<PAGE>
GALAXY FUND II
GALAXY FUND II REPORT
LARGE COMPANY INDEX FUND o SMALL COMPANY INDEX FUND o
UTILITY INDEX FUND o U.S. TREASURY INDEX FUND o MUNICIPAL BOND FUND
SEMI-ANNUAL
REPORT
FOR THE
SIX MONTHS ENDED
SEPTEMBER 30, 1997
<PAGE>
CHAIRMAN'S
MESSAGE
Dear Galaxy Fund II Shareholder:
Enclosed is your performance report for the six months ended September 30,
1997. Despite further volatility, the financial markets continued to reward
investors during that time. This was due largely to additional growth in the
economy without higher inflation or interest rates.
Investors also benefited during the period from passage of the Taxpayer
Relief Act of 1997, which should help them keep more of what their investments
earn. Among the most significant changes is a cut in the tax rate for long-term
capital gains. Although the holding period for long-term gains has been extended
from 12 to 18 months, for investments you sell after July 28, 1997, the tax rate
has been reduced to 20% for investors in the 28% federal tax bracket or above
and to 10% for investors in the 15% bracket.
The new law also expands the tax breaks for savings in individual
retirement accounts. Beginning in 1998, the income limits for making deductible
contributions will start to rise and the participation of one spouse in an
employer's retirement plan will no longer affect the deductibility of the other
spouse's IRA contributions unless the couple has adjusted gross income above
$150,000. You will also be able to take money out of a deductible IRA before age
59-1/2, without the standard 10% penalty, if you use the money for the purchase
of a first home (subject to a $10,000 lifetime limit) or for college expenses.
The legislation introduces two new IRAs for nondeductible contributions.
With the Roth IRA, you can make up to $2,000 in after-tax contributions each
year and pay no taxes on earnings that you keep in the account for at least five
years and use to buy a first home (subject to a $10,000 lifetime limit) or
withdraw after age 59-1/2. With the Education IRA, you can make up to $500 in
after-tax contributions each year for every child under age 18 that you wish to
help with college costs.
To help our shareholders make the most of these changes, we created both a
Roth IRA and an Education IRA that you can use with any of the Galaxy Funds. If
you would like more information on these products, or you have questions about
the material in this report, please contact the Galaxy Information Center at
1-800-628-0414 or visit an Investment Specialist located at Fleet Branches.
Sincerely,
/s/ Dwight E. Vicks, Jr.
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
MUTUAL FUNDS:
O ARE NOT BANK DEPOSITS
O ARE NOT FDIC INSURED
O ARE NOT OBLIGATIONS OF FLEET BANK
O ARE NOT GUARANTEED BY FLEET BANK
O ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED
<PAGE>
MARKET OVERVIEW
- ----------------------
MARKET OVERVIEW
- ----------------------
By Fleet Investment Advisors Inc.
In the six months ended September 30, 1997, prices for stocks and bonds
built on previous gains. As in the last several quarters, however, uncertainty
about where the economy, inflation and interest rates would head caused
significant price volatility. Although economic growth slowed during the period,
allowing inflation and interest rates to ease, investors frequently became
concerned that the economy would strengthen enough to push inflation and
interest rates higher.
A TIME OF MODERATION
After growing at an annual rate of 4.9% in the first quarter of 1997, the
Gross Domestic Product (GDP) improved at a rate of 3.6% in the second quarter.
With slower growth and improved productivity, the annual rate of inflation fell
from about 2.5% to about 2.2%.
In the first weeks of April, however, investors remained concerned that
strong growth would bring higher inflation. Stocks lost nearly 10% of their
value from their February and March highs, leaving prices near their levels at
the start of the year. Bond prices fell enough to push the yield for 30-year
Treasury bonds to 7.17% -- a nine-month high. Then, in the weeks that followed,
it became clear that inflation was under control and growth had begun to slow.
Bonds rallied strongly, leaving the yield for long-term Treasuries at 6.78% when
the second quarter ended. Lower bond yields, plus surprisingly strong corporate
earnings, helped stocks rebound to new highs.
Economic growth remained moderately strong in the third quarter. However,
inflation remained low allowing the Federal Reserve to leave interest rates
unchanged. Because analysts predicted growth to be slower than it was, investors
became nervous about inflation again. After tumbling briefly in July and August,
stocks and bonds quickly recovered to end the third quarter higher than where
they began. This left stocks significantly higher for the year-to-date. By the
end of September, the Standard & Poor's 500 Composite Stock Price Index(R) (the
"S&P 500 Index") had earned a total return of 29.64% for the nine months ended
September 30, 1997. On September 30, 1997, long-term Treasuries were yielding
6.39%, versus 6.64% on December 31, 1996.
After lagging large company stocks for the previous year, small company
stocks outperformed large company stocks in the past six months, benefiting from
exceptional earnings growth and reasonable valuations. Although stocks of
utilities firms continued to lag stocks as a whole, their price gains
accelerated as interest rates fell. Stronger demand for Treasury securities,
plus smaller supplies, helped Treasuries outpace corporate bonds during the
period. Municipal bonds outperformed taxable issues when interest rates rose,
but underperformed when rates fell.
"In the six months ended September 30, 1997, prices for
stocks and bonds built on previous gains. As in the
last several quarters, however, uncertainty about
where the economy, inflation, and interest rates would
head caused significant price volatility."
NEW TURBULENCE POSSIBLE
Even after the stock market turmoil of late October 1997, which stemmed,
in part, from weakness and uncertainty in the economies of Southeast Asia, U.S.
stock prices are still relatively high. We believe the United States economy
will remain strong in the fourth quarter of 1997. This could reverse the recent
downward course of inflation and force the Federal Reserve to raise interest
rates for the first time since March. Because we do not expect a large increase
in inflation, we feel any hike in interest rates and decline in bond prices will
be relatively modest. For investors, a rate hike could mean additional market
weakness -- especially if there are new disappointments in earnings.
We expect growth to slow significantly in the first half of 1998. This
should take some upward pressure off the rate of inflation and allow interest
rates to decline. If stock prices have become more attractive, lower interest
rates and bond yields should help the market resume its advance.
"We expect growth to slow significantly in the first
half of 1998. This should take some upward pressure
off the rate of inflation and allow interest rates to
decline. "
PERFORMANCE AT-A-GLANCE
Average Annual Returns as of September 30, 1997
LARGE COMPANY INDEX FUND Inception Date 10/1/90
6 Months* 25.99%
1 Year 39.87%
3 Year 29.42%
5 Year 20.30%
Life of Fund 19.97%
SMALL COMPANY INDEX FUND Inception Date 10/1/90
6 Months* 31.71%
1 Year 35.20%
3 Year 25.60%
5 Year 19.38%
Life of Fund 21.22%
UTILITY INDEX FUND Inception Date 1/5/93
6 Months* 13.54%
1 Year 21.11%
3 Year 15.45%
Life of Fund 10.83%
U.S. TREASURY INDEX FUND Inception Date 6/4/91
6 Months* 6.67%
1 Year 8.73%
3 Year 8.58%
5 Year 6.25%
Life of Fund 7.79%
MUNICIPAL BOND FUND Inception Date 4/15/93
6 Months* 5.12%
1 Year 7.51%
3 Year 7.08%
Life of Fund 5.62%
*6 month returns are not annualized.
The performance data quoted represents past performance and is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. During the six months ended September 30, 1997,
certain of the Funds' fees were reimbursed by First Data Investor Services
Group, Inc., the sub-administrator of the Funds. If those expenses had not been
reimbursed, returns would have been lower. Please see Note 4 of Notes to
Financial Statements.
<PAGE>
PORTFOLIO REVIEWS
- -----------------------------
Photo of Murphy van der Velde
- -----------------------------
GALAXY II LARGE COMPANY INDEX FUND
By Murphy van der Velde
Portfolio Manager
The Galaxy II Large Company Index Fund seeks to match, before the
deduction of operating expenses, the price and yield performance of the S&P 500
Index. By investing in publicly traded U.S. stocks according to their
representation in the S&P 500 Index, the Fund is also structured to deliver the
same volatility and risk as the Index.
Stocks of large companies led the market advance in the second quarter of
1997, as uncertainty about future economic growth favored stocks with good
liquidity and dependable earnings. Large-cap stocks continued to rally in the
third quarter, but began to somewhat lag stocks of smaller companies. With
valuations that were especially high, large-cap stocks became more vulnerable to
new concerns about corporate earnings. As earnings growth slowed for many large
companies that had led the market for several quarters, economic troubles
overseas raised doubts about the earnings of large multi-national firms.
By historical measures, however, returns for large company stocks were
quite strong in the six months ended September 30, 1997. During that time the
S&P 500 Index had a total return of 26.26%, and the Galaxy II Large Company
Index Fund had a total return of 25.99% (after the deduction of operating
expenses). During the 12 months ended September 30, 1997, the Fund's performance
represented a correlation coefficient of 99.99%. The correlation coefficient
measures the degree to which the Fund's performance moves in line with its
target index during specific periods.
If economic growth remains strong and interest rates rise, economic
problems abroad may make the stocks of large companies especially vulnerable to
correction. Once stock prices are more attractive, issues of larger firms should
benefit from the quality of their earnings and the positive long-term prospects
for stocks as a whole.
GALAXY II
LARGE COMPANY
INDEX FUND
Distribution of Total Net Assets
as of September 30, 1997
U.S. Government and Agency
Obligations and Net Other
Assets and Liabilities 2%
Other Common Stocks 8%
Finance 17%
Capital Goods 7%
Utilities 8%
Consumer Staples 22%
Technology 16%
Energy 9%
Consumer Cyclical 11%
GALAXY II LARGE COMPANY INDEX FUND
Growth of $10,000 investment*
GALAXY FUND II
S&P LARGE COMPANY
INDEX INDEX FUND
- ----------------------------------------
10/1/91 10,000 10,000
9/91 13,153 12,852
9/92 14,609 14,191
9/93 16,510 15,974
9/94 17,118 16,498
9/95 22,209 21,308
9/96 26,726 25,570
9/97 37,579 35,758
|_| Galaxy II Large Company Index Fund
|_| S&P 500 Index(R)
*Since inception on 10/1/90. The S&P Index(R) is an unmanaged index which does
not reflect expenses and management fees. An investor cannot invest in the
index.
GALAXY II SMALL COMPANY INDEX FUND
By Murphy van der Velde
Portfolio Manager
The Galaxy II Small Company Index Fund seeks to match, before the
deduction of operating expenses, the price and yield performance of the Standard
& Poor's Small Cap 600 Index (the "S&P 600 Index"). The S&P 600 Index is an
unmanaged index of small company stocks. By investing in smaller capitalization
stocks according to their representation in the S&P 600 Index, the Fund is also
structured to deliver the same volatility and risk as the Index.
After lagging large company issues for more than a year, stocks of smaller
companies rebounded strongly in the last six months. As large-cap stocks grew
more expensive, and the earnings momentum for larger firms began to slow,
investors turned to the more reasonable valuations and exceptional earnings that
small-cap stocks could offer. This, plus an extra sensitivity to falling
interest rates, helped stocks of smaller firms outperform stocks of larger firms
in the third quarter of 1997.
For the six months ended September 30, 1997, the S&P 600 Index produced a
total return of 34.38%. Over the same time the Galaxy II Small Company Index
Fund returned 31.71% (after the deduction of operating expenses). During the 12
months ended September 30, 1997, the Fund's performance represented a
correlation coefficient of 97.33%. The correlation coefficient measures the
degree to which a fund's performance moves in line with its target index during
specific periods.
