 7,195
Corporate Bond ............... 173,466 --
High Quality Bond ............ 816,039 11,152
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 forty-three classes of
shares, each consisting of one or more series.
Each share represents an equal proportionate interest in the respective
Fund, bears the same fees and expenses (except that Retail A Shares of a Fund
bear the expense of payments under the Services Plan, Retail B Shares of a Fund
bear the expense of payments under the 12b-1 Plan, Prime A Shares of a Fund bear
the expense of payments under the Prime A Shares Plan, Prime B Shares of a Fund
bear the expense of payments under the Prime B Shares Plan, BKB Shares of a Fund
bear the expense of payments under the BKB Plan and Trust Shares, Retail A
Shares, Retail B Shares, Prime A Shares, Prime B Shares and BKB Shares of a Fund
each bear series specific transfer agent charges) and are entitled to such
dividends and distributions of income earned as are declared at the discretion
of the Trust's Board of Trustees.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and will vote in
the aggregate and not by class or series, except as otherwise expressly required
by law or when the Board of Trustees determines that the matter to be voted on
affects only the interests of shareholders of a particular class or series.
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, 2000 were as follows
PURCHASES
--------------------------------
FUND GOVERNMENT OTHER
------ ------------- -------------
Short-Term Bond .............. $ 53,198,348 $ 32,989,402
Intermediate
Government Income ......... 254,547,418 112,039,885
Corporate Bond ............... 39,923,723 33,396,629
High Quality Bond ............ 272,331,335 169,903,884
SALES
--------------------------------
FUND GOVERNMENT OTHER
------ ------------- -------------
Short-Term Bond .............. $ 72,293,709 $ 54,843,214
Intermediate Government
Income .................... 288,388,577 95,790,773
Corporate Bond ............... 39,095,789 23,669,497
High Quality Bond ............ 298,644,365 116,275,149
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 2000 for each Fund is as follows:
FUND APPRECIATION (DEPRECIATION)
---- ------------- -------------
Short-Term Bond ........... $ 391,228 $ (845,583)
Intermediate Government
Income ................. 4,175,649 (5,827,171)
Corporate Bond ............ 809,079 (2,597,265)
High Quality Bond ......... 6,491,269 (8,975,339)
FUND NET COST
---- ------------- -------------
Short-Term Bond ........... $ (454,355) $ 123,934,492
Intermediate Government
Income ................. (1,651,522) 515,373,805
Corporate Bond ............ (1,788,186) 90,358,748
High Quality Bond ......... (2,484,070) 605,267,848
7. FEDERAL TAX INFORMATION
At October 31, 2000, the following Funds had capital loss carryforwards:
FUND AMOUNT EXPIRATION
---- ----------- ----------
Short-Term Bond ........... $ 2,112,786 2001
3,125,222 2002
1,516,262 2003
10,917 2004
9,409 2005
114,406 2006
1,642,976 2007
525,174 2008
Intermediate
Government Income ....... 3,310,634 2001
17,636,357 2002
5,158,907 2003
2,479,060 2004
1,373,737 2006
6,638,535 2007
3,139,481 2008
Corporate Bond ............ 288,371 2002
1,309,536 2003
450,363 2005
662,376 2007
692,739 2008
High Quality Bond ......... 4,808,589 2006
10,103,698 2007
4,350,002 2008
The availability of a portion of these capital loss carryforwards, which
were acquired on June 19, 2000 in connection with the Boston 1784 Funds
reorganization, may be limited in a given year.
8. LINE OF CREDIT
Each Fund and other affiliated funds participate in a $150 million
unsecured line of credit pursuant to a credit agreement dated as of December 29,
1999. Borrowings may be made under the credit agreement only for temporary or
emergency purposes, such as repurchase or redemption of shares of the Funds.
Interest is charged to each Fund based on its borrowings. In addition, a
commitment fee based on the average daily unused portion of the line of credit
is computed daily and paid quarterly at an annual rate of 0.10%, and allocated
among the Funds based on average daily net assets. For the year ended October
31, 2000, no borrowings have been made by the Funds against the line of credit.