During the same period, the Russell Special Small Company(R) Index (the
"Russell Index") produced a total return of 32.23%. The Russell Index is an
unmanaged index of the common stocks of 3,000 companies with the largest market
capitalizations, excluding companies in the S&P 500 Index. The Russell Index was
the target index for the Galaxy II Small Company Index Fund until May 9, 1997.
By matching the Fund's investments to the S&P 600 Index, we hope to give greater
emphasis to small company stocks with the broadest following.
Although strong economic growth and higher interest rates may weaken stock
prices in the months ahead, we believe that stocks of smaller firms will not
suffer any more than stocks of larger firms. Often smaller-cap stocks are more
vulnerable to a market correction because they are less liquid than larger-cap
firms and their earnings are less reliable. With prices that remain more
reasonable than those for larger-cap stocks, however, stocks of smaller firms
should hold up better than they usually do in a correction. As with large-cap
stocks, any price correction should make small-cap stocks more attractive and
set the stage for a further, if more modest, advance.
GALAXY II SMALL COMPANY INDEX FUND
Distribution of Total Net Assets
as of September 30, 1997
Consumer Cyclical 17%
Finance 15%
Basic Materials 5%
Other Common Stocks 8%
U.S. Government and Agency
Obligations and Net Other
Assets and Liabilities 10%
Consumer Staples 17%
Technology 17%
Energy 5%
Capital Goods 6%
PORTFOLIO REVIEWS
GALAXY II
SMALL COMPANY
INDEX FUND
Growth of $10,000 investment*
RUSSELL SPECIAL GALAXY FUND II
SMALL COMPANY(TM) S&P SMALL CAP SMALL COMPANY
INDEX 600 INDEX INDEX FUND
- --------------------------------------------------------------------------------
10/1/91 10,000 10,000 10,000
9/91 15,085 13,070 14,192
9/92 16,913 16,342 15,846
9/93 21,292 19,194 19,497
9/94 21,335 20,850 19,380
9/95 27,059 21,945 24,439
9/96 32,392 28,791 28,405
9/97 41,609 41,933 39,445
|_| Galaxy II Small Company Index Fund
|_| Standard & Pooor's(R) Small Cap 600 Index
|_| Russell Special Small Company(TM) Index
*Since inception on 10/1/90. The Russell Special Small Company (TM)Index and
the Standard & Poor's(R) Small Cap 600 Index are unmanaged indices which do not
reflect expenses and management fees. An investor cannot invest in these
indices.
GALAXY II UTILITY INDEX FUND
By Murphy van der Velde
Portfolio Manager
The Galaxy II Utility Index Fund seeks to match, before the deduction of
operating expenses, the price and yield performance of stocks in the utility
industry. To this end, the Fund invests in publicly traded stocks according to
their representation in the Standard & Poor's Utility Index (the "S&P Utility
Index"). The S&P Utility Index is an unmanaged index of the common stocks of the
utility companies included in the S&P 500 Index.
Although utility stocks continued to lag other market sectors, they
participated in the market's recent advance. When investors grew concerned about
higher inflation and interest rates, utility stocks suffered more than other
issues. Utility shares benefited, however, when bond yields fell and company
operating costs declined. The sector also gained from further merger activity
and industry deregulation.
For the six months ended September 30, 1997, the S&P Utility Index
produced a total return of 14.97%, and the Galaxy II Utility Index Fund had a
total return of 13.54% (after the deduction of operating expenses). During the
12 months ended September 30, 1997, the Fund's performance represented a
correlation coefficient of 97.42%. The correlation coefficient measures the
degree to which a fund's performance moves in line with its target index during
specific periods.
During the same period, the Russell 1000(R) Utility Index (the "Russell
Utility Index") produced a total return of 17.20%. The Russell Utility Index, an
unmanaged index of the common stocks of utility companies in the Russell 1000(R)
Index, was the target index for the Galaxy II Utility Index Fund until May 9,
1997. By matching the Fund's investments with the S&P Utility Index, we hope to
give greater attention to traditional utilities and higher yields.
Should further economic strength and higher inflation force the Federal
Reserve to raise interest rates, utilities stocks could be especially vulnerable
in a market correction. The sector's losses would probably be minimized,
however, if inflation remains low enough to keep interest rates from rising
significantly. As economic growth slows in 1998, and interest rates edge
downward again, utility stocks should benefit from their low valuations and
strong yields.
Murphy Van der Velde became manager of the Galaxy II Large Company Index Fund,
the Galaxy II Small Company Index Fund and the Galaxy II Utility Index Fund in
March of 1996. The managing director of equity trading and derivative products
for Fleet Investment Advisors Inc., Mr. van der Velde has managed equity
portfolios since 1993.
GALAXY II
UTILITY INDEX FUND
Growth of $10,000 investment*
RUSSELL 1000(R) GALAXY FUND II
UTILITY STANDARD & POOR'S(R) UTILITY
INDEX UTILITY INDEX INDEX FUND
- --------------------------------------------------------------------------------
1/5/93 10,000 10,000 10,000
9/93 11,935 10,950 10,985
9/94 10,505 10,498 10,454
9/95 14,440 11,261 10,941
9/96 14,661 14,160 13,853
9/97 16,771 17,032 16,272
|_| Galaxy II Utility Index Fund
|_| Russell 1000(R) Utility Index
|_| Standard & Poor's(R) Utility Index
*Since inception on 1/5/93. The Russell 1000(R) Utility Index and Standard &
Poor's(R) Utility Index are unmanaged indices which do not reflect expenses and
management fees. An investor cannot invest in these indices.
GALAXY II
UTILITY INDEX FUND
Distribution of Total Net Assets
as of September 30, 1997
Energy and Net Other
Assets and Liabilities 11%
Utilities 89%
GALAXY II U.S. TREASURY INDEX FUND
By David Lindsay
Portfolio Manager
PORTFOLIO REVIEWS
- -----------------------------
Photo of David Lindsay
- -----------------------------
David Lindsay
The Galaxy II U.S. Treasury Index Fund seeks to match, before the
deduction of operating expenses, the price and yield performance of the U.S.
Treasury component of the Salomon Brothers Broad Investment Grade Bond Index
(the "Index"), an unmanaged index of corporate and government bonds. The Fund
attempts to meet this objective by investing in U.S. Treasury notes and bonds
according to their representation in the Index. For the six months ended
September 30, 1997, the U.S. Treasury Index posted a total return of 6.90%, and
the Galaxy II U.S. Treasury Index Fund had a net return of 6.67% (after
deduction of operating expenses). During the 12 months ended September 30, 1997,
the Fund's performance represented a correlation coefficient of 99.80%. The
correlation coefficient measures the degree to which a fund's performance moves
in line with its target index during specific periods.
Treasury securities generally outperformed corporate debt securities over
the last six months. At times, investors worried that corporate earnings would
slow, adding extra credit risk to corporate debt. This was particularly true in
the third quarter of 1997, when foreign economic problems threatened the
earnings of large, multi-national firms. At the same time, trouble overseas
boosted demand for Treasuries among foreign investors. Meanwhile, supplies of
new Treasuries were shrinking, due to a decline in federal budget deficits.
Fixed income securities should likely suffer if strong economic growth
pushes inflation and interest rates higher. We believe yields for 30-year
Treasury bonds will continue to range between 5.75% and 6.75%, as long as
inflation is moderate. If U.S. stock prices remain historically high, and
economic problems persist abroad, Treasury securities should continue to attract
investors both here and overseas.
David Lindsay has managed the Galaxy Fund II U.S. Treasury Index Fund since July
of 1994. He has managed fixed income portfolios for Fleet Investment Advisors
Inc. since 1986.
GALAXY II
U.S. TREASURY INDEX FUND
Growth of $10,000 investment*
SALOMON BROTHERS GALAXY FUND II
U.S. TREASURY U.S. TREASURY
INDEX INDEX FUND
- --------------------------------------------------------------------------------
6/4/91 10,000 10,000
9/91 10,553 10,573
9/92 11,867 11,945
9/93 13,146 13,276
9/94 12,554 12,733
9/95 13,171 12,503
9/96 13,689 13,061
9/97 16,542 16,071
|_| Galaxy II U.S. Treasury Index Fund
|_| Salomon Brothers U.S. Treasury Index
*Since inception on 6/4/91. The Salomon Brothers U.S. Treasury Index is an
unmanaged index which does not reflect expenses and management fees. An
investor cannot invest in the index.
GALAXY II
U.S. TREASURY
INDEX FUND
Distribution of Total Net Assets
as of September 30, 1997
Net Other Assets and Liabilities 2%
Federal Home Loan Bank 1%
U.S. Treasury Bonds 27%
U.S. Treasury Notes 70%
GALAXY II MUNICIPAL BOND FUND
By Dan Rabasco
Portfolio Manager
- -----------------------------
Photo of Dan Rabasco
- -----------------------------
Dan Rabasco
The Galaxy II Municipal Bond Fund seeks to provide the highest level of
income exempt from regular federal income tax that is consistent with
preservation of capital. Typically, the Fund invests substantially all of its
assets in debt securities issued by state, local and regional government
agencies, and maintains an average maturity for its investments of 7 to 12
years. For the six months ended September 30, 1997, the Galaxy II Municipal Bond
Fund earned a total return of 5.12% (after deduction of operating expenses).
That compares to a return of 5.49% for its benchmark, the Lehman Brothers
Seven-Year Municipal Bond Index. In the first part of the period, municipal
bonds outperformed Treasury bonds and other taxable issues. With interest rates
on the high side, supplies of municipals were tight and demand was strong. As
interest rates fell, municipal supplies increased but demand declined. This
caused municipals to underperform Treasuries.
During this time the Galaxy II Municipal Bond Fund continued to benefit
from its added emphasis on high quality securities with good call protection,
strong liquidity, and coupons that were at or above market levels. When
municipal prices and yields became more attractive during the summer of 1997, we
bought longer-term issues to lock in the higher yields for more time. In making
those purchases, we concentrated on issues that were related to essential
services and available in good supply, such as water bonds, as well as hospital
and education bonds.
In the months to come we would expect municipal bonds to again
underperform when yields decline and outperform when yields rise. Yields should
increase at the end of 1997, if economic growth remains strong and the Federal
Reserve boosts interest rates. Although moderate inflation should keep any rate
hike to a minimum, we expect to continue to use any changes in rates to enhance
the Fund's yield where we can.
Daniel Rabasco has managed the Galaxy II Municipal Bond Fund since May 1997. He
has managed portfolios at Fleet Investment Advisors Inc. and other investment
firms for 10 years.
GALAXY II
MUNICIPAL BOND FUND
Growth of $10,000 investment*
LEHMAN BROTHERS GALAXY FUND II
SEVEN YEAR MUNICPAL MUNCIPAL
BOND INDEX BOND FUND
- -------------------------------------------------------------------------------
4/15/93 10,000 10,000
9/93 10,575 10,683
9/94 10,507 10,398
9/95 11,000 11,421
9/96 11,488 11,870
9/97 12,678 12,762
|_| Galaxy II Municipal Bond Fund
|_| Lehman Brothers. Seven Year Municipal Bond Index
*Since inception on 4/15/93. The Lehman Brothers Seven Year Municipal Bond
Index is an unmanaged index which does not reflect expenses and management
fees. An investor cannot invest in the index.
PORTFOLIO REVIEWS
GALAXY II MUNICIPAL BOND FUND
Geographical Distribution of Total Net Assets
as of September 30, 1997
South 34%
East 20%
Pacific 11%
Cash Equivalents 4%
Mountain 12%
North Central 21%
Net Other Assets & Liabilities (2)%
<PAGE>
SHAREHOLDER
INFORMATION
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce
McConnel, III, Esq.
Secretary
Jylanne Dunne
Vice President &
Assistant Treasurer
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
75 State Street
Boston, MA
02109
DISTRIBUTOR
First Data
Distributors, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581
ADMINISTRATOR
Fleet National Bank
50 Kennedy Plaza
Providence,
Rhode Island 02903-2305
For complete information, and before making an investment decision on any of the
Funds of Galaxy Fund II, you should request a prospectus from First Data
Distributors, Inc. by calling (800) 628-0414. This report is submitted for the
general information of shareholders of Galaxy Fund II. It is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective prospectus for each Fund of Galaxy Fund II, which contains more
information concerning the investment policies and expenses of the Funds as well
as other pertinent information. Read the prospectus carefully before you invest.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, Fleet Financial Group, Inc. or any of its affiliates, Fleet
Investment Advisors Inc., or any Fleet bank. Shares of the Funds are not
federally insured by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. The performance data
quoted represents past performance and investment return and principal value
will vary as a result of market conditions or other factors so that shares of
the Funds, when redeemed, may be worth more or less than their original cost. An
investment in the Funds involves investment risks, including the possible loss
of principal.
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<PAGE>
LARGE COMPANY INDEX FUND
GALAXY PORTFOLIO OF INVESTMENTS
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 98.33%
CONSUMER STAPLES - 22.38%
54,700 Abbott Laboratories ................................. $ 3,497,381
3,758 Alberto-Culver Co., Class B ......................... 114,384
4,387 Allergan, Inc. ...................................... 158,755
5,691 ALZA Corp. * ........................................ 165,039
44,670 American Home Products Corp. ........................ 3,260,910
18,348 Amgen, Inc. ......................................... 879,557
34,856 Anheuser-Busch Cos., Inc. ........................... 1,572,877
40,545 Archer-Daniels-Midland Co. .......................... 970,546
9,562 Avon Products, Inc. ................................. 592,844
4,000 Bard (C.R.), Inc. ................................... 135,750
3,922 Bausch & Lomb, Inc. ................................. 158,841
19,294 Baxter International, Inc. .......................... 1,008,112
8,842 Becton Dickinson & Co. .............................. 423,311
7,098 Beverly Enterprises, Inc. * ......................... 123,328
8,027 Biomet, Inc. ........................................ 192,648
70,248 Bristol-Myers Squibb Co. ............................ 5,813,022
4,711 Brown-Forman Corp., Class B ......................... 234,078
33,140 Campbell Soup Co. ................................... 1,623,860
7,300 Cardinal Health, Inc. ............................... 518,300
7,406 Clorox Co. .......................................... 548,970
174,804 Coca-Cola Co. ....................................... 10,652,119
20,436 Colgate Palmolive Co. ............................... 1,424,134
46,992 Columbia/HCA Healthcare Corp. ....................... 1,351,020
16,772 ConAgra, Inc. ....................................... 1,106,952
2,839 Coors (Adolph) Co., Class B ......................... 107,527
13,812 Costco Cos., Inc. * ................................. 519,677
9,965 CPC International, Inc. ............................. 923,008
11,793 CVS Corp. ........................................... 670,727
11,318 Darden Restaurants, Inc. ............................ 130,864
14,400 Federated Department Stores, Inc. * ................. 621,000
2,825 Fleming Cos., Inc. .................................. 51,733
15,576 Fort James Corp. .................................... 713,553
12,034 Fortune Brands, Inc. ................................ 405,395
5,403 Fruit of The Loom, Inc., Class A * .................. 151,959
11,414 General Mills, Inc. ................................. 786,853
38,854 Gillette Co. ........................................ 3,353,586
10,600 Guidant Corp. ....................................... 593,600
22,300 HEALTHSOUTH Corp. * ................................. 595,131
25,994 Heinz (H. J.) Co. ................................... 1,200,598
10,972 Hershey Foods Corp. ................................. 619,918
11,100 HFS, Inc. * ......................................... 826,256
11,400 Humana, Inc. * ...................................... 271,463
7,832 International Flavors & Fragances, Inc .............. 383,768
93,502 Johnson & Johnson ................................... 5,388,053
29,570 Kellogg Co. ......................................... 1,245,636
39,994 Kimberly-Clark Corp. ................................ 1,957,206
39,028 Lilly (Eli) & Co. ................................... 4,700,435
18,882 Limited, Inc. ....................................... 461,429
5,213 Liz Claiborne, Inc. ................................. 286,389
4,224 Manor Care, Inc. .................................... 140,448
33,584 Medtronic, Inc. ..................................... 1,578,448
85,305 Merck & Co., Inc. ................................... 8,525,168
20,216 Nike, Inc., Class B ................................. 1,071,448
109,700 PepsiCo, Inc. ....................................... 4,449,706
90,500 Pfizer, Inc. ........................................ 5,435,656
35,445 Pharmacia & Upjohn, Inc. ............................ 1,293,743
171,751 Philip Morris Cos., Inc. ............................ 7,138,401
5,915 Pioneer Hi-Bred International, Inc. ................. 538,265
96,058 Procter & Gamble Co. ................................ 6,634,006
9,351 Quaker Oats Co. ..................................... 471,057
7,413 Ralston Purina Co. .................................. 656,051
3,886 Reebok International, Ltd. .......................... 189,200
10,776 Rubbermaid, Inc. .................................... 275,462
2,953 Russell Corp. ....................................... 86,929
34,074 Sara Lee Corp. ...................................... 1,754,811
52,210 Schering-Plough Corp. ............................... 2,688,815
26,125 Seagram Co., Ltd. ................................... 920,906
27,366 Sears Roebuck & Co. ................................. 1,558,152
1,379 Shared Medical Systems Corp. ........................ 72,915
1,252 Springs Industries, Inc., Class A ................... 65,730
5,664 St. Jude Medical, Inc. * ............................ 198,594
4,778 SuperValu, Inc. ..................................... 187,537
12,694 Sysco Corp. ......................................... 468,885
4,233 Tupperware Corp. .................................... 119,053
13,088 UST, Inc. ........................................... 400,002
11,409 Unilever NV, New York Shares, ADR ................... 2,425,839
12,636 United Healthcare Corp. ............................. 631,800
4,078 U.S. Surgical Corp. ................................. 119,027
4,325 VF Corp. ............................................ 400,603
18,914 Warner-Lambert Co. .................................. 2,552,208
10,688 Winn-Dixie Stores, Inc. ............................. 378,756
8,046 Wrigley (Wm.) Jr. Co. ............................... 605,964
------------
117,526,087
------------
FINANCE - 16.74%
10,503 Aetna, Inc. ......................................... 855,338
7,897 Ahmanson (H.F.) & Co. ............................... 448,648
30,978 Allstate Corp. ...................................... 2,489,857
33,307 American Express Co. ................................ 2,727,011
17,244 American General Corp. .............................. 894,532
49,437 American International Group, Inc. .................. 5,101,280
11,400 Aon Corp. ........................................... 602,775
40,431 Banc One Corp. ...................................... 2,256,555
26,930 The Bank of New York Co., Inc. ...................... 1,292,640
50,558 BankAmerica Corp. ................................... 3,706,533
10,930 BankBoston Corp. .................................... 966,622
5,606 Bankers Trust New York Corp. ........................ 686,735
13,668 Barnett Banks, Inc. ................................. 967,011
3,681 Beneficial Corp. .................................... 280,446
7,299 Block (H & R), Inc. ................................. 281,924
30,974 Chase Manhattan Corp. ............................... 3,654,932
12,340 Chubb Corp. ......................................... 876,911
5,185 CIGNA Corp. ......................................... 965,706
32,648 Citicorp ............................................ 4,372,791
7,800 Comerica, Inc. ...................................... 615,712
11,600 Conseco, Inc. ....................................... 566,225
15,799 CoreStates Financial Corp. .......................... 1,045,696
7,200 Countrywide Credit Industries, Inc. ................. 262,350
9,400 Equifax, Inc. ....................................... 295,512
76,612 Fannie Mae .......................................... 3,600,764
11,100 Fifth Third Bancorp ................................. 725,663
22,202 First Chicago NBD Corp. ............................. 1,670,700
31,424 First Data Corp. .................................... 1,180,364
39,844 First Union Corp. ................................... 1,994,690
18,431 Fleet Financial Group, Inc. ......................... 1,208,382
50,184 Freddie Mac ......................................... 1,768,986
5,725 General Re Corp. .................................... 1,136,412
4,032 Golden West Financial Corp. ......................... 361,872
9,500 Green Tree Financial Corp. .......................... 446,500
8,136 Hartford Financial Services Group, Inc .............. 700,205
7,003 Household International, Inc. ....................... 792,652
10,000 Huntington Bancshares, Inc. ......................... 360,625
8,236 ITT Industries, Inc. ................................ 273,332
8,136 ITT Corp. * ......................................... 551,214
4,894 Jefferson-Pilot Corp. ............................... 386,626
16,125 Keycorp ............................................. 1,025,953
7,433 Lincoln National Corp. .............................. 517,523
8,160 Loews Corp. ......................................... 921,570
3,200 MBIA, Inc. .......................................... 401,400
23,704 MBNA Corp. .......................................... 960,012
10,154 Marsh & McLennan Cos., Inc. ......................... 778,050
18,318 Mellon Bank Corp. ................................... 1,002,911
23,684 Merrill Lynch & Co., Inc. ........................... 1,757,057
8,200 MGIC Investment Corp. ............................... 469,963
13,107 Morgan (J.P.) & Co., Inc. ........................... 1,489,283
41,256 Morgan Stanley, Dean Witter, Discover & Co. ......... 2,230,402
15,800 National City Corp. ................................. 972,687
51,316 NationsBank Corp. ................................... 3,175,177
26,040 Norwest Corp. ....................................... 1,594,950
23,670 PNC Bank Corp. ...................................... 1,155,392
5,000 Progressive Corp. ................................... 535,625
6,755 Providian Financial Corp. ........................... 268,089
1,794 Pulte Corp. ......................................... 68,620
3,870 Republic New York Corp. ............................. 439,729
8,878 Safeco Corp. ........................................ 470,534
5,920 St. Paul Cos., Inc. ................................. 482,850
7,729 Salomon, Inc. ....................................... 581,124
16,500 Schwab (Charles) Corp. .............................. 589,875
11,000 State Street Corp. .................................. 670,313
12,600 SunAmerica, Inc. .................................... 493,763
16,020 Suntrust Banks, Inc. ................................ 1,088,359
16,709 Tele-Communications, Inc., TCI Venture Series A ..... 344,623
9,772 Torchmark Corp. ..................................... 383,551
4,581 Transamerica Corp. .................................. 455,809
44,922 Travelers Group, Inc. ............................... 3,065,927
9,800 UNUM Corp. .......................................... 447,125
17,659 U.S. Bancorp ........................................ 1,704,094
7,903 USF & G Corp. ....................................... 181,275
11,837 Wachovia Corp. ...................................... 852,264
17,350 Washington Mutual, Inc. ............................. 1,210,163
6,463 Wells Fargo & Co. ................................... 1,777,304
------------
87,936,075
------------
TECHNOLOGY - 16.31%