9. ACQUISITION OF BOSTON 1784 FUNDS
At a meeting held on January 25, 2000, the Board of Trustees of the Trust
approved an Agreement and Plan of Reorganization (the "Agreement") providing for
the acquisition of the Boston 1784 Funds by the Trust. Purusant to the
Agreement, (i) all of the assets and liabilities of the Boston 1784 Short-Term
Income Fund were transferred to the Galaxy Short-Term Bond Fund in exchange for
11,061,444 Trust Shares and 2,139,391 BKBShares of the Galaxy Short-Term Bond
Fund, (ii) all of the assets and liabilities of the Boston 1784 Government
Medium-Term Income Fund were transferred to the Galaxy Intermediate Government
Income Fund in exchange for 23,087,034 TrustShares and 1,590,933 BKBShares of
the Galaxy Intermediate Government Income Fund, and (iii) all of the assets and
liabilities of the Boston 1784 Income Fund were tranferred to the Galaxy High
Quality Bond Fund in exchange for 28,577,262 Trust Shares and 1,055,977
BKBShares of the Galaxy High Quality Bond Fund. In related transactions, the
assets and liabilities of the other Boston 1784 Fund portfolios were transferred
to corresponding Galaxy portfolios in exchange for shares in such Galaxy
portfolios. The acquisition, which qualified as a tax-free reorganization for
federal income tax purposes, was completed on June 26, 2000, following the
approval of the reorganization by Boston 1784 Fund shareholders. The following
is a summary of the Net Assets, Shares Outstanding, Net Asset Value per share
and Unrealized Depreciation associated with the transaction:
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BEFORE AFTER
ACQUISITION ACQUISITION
---------------------------- ------------
GALAXY BOSTON 1784 GALAXY
SHORT-TERM SHORT-TERM SHORT-TERM
BOND FUND INCOME FUND BOND FUND
----------- ------------ ------------
Net Assets .................... $49,608,273 $129,120,201 $178,728,474
Shares Outstanding ............ 5,071,839 13,077,958 18,272,674
Net Asset Value, per share .... $ -- $ 9.87 $ --
Trust Net Asset Value,
per share .................... $ 9.78 $ -- $ 9.78
BKBNet Asset Value, per share . $ -- $ -- $ 9.78
Unrealized Depreciation ....... $ (670,939) $ (1,085,356) $ (1,756,295)
BEFORE AFTER
ACQUISITION ACQUISITION
---------------------------- ------------
GALAXY BOSTON 1784 GALAXY
INTERMEDIATE GOVERNMENT INTERMEDIATE
GOVERNMENT MEDIUM-TERM GOVERNMENT
BOND FUND INCOME FUND BOND FUND
------------ ------------ ------------
Net Assets .................... $287,099,811 $242,811,936 $529,911,747
Shares Outstanding ............ 29,180,792 26,322,070 53,858,820
Net Asset Value, per share .... $ -- $ 9.22 $ --
Trust Net Asset Value,
per share$ ................... 9.84 $ -- $ 9.84
BKBNet Asset Value, per share . $ -- $ -- $ 9.84
Unrealized Depreciation ....... $ (3,901,428) $ (4,005,695) $ (7,907,123)
BEFORE AFTER
ACQUISITION ACQUISITION
---------------------------- ------------
GALAXY GALAXY
HIGH-QUALITY BOSTON 1784 HIGH-QUALITY
BOND FUND INCOME FUND BOND FUND
----------- ------------ ------------
Net Assets .................... $292,504,935 $303,271,793 $595,776,728
Shares Outstanding ............ 28,580,598 31,680,604 58,213,837
Net Asset Value, per share .... $ -- $ 9.57 $ --
Trust Net Asset Value,
per share .................... $ 10.23 $ -- $ 10.23
BKBNet Asset Value, per share . $ -- $ -- $ 10.23
Unrealized Depreciation ....... $ (7,099,028) $ (3,733,913) $(10,832,941)
10. TAX INFORMATION (UNAUDITED)
During the fiscal year ended October 31, 2000, the following Funds earned
income from direct obligations of the U.S. Governement:
FUND U.S. GOVERNMENT
INCOME
---------------
Short-Term Bond ................... 28.06%
Intermediate Government Income .... 52.47%
Corporate Bond .................... 10.29%
High Quality Bond ................. 33.00%
Appropriate tax information detailing u.s. government income percentages on
a calender basis will accompany each shareholder's year-end statement. as each
state's rules on the exemption of this income differ, please consult your tax
advisor regarding specific tax treatments.
49
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Galaxy Short-Term Bond Fund, Galaxy
Intermediate Government Income Fund, Galaxy Corporate Bond Fund and Galaxy High
Quality Bond Fund (four of the portfolios constituting The Galaxy Fund) as of
October 31, 2000, and the related statements of operations for the year then
ended, the statements of changes in net assets, and the financial highlights for
each of the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial highlights for the three
years ended October 31, 1998 were audited by other auditors whose report dated
December 23, 1998, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2000 by correspondence with
the custodian and brokers or other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Galaxy Short-Term Bond Fund, Galaxy Intermediate Government Income Fund, Galaxy
Corporate Bond Fund and Galaxy High Quality Bond Fund portfolios of The Galaxy
Fund at October 31, 2000, the results of their operations for the year then
ended, changes in their net assets and their financial highlights for each of
the two years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/S/ SIGNATURE ERNST & YOUNG LLP
Boston, Massachusetts
December 15, 2000
50
<PAGE>
SHAREHOLDER INFORMATION
[BEGIN SIDEBAR]
TRUSTEES
AND
EXECUTIVE 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
William Greilich
VICE PRESIDENT
W. Bruce
McConnel, Esq.
SECRETARY
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
100 Federal Street
Boston, MA 02110
DISTRIBUTOR
Provident Distributors, Inc.
3200 Horizon Drive
King of Prussia
Pennsylvania 19406
ADMINISTRATOR
PFPC Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
AUDITOR
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
[END SIDEBAR]
This report is submitted for the general information of shareholders of The
Galaxy Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for each Fund of The
Galaxy Fund, which contains more information concerning the investment policies
and expenses of the Funds as well as other pertinent information. For complete
information, and before making an investment decision on any of the Funds of The
Galaxy Fund, you should request a prospectus from Provident Distributors, Inc.
by calling toll-free 1-877-BUY-GALAXY (1-877-289-4252). Read the prospectus
carefully before you invest.
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEETBOSTON FINANCIAL CORPORATION 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 POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED.
[GRAPHIC OMITTED: RECYCLE LOGO]
This report was printed on recycled paper.
51
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<PAGE>
<PAGE>
[GRAPHIC OMITTED: GALAXY LOGO]
GALAXY
FUNDS
4400 Computer Drive
P.O. Box 5108
Westborough, MA 01581-5108
-----------------------
Bulk Rate
U. S. Postage Paid
Permit No. 105
North Reading, MA
-----------------------
ABND(12/00)