4,400 Adobe Systems, Inc. ................................. 221,650
9,438 Advanced Micro Devices, Inc. * ...................... 307,325
34,647 AirTouch Communications, Inc. * ..................... 1,227,803
15,318 AMP, Inc. ........................................... 820,470
8,753 Apple Computer, Inc. * .............................. 189,831
12,822 Applied Materials, Inc. * ........................... 1,221,296
3,384 Autodesk, Inc. ...................................... 153,549
20,106 Automatic Data Processing, Inc. ..................... 1,005,300
13,200 Bay Networks, Inc. * ................................ 509,850
12,502 Boston Scientific Corp. * ........................... 689,954
10,890 Cabletron Systems, Inc. * ........................... 348,480
4,766 Ceridian Corp. * .................................... 176,342
45,610 CISCO Systems, Inc. * ............................... 3,332,381
11,776 Cognizant Corp. ..................................... 479,872
51,878 Compaq Computer Corp. * ............................. 3,877,881
25,312 Computer Associates International, Inc .............. 1,817,718
5,190 Computer Sciences Corp. * ........................... 367,193
16,168 Corning, Inc. ....................................... 763,938
7,945 DSC Communications Corp. * .......................... 214,018
2,821 Data General Corp. * ................................ 75,109
24,800 Dell Computer Corp. * ............................... 2,402,500
10,697 Digital Equipment Corp. * ........................... 463,314
3,712 EG & G, Inc. ........................................ 76,792
16,000 EMC Corp. * ......................................... 934,000
3,459 General Signal Corp. ................................ 149,602
5,700 Harris Corp. ........................................ 260,775
71,622 Hewlett-Packard Co. ................................. 4,982,205
8,946 Honeywell, Inc. ..................................... 601,059
115,432 Intel Corp. ......................................... 10,655,817
69,862 International Business Machines Corp. ............... 7,401,006
5,800 KLA-Tencor Corp. * .................................. 391,863
9,200 LSI Logic Corp. * ................................... 295,550
44,801 Lucent Technologies, Inc. ........................... 3,645,681
48,160 MCI Communications Corp. ............................ 1,414,700
84,732 Microsoft Corp. * ................................... 11,211,103
14,463 Micron Technology, Inc. * ........................... 501,685
41,571 Motorola, Inc. ...................................... 2,987,916
9,622 National Semiconductor Corp. * ...................... 394,502
9,500 Nextlevel Systems, Inc. * ........................... 159,125
18,037 Northern Telecom, Ltd. .............................. 1,874,721
25,690 Novell, Inc. * ...................................... 230,407
71,427 Oracle Corp. * ...................................... 2,602,621
9,000 Parametric Technology Corp. * ....................... 397,125
3,139 Perkin-Elmer Corp. .................................. 229,343
10,486 Pitney Bowes, Inc. .................................. 872,304
5,468 Scientific-Atlanta, Inc. ............................ 123,714
18,200 Seagate Technology, Inc. * .......................... 657,475
11,680 Silicon Graphics, Inc. * ............................ 306,600
30,489 Sprint Corp. ........................................ 1,524,450
26,104 Sun Microsystems, Inc. * ............................ 1,221,994
2,515 Tektronix, Inc. ..................................... 169,605
19,219 Tele-Communications, Inc., TCI Group, * ...... 393,990
12,334 Tellabs, Inc. * ..................................... 635,201
13,246 Texas Instruments, Inc. ............................. 1,789,866
2,938 Thomas & Betts Corp. ................................ 160,488
23,300 3Com Corp. * ........................................ 1,194,125
12,421 Unisys Corp. * ...................................... 190,197
43,694 U.S. West, Inc., Media Group * ...................... 974,922
3,686 Western Atlas, Inc. ................................. 324,368
43,395 Westinghouse Electric Corp. ......................... 1,174,377
22,707 Xerox Corp. ......................................... 1,911,646
------------
85,688,694
------------
CONSUMER CYCLICAL - 10.50%
17,700 Albertson's, Inc. ................................... 617,288
5,145 American Greetings Corp., Class A ................... 189,722
2,741 Armstrong World Industries, Inc. .................... 183,818
10,200 AutoZone, Inc. * .................................... 306,000
5,969 Black & Decker Corp. ................................ 222,345
2,010 Briggs & Stratton Corp. ............................. 99,369
6,944 Brunswick Corp. ..................................... 244,776
27,470 CUC International, Inc. * ........................... 851,570
2,013 Centex Corp. ........................................ 117,509
7,684 Charming Shoppes, Inc. * ............................ 47,305
49,540 Chrysler Corp. ...................................... 1,823,691
6,954 Circuit City Stores-Circuit City Group .............. 280,333
6,000 Clear Channel Communications, Inc. * ................ 389,250
22,827 Comcast Corp. Special, Class A ...................... 587,795
5,813 Cooper Tire & Rubber Co. ............................ 154,408
3,478 Crane Co. ........................................... 143,033
7,238 Dana Corp. .......................................... 357,376
14,913 Dayton-Hudson Corp. ................................. 893,848
5,819 Deluxe Corp. ........................................ 195,300
8,009 Dillard's, Inc., Class A ............................ 350,894
47,597 Disney (Walt) Co. ................................... 3,837,508
10,787 Donnelley (R.R.) & Sons Co. ......................... 384,961
6,877 Dow Jones & Co., Inc. ............................... 321,500
11,776 Dun & Bradstreet Corp. .............................. 334,144
23,457 Eastman Kodak Co. ................................... 1,523,239
5,582 Eaton Corp. ......................................... 515,637
4,218 Echlin, Inc. ........................................ 147,894
2,671 Fleetwood Enterprises, Inc. ......................... 89,645
83,121 Ford Motor Co. ...................................... 3,761,225
9,776 Gannett Co., Inc. ................................... 1,055,197
20,184 Gap, Inc. ........................................... 1,010,462
12,898 Genuine Parts Co. ................................... 397,420
4,127 Giant Food, Inc., Class A ........................... 134,385
10,993 Goodyear Tire & Rubber Co. .......................... 755,769
2,845 Great Atlantic & Pacific Tea Co., Inc. .............. 90,329
4,968 Harcourt General, Inc. .............................. 246,227
2,234 Harland (John H.) Co. ............................... 51,522
7,336 Harrah's Entertainment, Inc. * ...................... 164,602
9,220 Hasbro, Inc. ........................................ 259,313
16,968 Hilton Hotels Corp. ................................. 571,610
50,527 Home Depot, Inc. .................................... 2,633,720
9,148 Ikon Office Solutions, Inc. ......................... 233,846
8,409 Interpublic Group of Companies, Inc. ................ 431,487
2,758 Jostens, Inc. ....................................... 74,811
32,804 Kmart Corp. ......................................... 459,256
2,509 Kaufman & Broad Home Corp. .......................... 54,414
2,842 King World Productions, Inc. ........................ 122,917
6,978 Knight-Ridder, Inc. ................................. 381,173
17,618 Kroger Co. * ........................................ 531,843
2,916 Longs Drug Stores Corp. ............................. 77,821
12,076 Lowe's Cos., Inc. ................................... 469,455
8,894 Marriott International, Inc. ........................ 632,030
11,493 Masco Corp. ......................................... 526,523
19,430 Mattel, Inc. ........................................ 643,619
17,537 The May Department Stores Co. ....................... 955,767
7,506 Maytag Corp. ........................................ 256,142
48,905 McDonald's Corp. .................................... 2,329,101
7,174 The McGraw-Hill Cos., Inc. .......................... 485,590
2,840 Mercantile Stores Co., Inc. ......................... 178,743
3,756 Meredith Corp. ...................................... $ 124,418
11,800 Mirage Resorts, Inc. * .............................. 355,475
7,267 Moore Corp., Ltd. ................................... 138,073
3,486 National Service Industries, Inc. ................... 153,166
6,922 New York Times Co., Class A ......................... 363,405
11,304 Newell Co. .......................................... 452,160
5,811 Nordstrom, Inc. ..................................... 370,451
3,568 Owens Corning ....................................... 130,232
17,488 Penney (J.C.) Co., Inc. ............................. 1,018,676
4,220 Pep Boys-Manny, Moe & Jack .......................... 114,995
3,289 Polaroid Corp. ...................................... 168,356
8,618 Rite Aid Corp. ...................................... 477,760
4,050 Safety-Kleen Corp. .................................. 96,947
16,608 Service Corp. International ......................... 534,570
11,952 Sherwin-Williams Co. ................................ 351,837
4,432 Snap-On, Inc. ....................................... 204,149
6,226 The Stanley Works ................................... 267,718
3,496 Stride Rite Corp. ................................... 47,415
10,336 TJX Cos., Inc. ...................................... 315,894
8,382 Tandy Corp. ......................................... 281,845
39,602 Time Warner, Inc. ................................... 2,145,933
7,160 Times Mirror Co., Class A ........................... 393,353
19,590 Toys 'R' Us, Inc. * ................................. 695,445
8,798 Tribune Co. ......................................... 469,043
17,112 Tyco International, Ltd. ............................ 1,404,254
160,895 Wal-Mart Stores, Inc. ............................... 5,892,779
34,272 Walgreen Co. ........................................ 878,220
33,931 Waste Management, Inc. .............................. 1,185,464
8,670 Wendy's International, Inc. ......................... 184,238
5,171 Whirlpool Corp. ..................................... 342,902
7,392 Whitman Corp. ....................................... 201,432
9,298 Woolworth Corp. * ................................... 205,718
------------
55,152,800
------------
ENERGY - 9.07%
6,624 Amerada Hess Corp. .................................. 408,618
34,918 Amoco Corp. ......................................... 3,365,222
4,100 Anadarko Petroleum Corp. ............................ 294,431
6,100 Apache Corp. ........................................ 261,538
4,426 Ashland, Inc. ....................................... 240,664
22,826 Atlantic Richfield Co. .............................. 1,950,196
9,623 Baker Hughes, Inc. .................................. 421,006
8,872 Burlington Resources, Inc. .......................... 455,245
45,706 Chevron Corp. ....................................... 3,802,168
7,485 Coastal Corp. ....................................... 458,456
1,267 Eastern Enterprises ................................. 47,275
21,439 Enron Corp. ......................................... 825,402
174,622 Exxon Corp. ......................................... 11,186,722
17,428 Halliburton Co. ..................................... 906,256
1,692 Helmerich & Payne, Inc. ............................. 135,360
3,693 Kerr-McGee Corp. .................................... 254,125
2,614 Louisiana Land & Exploration Co. .................... 204,709
3,781 McDermott International, Inc. ....................... 138,007
55,434 Mobil Corp. ......................................... 4,102,116
22,353 Occidental Petroleum Corp. .......................... 579,781
7,494 Oryx Energy Co. * ................................... 190,629
3,362 Pennzoil Co. ........................................ 267,909
18,159 Phillips Petroleum Co. .............................. 937,458
5,888 Rowan Cos., Inc. .................................... 209,760
150,932 Royal Dutch Petroleum Co., ADR ...................... 8,376,726
34,222 Schlumberger, Ltd. .................................. 2,881,065
5,927 Sonat, Inc. ......................................... 301,536
5,261 Sun Co., Inc. ....................................... 230,498
36,758 Texaco, Inc. ........................................ 2,258,320
20,319 USX-Marathon Group .................................. 755,613
17,451 Union Pacific Resources Group, Inc. ................. 456,998
17,303 Unocal Corp. ........................................ 748,355
------------
47,652,164
------------
UTILITIES - 7.95%
113,385 AT&T Corp. .......................................... 5,024,373
13,051 ALLTEL Corp. ........................................ 450,260
13,104 American Electric Power Co., Inc. ................... 596,232
38,536 Ameritech Corp. ..................................... 2,562,644
10,203 Baltimore Gas & Electric Co. ........................ 283,133
54,092 Bell Atlantic Corp. ................................. 4,351,025
69,304 BellSouth Corp. ..................................... 3,205,310
10,805 Carolina Power & Light Co. .......................... 388,305
14,720 Central & South West Corp. .......................... 326,600
11,088 CINergy Corp. ....................................... 370,755
3,784 Columbia Gas System, Inc. ........................... 264,880
16,775 Consolidated Edison Co. of New York ................. 570,350
6,837 Consolidated Natural Gas Co. ........................ 397,828
10,055 DTE Energy Co. ...................................... 306,049
12,455 Dominion Resources, Inc. ............................ 471,733
25,413 Duke Energy Corp. ................................... 1,256,355
31,175 Edison International ................................ 787,169
16,402 Entergy Corp. ....................................... 427,477
13,083 FPL Group, Inc. ..................................... 670,504
11,200 Frontier Corp. ...................................... 257,600
8,458 GPU, Inc. ........................................... 303,431
67,825 GTE Corp. ........................................... 3,077,559
23,854 Houston Industries, Inc. ............................ 518,825
9,929 Niagara Mohawk Power Corp. * ........................ 94,946
3,612 NICOR, Inc. ......................................... 135,450
4,744 Northern States Power Co. ........................... 236,014
10,980 Ohio Edison Co. ..................................... 257,344
2,001 ONEOK, Inc. ......................................... 65,283
15,821 PECO Energy Co. ..................................... 370,805
29,613 PG & E Corp. ........................................ 686,651
11,300 PP & L Resources, Inc. .............................. 247,188
5,881 Pacific Enterprises ................................. 199,219
20,191 Pacificorp .......................................... 451,774
2,628 Peoples Energy Corp. ................................ 99,043
17,149 Public Service Enterprise Group, Inc. ............... 441,587
64,427 SBC Communications, Inc. ............................ 3,954,207
48,151 Southern Co. ........................................ 1,086,407
12,054 Tenneco, Inc. ....................................... 577,085
16,781 Texas Utilities Co. (Holding Co.) ................... 604,116
15,209 Unicom Corp. ........................................ 355,510
7,340 Union Electric Co. .................................. 282,131
33,294 U.S. West, Inc., Communications Group ............... 1,281,819
25,005 Viacom, Inc., Class B * ............................. 790,783
10,958 Williams Cos., Inc. ................................. 512,971
60,900 Worldcom, Inc. ...................................... 2,154,338
------------
41,753,068
------------
CAPITAL GOODS - 7.24%
20,274 American Stores Co. ................................. 494,179
6,410 Andrew Corp. * ...................................... 167,862
69,679 Boeing Co. .......................................... 3,793,129
15,059 Browning-Ferris Industries, Inc. .................... 573,183
26,740 Caterpillar, Inc. ................................... 1,442,289
2,714 Cincinnati Milacron, Inc. ........................... 72,939
7,813 Cooper Industries, Inc. ............................. 422,390
2,905 Cummins Engine Co., Inc. ............................ 226,772
18,009 Deere & Co. ......................................... 967,984
7,954 Dover Corp. ......................................... 539,878
12,685 Dresser Industries, Inc. ............................ 545,455
31,526 Emerson Electric Co. ................................ 1,816,686
2,834 FMC Corp. * ......................................... 251,518
5,811 Fluor Corp. ......................................... 311,615
2,935 Foster Wheeler Corp. ................................ 128,957
4,289 General Dynamics Corp. .............................. 373,679
232,090 General Electric Co. ................................ 15,796,626
3,603 Grainger (W.W.), Inc. ............................... 320,667
3,542 Harnischfeger Industries, Inc. ...................... 151,421
17,240 Illinois Tool Works, Inc. ........................... 862,000
11,695 Ingersoll-Rand Co. .................................. 503,616
5,904 Johnson Controls, Inc. .............................. 292,617
13,549 Lockheed Martin Corp. ............................... 1,444,662
565 NACCO Industries, Inc., Class A ..................... 66,423
5,297 Navistar International Corp. * ...................... 146,330
4,082 Northrop Grumman Corp. .............................. 495,453
5,748 PACCAR, Inc. ........................................ 321,888
7,843 Parker-Hannifin Corp. ............................... 352,935
16,568 Raytheon Co. ........................................ 979,583
15,380 Rockwell International Corp. ........................ 967,979
8,774 TRW, Inc. ........................................... 481,473
11,256 Textron, Inc. ....................................... 731,640
10,000 Thermo Electron Corp. * ............................. 400,000
5,030 Timken Co. .......................................... 201,514
16,826 United Technologies Corp. ........................... 1,362,906
------------
38,008,248
------------
BASIC MATERIALS - 5.72%
2,014 Aeroquip-Vickers, Inc. .............................. 98,686
8,028 Air Products & Chemicals, Inc. ...................... 665,822
15,949 Alcan Aluminum, Ltd. ................................ 554,228
40,124 AlliedSignal, Inc. .................................. 1,705,270
12,265 Aluminum Co. of America ............................. 1,005,730
7,261 Armco, Inc. * ....................................... 43,566
3,058 ASARCO, Inc. ........................................ 97,856
7,362 Avery-Dennison Corp. ................................ 294,480
2,194 Ball Corp. .......................................... 76,379
24,884 Barrick Gold Corp. .................................. 615,879
3,692 Bemis Co., Inc. ..................................... 165,217
8,137 Bethlehem Steel Corp. * ............................. 83,913
3,557 Boise Cascade Corp. ................................. 149,616
6,954 Champion International Corp. ........................ 423,759
9,034 Crown Cork & Seal Co., Inc. ......................... 416,693
6,682 Cyprus Amax Minerals Co. ............................ 160,368
17,131 Dow Chemical Co. .................................... 1,553,568
79,400 duPont (E.I.) deNemours & Co. ....................... 4,888,063
5,635 Eastman Chemical Co. ................................ 349,370
9,798 Engelhard Corp. ..................................... 211,269
13,884 Freeport-McMoran Copper & Gold, Inc., 400,033
6,134 Georgia-Pacific Corp. ............................... 640,236
3,596 Goodrich (B.F.) Co. ................................. 162,719
4,291 Great Lakes Chemical Corp. .......................... 211,600
7,701 Hercules, Inc. ...................................... 383,125
9,730 Homestake Mining Co. ................................ 148,991
11,814 Inco, Ltd., Class A ................................. 296,088
3,538 Inland Steel Industries, Inc. ....................... 77,394
21,364 International Paper Co. ............................. 1,176,355
7,834 Louisiana-Pacific Corp. ............................. 195,850
3,729 Mead Corp. .......................................... 269,420
3,197 Millipore Corp. ..................................... 157,053
29,454 Minnesota Mining & Manufacturing Co. ................ 2,724,495
40,845 Monsanto Co. ........................................ 1,592,955
9,852 Morton International, Inc. .......................... 349,746
4,662 Nalco Chemical Co. .................................. 186,771
10,981 Newmont Mining Corp. ................................ 493,459
6,028 Nucor Corp. ......................................... 317,600
10,000 Owens-Illinois, Inc. * .............................. 339,375
13,111 PPG Industries, Inc. ................................ 821,896
8,174 Pall Corp. .......................................... 176,252
4,563 Phelps Dodge Corp. .................................. 354,203
16,898 Placer Dome, Inc. ................................... 323,174
2,010 Potlatch Corp. ...................................... 101,128
11,040 Praxair, Inc. ....................................... 565,110
3,247 Raychem Corp. ....................................... 274,372
4,229 Reynolds Metals Co. ................................. 299,466
4,555 Rohm & Haas Co. ..................................... 436,995
6,936 Sigma Aldrich Corp. ................................. 228,455
7,014 Stone Container Corp. ............................... 109,155
3,811 Temple-Inland, Inc. ................................. 243,904
5,875 USX-U.S. Steel Group, Inc. .......................... 204,156
4,764 Union Camp Corp. .................................... 293,879
8,938 Union Carbide Corp. ................................. 435,169
7,228 Westvaco Corp. ...................................... 260,660
14,082 Weyerhaeuser Co. .................................... 836,119
7,600 Willamette Industries, Inc. ......................... 290,700
6,317 Worthington Industries, Inc. ........................ 127,919
------------
30,065,709
------------
TRANSPORTATION - 2.09%
6,156 AMR Corp. * ......................................... 681,392
10,960 Burlington Northern Santa Fe Corp. .................. 1,059,010
2,849 Caliber System, Inc. ................................ 154,558
4,900 Case Corp. .......................................... 326,463
14,966 CSX Corp. ........................................... 875,511
5,385 Delta Air Lines, Inc. ............................... 507,200
4,401 Ecolab, Inc. ........................................ 213,724
8,010 Federal Express Corp. * ............................. 640,800
52,985 General Motors Corp. ................................ 3,546,683
21,176 Laidlaw, Inc. ....................................... 316,317
8,775 Norfolk Southern Corp. .............................. 906,019
5,389 Ryder System, Inc. .................................. 193,667
9,796 Southwest Airlines Co. .............................. 312,860
17,067 Union Pacific Corp. ................................. 1,068,821
4,295 US Airways Group, Inc. * ............................ 177,706
------------
10,980,731
------------
CHEMICALS AND DRUGS - 0.23%
5,935 Grace (W.R.) & Co. .................................. 436,964
5,268 Mallinckrodt, Inc. .................................. 189,648
20,659 Tenet Healthcare Corp. * ............................ 601,693
------------
1,228,305
------------
METALS AND MINING - 0.10%
12,182 Allegheny Teledyne, Inc. ............................ 348,710
14,300 Battle Mountain Gold Co. ............................ 102,781
9,196 Echo Bay Mines, Ltd. ................................ 52,302
------------
503,793
------------
TOTAL COMMON STOCKS ................................. 516,495,674
(Cost $321,326,808) ------------
PAR VALUE
VALUE (NOTE 2)
----- --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 1.72%
FEDERAL HOME LOAN
MORTGAGE CORPORATION (C) - 1.44%
$7,552,000 6.05%, 10/01/97 ..................................... $ 7,552,000
------------
U.S. TREASURY BILL (B) - 0.28%
1,500,000 4.93%, 12/18/97 ..................................... 1,483,994
------------
TOTAL U.S GOVERNMENT
AND AGENCY OBLIGATIONS ......................................... 9,035,994
(Cost $9,035,994) ------------
TOTAL INVESTMENTS - 100.05% .................................... 525,531,668
(Cost $330,362,802) ------------
NET OTHER ASSETS AND LIABILITIES - (0.05)% ..................... (283,732)
------------
NET ASSETS - 100.00% ........................................... $525,247,936
============
- ----------
* Non-income producing security.
ADR American Depositary Receipt.
(A) Annualized yield at time of purchase.
(B) Security has been deposited as initial margin on open futures contracts.
At September 30, 1997 the Fund's open futures contracts were as follows:
NUMBER OF
CONTRACTS CONTRACT EXPIRATION OPENING CURRENT
PURCHASED (SOLD) TYPE DATE POSITION MARKET VALUE
---------------- ---------- ---------- -------- ------------
S&P 500
17 Stock Index 12/97 $ 8,120,170 $ 8,113,250
=========== ===========
(C) All or a portion of these shares are used as collateral on open futures
contracts.
See Notes to Financial Statements.
<PAGE>
SMALL COMPANY INDEX FUND
GALAXY PORTFOLIO OF INVESTMENTS
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 91.31%
TECHNOLOGY - 17.20%
51,000 Acxiom Corp. * .................................... $ 889,313
------------
37,100 Advanced Tissue Sciences, Inc. * .................. 577,369
26,500 Allen Telecom, Inc. * ............................. 755,250
14,500 Analysts International Corp. ...................... 561,875
47,500 Anixter International, Inc. * ..................... 816,406
24,500 Auspex Systems, Inc. * ............................ 303,188
24,900 BISYS Group, Inc. * ............................... 799,913
27,100 BMC Industries, Inc. .............................. 862,119
20,600 BancTec, Inc.* .................................... 548,475
21,600 BE Aerospace, Inc. * .............................. 777,600
11,400 Benchmark Electronics, Inc. * ..................... 321,338
18,100 Boole & Babbage, Inc. ............................. 520,375
25,100 Boston Technology, Inc. * ......................... 850,263
13,200 BroadBand Technologies, Inc. * .................... 112,200
20,500 Broderbund Software, Inc. * ....................... 697,000
9,600 C-Cor Electronics, Inc. * ......................... 153,600
35,700 C-Cube Microsystems, Inc. * ....................... 1,213,800
19,600 CDI Corp. * ....................................... 739,900
16,100 California Microwave, Inc. * ...................... 322,000
19,400 Catalina Marketing Corp. * ........................ 1,006,375
14,300 CellPro, Inc. * ................................... 67,031
6,900 Centigram Communications Corp. * .................. 122,475
24,300 Cephalon, Inc. * .................................. 285,525
32,600 Cerner Corp. * .................................... 780,363
21,700 Chips & Technologies, Inc. * ...................... 347,200
40,400 Cognex Corp. * .................................... 1,328,150
11,200 Coherent, Inc. * .................................. 620,200
13,600 CommNet Cellular, Inc. * .......................... 476,850
24,600 Comverse Technology, Inc. * ....................... 1,297,650
18,500 Cygnus, Inc. * .................................... 365,375
19,300 Cyrix Corp. * ..................................... 646,550
26,400 Dallas Semiconductor Corp. ........................ 1,181,400
15,600 Dialogic Corp. * .................................. 670,800
13,300 Digi International, Inc. * ........................ 189,525
16,900 Dynatech Corp. * .................................. 693,956
12,500 Fair Isaac & Co., Inc. ............................ 553,125
15,000 FileNet Corp. * ................................... 232,500
63,200 FirstMerit Corp. .................................. 1,706,400
14,500 Flow International Corp. * ........................ 157,688
23,000 Gerber Scientific, Inc. ........................... 556,313
10,300 Hadco Corp. * ..................................... 557,809
6,800 Harmon Industries, Inc. ........................... 180,200
37,400 IDEXX Laboratories, Inc. * ........................ 626,450
42,800 Input/Output, Inc. * .............................. 1,267,950
26,600 Insituform Technologies, Inc., Class A * .......... 232,750
22,600 Interface, Inc. ................................... 658,225
50,600 International Rectifier Corp. * ................... 1,182,775
16,200 InterVoice, Inc. .................................. 164,025
15,500 Ionics, Inc. * .................................... 686,844
13,200 Itron, Inc. * ..................................... 326,700
63,900 Keane, Inc. * ..................................... 2,028,825
26,000 Kent Electronics Corp. * .......................... 1,027,000
8,100 Kronos, Inc. * .................................... 209,588
13,800 Kuhlman Corp. * ................................... 496,800
12,600 Landstar System, Inc. * ........................... 337,050
22,400 Lattice Semiconductor Corp. * ..................... 1,458,800
16,700 Marshall Industries * ............................. 647,125
15,300 Material Sciences Corp. * ......................... 218,025
10,400 McWhorter Technologies, Inc. * .................... 261,300
34,100 Methode Electronics, Inc., Class A ................ 878,075
15,300 MicroAge, Inc. * .................................. 443,700
52,600 Microchip Technology, Inc. * ...................... 2,375,219
17,500 Molecular Biosystems, Inc. * ...................... 203,438
22,300 NTN Communications, Inc. * ........................ 47,388
6,600 Nashua Corp. * .................................... 75,488
15,100 National Computer Systems, Inc. ................... 534,163
20,700 Network Equipment Technologies, Inc. * ............ 360,956
42,800 Network General Corp. * ........................... 829,250
16,000 Novellus Systems, Inc. * .......................... 2,016,000
18,100 Oak Industries, Inc. * ............................ 490,963
22,800 P-COM, Inc. * ..................................... 545,775
34,500 Paxar Corp. * ..................................... 679,219
21,100 PerSeptive Biosystems, Inc., * .................... 253,200
33,600 PictureTel Corp. * ................................ 348,600
60,700 PLATINUM Technology, Inc. * ....................... 1,305,050
25,300 Pioneer Standard Electronics, Inc. ................ 434,844
18,600 Platinum Software Corp. * ......................... 216,225
14,000 Plexus Corp. ...................................... 491,750
12,400 Progress Software Corp. * ......................... 277,450
17,800 Protein Design Laboratories, Inc. * ............... 689,750
19,200 Resound Corp. * ................................... 104,400
11,900 SPS Technologies, Inc. * .......................... 559,300
16,800 Sanmina Corp. * ................................... 1,454,250
9,800 Spacelabs Medical, Inc. * ......................... 214,375
13,000 Speedfam International, Inc. * .................... 784,875
13,900 Standard Microsystems Corp. * ..................... 238,906
11,900 Steel Technologies, Inc. .......................... 148,006
38,100 Sterling Software, Inc. ........................... 1,366,838
15,500 Symmetricom, Inc. * ............................... 247,031
42,200 System Software Associates, Inc. * ................ 622,450
42,800 Tech Data Corp. * ................................. 1,968,800
24,500 Tracor, Inc. * .................................... 753,375
18,900 Tseng Laboratories, Inc. * ........................ 76,781
11,400 Unitrode Corp. * .................................. 845,025
45,500 VLSI Technology, Inc. * ........................... 1,578,281
21,500 Valence Technology, Inc. * ........................ 177,375
24,000 Vantive Corp. * ................................... 576,000
16,500 Viewlogic Systems, Inc. * ......................... 392,906
34,100 Vitesse Semiconductor Corp. * ..................... 1,690,075
23,900 WMS Industries, Inc. * ............................ 721,481
8,200 Watkins-Johnson Co. ............................... 274,700
11,000 Whittaker Corp. * ................................. 143,000
20,800 X-Rite, Inc. ...................................... 431,600
20,100 Xircom, Inc. * .................................... 248,738
23,900 Zebra Technologies Corp., Class A * ............... 854,425
12,100 Zero Corp. ........................................ 342,581
19,900 Zilog, Inc. * ..................................... 434,069
------------
68,421,822
------------
CONSUMER STAPLES - 17.03%
18,000 AAR Corp. ......................................... 600,750
17,900 ADAC Laboratories ................................. 334,506
30,000 Alliance Pharmaceutical Corp. * ................... 358,125
21,600 Alpharma, Inc., Class A ........................... 483,300
9,100 Angelica Corp. .................................... 180,863
27,200 Apogee Enterprises, Inc. .......................... 666,400
31,000 Applebees International, Inc. ..................... 775,000
44,600 Aztar Corp. * ..................................... 328,925
28,000 Ballard Medical Products .......................... 675,500
25,900 Belden, Inc. ...................................... 976,106
46,200 Bio-Technology General Corp. * .................... 693,000
17,300 Books-A-Million, Inc. * ........................... 108,125
18,700 Canandaigua Wine Co., Inc., Class A * ............. 881,238
24,700 Caraustar Industries, Inc. ........................ 845,975
26,000 Casey's General Stores, Inc. ...................... 640,250
28,200 Cato Corp., Class A ............................... 257,325
9,700 Chemed Corp. ...................................... 373,450
55,200 Chiquita Brands International, Inc. ............... 890,100
16,000 Clarcor, Inc. ..................................... 458,000
8,500 Coca-Cola Bottling Co. ............................ 488,750
27,100 Cone Mills Corp. * ................................ 225,269
19,800 Cor Therapeutics, Inc. * .......................... 329,175
32,700 Coventry Corp. * .................................. 539,550
16,300 Cross (A.T.) Co., Class A ......................... 157,906
1 CVS Corp. ......................................... 57
8,100 Damark International, Inc., Class A * ............. 113,906
33,900 Dekalb Genetics Corp., Class B .................... 1,504,313
27,900 Delta & Pine Land Co. ............................. 898,031
24,300 Delta Woodside Industries, Inc. ................... 147,319
42,100 Dimon, Inc. ....................................... 1,052,500
22,400 Dress Barn, Inc. * ................................ 537,600
20,200 Earthgrains Co. ................................... 868,600
22,900 Enzo Biochem, Inc. * .............................. 412,200
20,500 Filene's Basement Corp. * ......................... 170,406
38,500 Foodmaker, Inc. * ................................. 724,281
11,400 Galey & Lord, Inc. * .............................. 215,175
20,300 G & K Services, Inc., Class A ..................... 705,425
34,600 Genesis Health Ventures, Inc. * ................... 1,347,238
7,300 Goodmark Foods, Inc. .............................. 125,013
28,800 Griffon Corp. * ................................... 468,000
21,600 Guilford Mills, Inc. .............................. 561,600
24,900 Gymboree Corp. * .................................. 647,400
8,500 Haggar Corp. ...................................... 126,438
21,200 Hancock Fabrics, Inc. ............................. 284,875
32,900 Hartmarx Corp. * .................................. 283,763
10,500 Hauser, Inc. * .................................... 68,250
33,500 ICN Pharmaceuticals, Inc. ......................... 1,647,781
20,100 ImmuLogic Pharmaceutical Corp. * .................. 66,581
29,100 Invacare Corp. .................................... 683,850
8,600 J & J Snack Foods Corp. * ......................... 139,750
10,200 Johnston Industries, Inc. ......................... 59,288
18,600 Kaman Corp., Class A .............................. 341,775
20,900 Kellwood Co. ...................................... 740,644
50,900 Komag, Inc. * ..................................... 1,037,088
17,000 Lechters, Inc. * .................................. 81,813
27,900 Lincare Holdings, Inc. * .......................... 1,407,206
9,400 Lindsay Manufacturing Co. ......................... 401,850
36,300 Liposome Co., Inc. ................................ 251,831
19,300 Living Centers of America, Inc. * ................. 786,475
28,400 Magellan Health Services, Inc. * .................. 901,700
28,700 Mariner Health Group, Inc. * ...................... 452,025
21,500 Medimmune, Inc. * ................................. 790,125
24,700 Mentor Corp. ...................................... 784,225
33,850 Mohawk Industries, Inc. * ......................... 926,644
15,500 Mosinee Paper Corp. ............................... 525,063
11,100 Nash Finch Co. .................................... 263,625
18,800 Nature's Sunshine Products, Inc. .................. 444,150
39,700 Nautica Enterprises, Inc. * ....................... 1,116,563
18,400 NBTY, Inc. * ...................................... 388,700
31,000 North American Vaccine, Inc. * .................... 782,750
19,600 Noven Pharmaceuticals, Inc. * ..................... 137,200
45,500 Oakwood Homes Corp. ............................... 1,291,063
12,000 Oshkosh B'Gosh, Inc., Class A ..................... 313,500
31,600 Owens & Minor, Inc. ............................... 450,300
8,600 Oxford Industries, Inc. ........................... 291,325
11,900 Paragon Trade Brands, Inc. * ...................... 220,894
21,500 Patterson Dental Co. * ............................ 870,750
6,800 Penwest, Ltd. ..................................... 243,100
13,100 Pharmaceutical Marketing Services, Inc. * ......... 150,650
26,800 Phillips-Van Heusen Corp. ......................... 423,775
61,500 PhyCor, Inc. * .................................... 1,787,344
66,700 Pier 1 Imports, Inc. .............................. 1,196,431
13,300 Pope & Talbot, Inc. ............................... 281,794
8,500 Quaker Chemical Corp. ............................. 159,375
22,400 Regis Corp. ....................................... 565,600
21,500 Renal Care Group, Inc. * .......................... 774,000
24,200 Renal Treatment Centers, Inc. * ................... 860,613
19,500 Respironics, Inc. * ............................... 536,250
46,900 Richfood Holdings, Inc. ........................... 1,216,469
27,000 Roberts Pharmaceutical Corp. * .................... 293,625
25,600 RoTech Medical Corp. * ............................ 492,800
23,800 Royal Appliance Manufacturing Co. * ............... 208,250
27,600 Rykoff-Sexton, Inc. ............................... 714,150
15,200 Ryland Group, Inc. ................................ 269,800
25,500 Safeskin Corp. * .................................. 1,131,563
15,800 Schweitzer-Mauduit International, Inc. ............ 671,500
17,400 SciClone Pharmaceuticals, Inc. * .................. 97,875
29,400 SEQUUS Pharmaceuticals, Inc.* ..................... 253,575
31,800 Shopko Stores, Inc. * ............................. 826,800
16,100 Showboat, Inc. .................................... 328,038
17,600 Sierra Health Services, Inc. * .................... 644,600
35,600 Smithfield Foods, Inc. * .......................... 1,068,000
13,300 Standex International Corp. ....................... 418,950
33,900 STERIS Corp. * .................................... 1,394,138
30,600 Summit Technology, Inc. * ......................... 225,675
19,100 Sunrise Medical, Inc. * ........................... 298,438
9,400 Syncor International Corp. * ...................... 136,888
24,300 TCBY Enterprises, Inc. ............................ 170,100
19,700 Tecnol Medical Products, Inc. * ................... 396,463
20,400 TheraTech, Inc. * ................................. 237,150
11,000 Timberland Co., Class A * ......................... 877,250
29,600 Triarc Cos., Inc. * ............................... 595,700
22,600 United States Bioscience, Inc. .................... 257,075
31,800 Universal Health Services, Inc., Class B * ........ 1,375,350
13,600 USA Detergents, Inc. * ............................ 175,100
41,700 Vicor Corp. * ..................................... 1,209,300
15,300 VISX, Inc. * ...................................... 390,150
15,300 WD-40 Co. ......................................... 460,913
19,100 Whole Foods Market, Inc. * ........................ 737,727
25,300 Williams-Sonoma, Inc. * ........................... 1,081,575
------------
67,760,431
------------
CONSUMER CYCLICAL - 16.91%
19,700 ABM Industries, Inc. .............................. 520,819
24,100 ADVO, Inc. * ...................................... 439,825
8,500 Amcast Industrial Corp. ........................... 208,250
23,400 Applied Magnetics Corp. * ......................... 737,100
38,700 Arbor Drugs, Inc. ................................. 899,775
29,000 Arctic Cat, Inc. .................................. 333,500
12,100 Ashworth, Inc. * .................................. 124,025
11,600 Au Bon Pain Co., Inc., Class A * .................. 104,400
22,200 Authentic Fitness Corp. ........................... 327,450
13,800 Baker (J.), Inc. .................................. 127,650
12,900 Bassett Furniture Industries, Inc. ................ 367,650
13,600 Bell Sports Corp. * ............................... 147,900
8,860 Bell Industries, Inc. ............................. 149,513
8,600 Bertucci's, Inc. * ................................ 54,288
36,637 Bombay Co., Inc. * ................................ 281,647
17,800 Bowne & Co., Inc. ................................. 625,225
31,400 Breed Technologies, Inc. .......................... 753,600
17,800 Brown Group, Inc. ................................. 323,738
11,800 Building Materials Holding Corp. * ................ 154,138
7,600 Butler Manufacturing Co. .......................... 256,500
39,700 CKE Restaurants, Inc. ............................. 1,667,400
11,100 Carmike Cinemas, Inc., Class A * .................. 333,000
15,900 Carson Pirie Scott & Co. * ........................ 627,056
24,000 Cash America International, Inc. .................. 270,000
47,200 Champion Enterprises, Inc. * ...................... 902,700
10,800 The Cheesecake Factory, Inc. * .................... 297,675
18,600 CIBER, Inc. * ..................................... 878,850
174,600 Cineplex Odeon Corp. * ............................ 316,463
8,700 Collagen Corp. .................................... 154,969
16,200 Consolidated Products, Inc. * ..................... 314,891
10,700 Cyrk International, Inc. * ........................ 108,338
17,900 Dames & Moore Group ............................... 234,938
15,500 Designs, Inc. * ................................... 73,625
33,100 DEVRY, Inc. * ..................................... 988,863
16,400 Discount Auto Parts, Inc. * ....................... 393,600
11,100 Dixie Group, Inc. * ............................... 149,850
21,100 ETEC Systems, Inc. * .............................. 1,202,700
28,600 Eagle Hardware & Garden, Inc. * ................... 563,063
15,100 Envoy Corp. * ..................................... 431,294
28,400 Ethan Allen Interiors, Inc. ....................... 880,400
16,300 Express Scripts, Inc., Class A * .................. 878,163
17,800 Fabri-Centers of America, Inc., Class A * ......... 411,625
38,300 Fedders Corp. ..................................... 229,800
9,000 Fieldcrest Cannon, Inc. * ......................... 310,500
19,900 Fisher Scientific International, Inc. ............. 934,056
24,000 Franklin Covey Co. * .............................. 670,500
7,800 GC Cos., Inc. * ................................... 335,400
17,800 Galoob Toys, Inc. * ............................... 262,550
5,200 Global Motorsport Group, Inc. * ................... 83,200
10,400 Gottschalks, Inc. * ............................... 85,150
23,400 GranCare, Inc. .................................... 276,413
41,400 Grand Casinos, Inc. * ............................. 633,938
20,000 Ha-Lo Industries Inc. * ........................... 572,500
17,800 Henry (Jack) & Associates, Inc. ................... 469,475
23,600 Hollywood Park, Inc. * ............................ 446,925
13,300 Huffy Corp. ....................................... 219,450
9,400 IHOP Corp. * ...................................... 336,050
20,100 Immune Response Corp.* ............................ 253,763
14,200 Innovex, Inc. ..................................... 457,950
11,500 Integrated Circuit Systems, Inc. * ................ 425,500
23,000 Integrated Health Services, Inc. .................. 769,063
38,600 Interim Services, Inc. * .......................... 1,085,625
25,700 Jan Bell Marketing, Inc. * ........................ 69,069
19,700 JumboSports, Inc. * ............................... 68,950
18,300 Juno Lighting, Inc. ............................... 313,388
28,400 Just For Feet, Inc. * ............................. 449,075
6,000 K-Swiss, Inc., Class A ............................ 102,000
16,400 K2, Inc. .......................................... 412,050
12,800 LSB Industries, Inc. .............................. 59,200
17,800 La-Z-Boy, Inc. .................................... 658,600
25,000 Landry's Seafood Restaurants, Inc. * .............. 734,375
9,500 Lillian Vernon Corp. .............................. 160,906
23,100 Luby's Cafeterias, Inc. ........................... 480,769
11,100 Mail Boxes Etc. * ................................. 316,350
19,200 Marcus Corp. ...................................... 559,200
16,800 Medusa Corp. ...................................... 800,100
20,500 Men's Wearhouse, Inc. * ........................... 763,625
7,900 Merrill Corp. ..................................... 363,400
16,200 Metro Networks, Inc. * ............................ 488,025
23,300 Michaels Stores, Inc. * ........................... 712,106
18,350 Myers Industries, Inc. ............................ 302,775
12,000 NFO Research, Inc. ................................ 330,000
26,100 National Data Corp. ............................... 1,070,100
16,900 Thomas Nelson, Inc. ............................... 234,488
23,800 Norrell Corp. ..................................... 818,125
20,700 O'Reilly Automotive, Inc. * ....................... 470,925
43,000 Orthodontic Centers of America, Inc. * ............ 860,000
11,100 Park Electrochemical Corp. ........................ 321,905
11,800 Photronics, Inc. * ................................ 714,638
10,600 Pillowtex Corp. ................................... 302,100
31,000 Players International, Inc. * ..................... 137,563
3,900 Plenum Publishing Corp. ........................... 187,200
28,000 Primadonna Resorts, Inc. * ........................ 504,000
26,800 Primark Corp. * ................................... 792,275
39,400 Prime Hospitality Corp. * ......................... 888,963
27,400 Proffitt's, Inc. * ................................ 1,623,450
32,800 Regal Cinemas, Inc. * ............................. 881,500
25,800 Regeneron Pharmaceuticals, Inc.* .................. 288,638
11,500 Republic Group, Inc. .............................. 215,625
9,600 Rival Co. ......................................... 153,600
48,500 Ross Stores, Inc. ................................. 1,655,063
17,500 Ruby Tuesday, Inc. * .............................. 446,250
11,600 Rural/Metro Corp. * ............................... 353,800
21,600 Russ Berrie & Co., Inc. ........................... 631,800
47,100 Ryan's Family Steakhouses, Inc. * ................. 432,731
18,200 SEI Investments Co. ............................... 600,600
11,600 SPX Corp. * ....................................... 680,050
47,800 S3, Inc. * ........................................ 561,650
16,400 St. John Knits, Inc. .............................. 736,975
48,100 Shoney's, Inc. * .................................. 237,494
18,200 ShowBiz Pizza Time, Inc. * ........................ 418,600
18,500 Smith (A.O.) Corp. ................................ 733,063
24,100 Sola International, Inc. * ........................ 826,931
13,400 Sonic Corp. * ..................................... 375,200
12,300 Spartan Motors, Inc. .............................. 90,713
31,200 The Sports Authority, Inc. * ...................... 581,100
13,000 Standard Motor Products, Inc. ..................... 303,875
29,700 Standard Pacific Corp. ............................ 311,850
22,700 Stein Mart, Inc. * ................................ 743,425
26,600 Sturm Ruger & Co., Inc. ........................... 503,738
8,100 Swiss Army Brands, Inc. * ......................... 84,038
23,500 TBC Corp. * ....................................... 221,781
20,900 TCSI Corp. * ...................................... 113,644
15,500 Taco Cabana, Class A * ............................ 85,250
10,500 Thomas Industries, Inc. ........................... 315,000
8,100 Thor Industries, Inc. ............................. 248,063
7,700 Three-Five Systems, Inc. * ........................ 169,400
33,700 Toll Brothers, Inc. * ............................. 783,525
12,000 Toro Co. .......................................... 475,500
21,900 Trimble Navigation, Ltd. * ........................ 429,788
23,600 True North Communications, Inc. ................... 585,575
29,100 Tultex Corp. * .................................... 174,600
20,100 Ultratech Stepper, Inc. * ......................... 683,400
11,400 U.S. Home Corp. * ................................. 440,325
23,900 Vertex Pharmaceuticals, Inc. * .................... 902,225
12,800 Vital Signs, Inc. ................................. 230,400
8,500 Walbro Corp. ...................................... 185,938
9,100 Wall Data, Inc. * ................................. 175,175
31,100 Westwood One, Inc. * .............................. 987,425
25,100 Winnebago Industries, Inc. ........................ 205,506
41,300 Wolverine World Wide, Inc. ........................ 1,042,825
33,200 World Color Press, Inc. * ......................... 1,002,212
6,100 Zoll Medical Corp. * .............................. 42,700
------------
67,292,525
------------
FINANCE - 15.00%
20,200 Allied Group, Inc. ................................ 1,026,413
40,600 American Bankers Insurance Group, Inc. ............ 1,481,900
35,000 AMRESCO, Inc. * ................................... 1,299,375
21,300 Astoria Financial Corp. ........................... 1,071,656
15,700 Capital Re Corp. .................................. 957,700
20,300 CCB Financial Corp. ............................... 1,636,688
25,500 Centura Banks, Inc. ............................... 1,404,094
46,100 Charter One Financial, Inc. ....................... 2,725,663
22,200 CMAC Investment Corp. ............................. 1,190,475
18,400 Coast Savings Financial, Inc. * ................... 964,850
21,300 Commercial Federal Corp. .......................... 1,003,763
9,900 CompDent Corp. * .................................. 247,500
22,200 Cullen/Frost Bankers, Inc. ........................ 1,051,748
42,000 Deposit Guaranty Corp. ............................ 1,399,125
26,400 Downey Financial Corp. ............................ 643,500
18,400 Eaton Vance Corp. ................................. 657,800
17,900 Enhance Financial Services Group, Inc. ............ 980,025
9,400 Executive Risk, Inc. .............................. 642,725
13,600 Fidelity National Financial, Inc. ................. 322,150
11,300 First American Financial Corp. .................... 678,000
33,200 First Commercial Corp. ............................ 1,593,600
37,000 First Financial Corp. of Wisconsin ................ 1,260,313
27,400 First Michigan Bank Corp. ......................... 1,133,675
15,000 Firstbank Puerto Rico ............................. 487,500
29,100 Fremont General Corp. ............................. 1,389,525
29,200 Frontier Insurance Group, Inc. .................... 1,109,600
16,100 Gallagher (Arthur J.) & Co. ....................... 599,725
13,300 Hilb, Rogal & Hamilton Co. ........................ 244,388
15,500 Integon Corp. ..................................... 403,000
12,100 Interra Financial, Inc. ........................... 726,756
9,700 JSB Financial, Inc. ............................... 474,694
52,600 Keystone Financial, Inc. .......................... 1,985,650
24,000 Legg Mason, Inc. .................................. 1,266,000
13,400 Life Re Corp. ..................................... 706,850
32,800 Magna Group, Inc. ................................. 1,293,550
18,000 MDC Holdings, Inc. ................................ 178,875
18,500 Mutual Risk Management, Ltd. ...................... 940,031
28,300 National Auto Credit, Inc. * ...................... 228,169
13,800 North American Mortgage Co. ....................... 396,750
12,300 ONBANCorp, Inc. ................................... 704,175
27,400 Orion Capital Corp. ............................... 1,241,563
24,700 Pioneer Group, Inc. ............................... 790,400
18,400 Piper Jaffray Cos., Inc. .......................... 562,350
30,500 Protective Life Corp. ............................. 1,540,250
39,300 Provident Financial Group ......................... 1,859,381
37,400 Quick & Reilly Group, Inc. ........................ 1,400,163
31,300 Raymond James Financial, Inc. ..................... 1,126,800
14,300 RCSB Financial, Inc. .............................. 779,350
30,100 Riggs National Corp. .............................. 709,231
14,500 Selective Insurance Group, Inc. ................... 746,750
87,056 Sovereign Bancorp, Inc. ........................... 1,523,480
33,700 St. Paul Bancorp, Inc. ............................ 842,500
44,800 TCF Financial Corp. ............................... 2,618,000
11,800 Trenwick Group, Inc. .............................. 445,450
19,300 U.S. Trust Corp. .................................. 1,088,038
12,200 Washington National Corp. ......................... 395,738
18,900 Whitney Holding Corp. ............................. 893,025
17,400 Zenith National Insurance Co. ..................... 496,983
56,200 Zions Bancorp ..................................... 2,107,500
------------
59,674,928
------------
CAPITAL GOODS - 5.95%
4,600 Air & Water Technologies Corp., Class A * ......... 9,487
12,900 Alliant Techsystems, Inc. * ....................... 831,244
40,500 American Management Systems, Inc. * ............... 774,563
14,500 Amtech Corp. * .................................... 67,063
13,600 Applied Power, Inc., Class A ...................... 855,950
17,800 AptarGroup, Inc. .................................. 995,688
25,900 Baldor Electric Co. ............................... 788,331
19,000 Blount International, Inc., Class A ............... 958,313
36,500 Camco International, Inc. ......................... 2,545,875
34,200 Checkpoint Systems, Inc. .......................... 500,175
13,100 Circon Corp. * .................................... 204,688
15,000 Commercial Metals Co. ............................. 479,063
6,800 Continental Homes Holding Corp. ................... 199,325
16,900 Daniel Industries, Inc. ........................... 328,494
18,100 Digital Microwave Corp. * ......................... 809,975
11,900 Dionex Corp. * .................................... 641,856
18,900 Electroglas, Inc. * ............................... 642,600
34,200 Gentex Corp. * .................................... 848,588
22,400 Global Industrial Technologies, Inc. * ............ 464,800
16,200 Greenfield Industries, Inc. ....................... 465,750
15,700 Hughes Supply, Inc. ............................... 473,944
12,400 IMCO Recycling, Inc. .............................. 233,275
43,200 JLG Industries, Inc. .............................. 553,500
38,400 KEMET Corp. * ..................................... 1,166,400
22,000 Kulicke & Soffa Industries, Inc. * ................ 1,018,875
17,100 Manitowoc Co., Inc. ............................... 610,256
30,600 Orbital Sciences Corp. * .......................... 749,700
12,100 Pacific Scientific Co. ............................ 199,650
20,400 Regal Beloit Corp. ................................ 627,300
25,500 Rexel, Inc. * ..................................... 548,250
10,800 Robbins & Myers, Inc. ............................. 415,800
30,000 Roper Industries, Inc. ............................ 1,012,500
17,900 Simpson Industries, Inc. .......................... 206,969
9,900 Skyline Corp. ..................................... 295,763
15,000 Southern Energy Homes, Inc. * ..................... 158,438
12,700 Stone & Webster, Inc. ............................. 696,913
12,700 TETRA Technologies, Inc. * ........................ 293,688
21,500 Titan International, Inc. ......................... 430,000
26,700 Valmont Industries, Inc. .......................... 569,038
------------
23,672,087
------------
ENERGY - 5.34%
31,100 Barrett Resources Corp. * ......................... 1,210,956
28,200 Benton Oil & Gas Co. * ............................ 526,988
20,600 Box Energy Corp., Class B * ....................... 164,800
22,500 Cabot Oil & Gas Corp., Class A .................... 518,906
26,500 Cross Timbers Oil Co. ............................. 645,938
31,800 Devon Energy Corp. ................................ 1,399,200
12,900 Energen Corp. ..................................... 458,756
16,800 HS Resources, Inc. * .............................. 289,800
28,900 KCS Energy, Inc. .................................. 852,550
29,900 KN Energy, Inc. ................................... 1,367,925
53,500 Monterey Resources, Inc. .......................... 1,123,500
34,800 Newfield Exploration Co. * ........................ 976,575
23,600 Oceaneering International, Inc. * ................. 561,975
20,800 Offshore Logistics, Inc. * ........................ 374,400
16,400 Plains Resources, Inc. * .......................... 295,200
32,900 Pogo Producing Co. ................................ 1,437,319
18,700 Pool Energy Services Co. * ........................ 633,463
45,800 Pride International, Inc. * ....................... 1,557,200
97,200 Santa Fe Energy Resources, Inc. * ................. 1,215,000
9,900 Seitel, Inc. ...................................... 439,313
30,800 Snyder Oil Corp. .................................. 698,775
10,700 St. Mary Land & Exploration Co. ................... 485,513
43,500 Tuboscope Vetco International Corp. * ............. 1,364,813
34,100 United Meridian Corp. * ........................... 1,253,173
25,400 Vintage Petroleum, Inc. ........................... 1,250,950
8,800 Wiser Oil Co. ..................................... 150,700
------------
21,253,688
------------
BASIC MATERIALS - 4.57%
11,500 Acme Metals, Inc. * ............................... 184,000
19,000 Amcol International Corp. ......................... 394,250
9,300 Astec Industries, Inc. * .......................... 156,938
29,300 Birmingham Steel Corp. ............................ 507,256
21,600 Brady (W.H.) Co., Class A ......................... 675,000
18,800 Buckeye Cellulose Corp. * ......................... 757,875
11,500 Cambrex Corp. ..................................... 536,188
13,900 Castle (A.M.) & Co. ............................... 361,400
20,400 Chemfirst, Inc. ................................... 512,550
10,100 Commonwealth Industries, Inc. ..................... 194,425
14,700 Dravo Corp. * ..................................... 174,563
23,600 Geon Co. .......................................... 483,800
25,600 Getchell Gold Corp. * ............................. 1,049,600
30,700 Glamis Gold, Ltd. ................................. 205,306
11,900 Handy & Harman .................................... 272,213
8,300 Insteel Industries, Inc. .......................... 65,881
12,324 Intermagnetics General Corp. ...................... 130,172
24,900 Intermet Corp. .................................... 435,750
26,200 Justin Industries, Inc. ........................... 352,063
22,400 Lilly Industries, Inc., Class A ................... 470,400
10,600 Lone Star Industries, Inc. ........................ 572,400
16,900 Lydall, Inc. * .................................... 396,094
8,200 MacDermid, Inc. ................................... 714,425
27,700 Mississippi Chemical Corp. ........................ 540,150
17,300 Mueller Industries, Inc. * ........................ 786,069
30,500 Mycogen Corp. * ................................... 716,750
24,300 Northwestern Steel & Wire Co. * ................... 83,531
21,400 Om Group, Inc. .................................... 854,663
15,800 O'Sullivan Corp. .................................. 169,850
13,500 Quanex Corp. ...................................... 473,344
18,400 Scotts Co., Class A * ............................. 483,000
18,200 Shorewood Packaging Corp. * ....................... 434,525
20,000 Stillwater Mining Co. * ........................... 426,250
16,000 Telxon Corp. ...................................... 392,000
21,500 Texas Industries, Inc. ............................ 912,406
12,100 Tredegar Industries, Inc. ......................... 850,025
16,800 Universal Forest Products, Inc. ................... 294,000
24,000 WHX Corp. * ....................................... 312,000
13,700 Wolverine Tube, Inc. * ............................ 429,835
12,400 Wynn's International, Inc. ........................ 412,300
------------
18,173,247
------------
UTILITIES - 4.01%
16,400 ACC Corp.* ........................................ 539,150
6,900 Aquarion Co. ...................................... 191,475
48,200 Aspect Telecommunications Corp.* .................. 1,126,675
29,000 Atmos Energy Corp. ................................ 721,375
7,200 Bangor Hydro-Electric Co. ......................... 38,250
10,700 Cascade Natural Gas Corp. ......................... 179,225
17,400 Central Hudson Gas & Electric Corp. ............... 623,138
11,400 Central Vermont Public Service Corp. .............. 151,050
13,500 Cilcorp, Inc. ..................................... 564,469
21,400 Commonwealth Energy System ........................ 577,800
9,100 Connecticut Energy Corp. .......................... 224,656
8,600 Consumers Water Co. ............................... 154,800
20,300 Eastern Utilities Associates ...................... 404,731
40,900 General Communication, Inc., Class A * ............ 322,088
59,200 Geotek Communications, Inc. * ..................... 251,600
5,000 Green Mountain Power Corp. ........................ 94,375
9,500 Interstate Power Co. .............................. 300,438
17,900 New Jersey Resources Corp. ........................ 579,513
22,200 Northwest Natural Gas Co. ......................... 571,650
26,700 OHM Corp. * ....................................... 200,250
13,500 Orange & Rockland Utilities, Inc. ................. 503,719
9,500 Pennsylvania Enterprises, Inc. .................... 289,750
18,900 Philadelphia Suburban Corp. ....................... 408,713
29,300 Piedmont Natural Gas Co., Inc. .................... 853,363
19,300 Public Service Co. of North Carolina .............. 387,206
30,500 Sierra Pacific Resources .......................... 977,906
8,800 Southern California Water Co. ..................... 196,900
26,300 Southwest Gas Corp. ............................... 516,138
24,500 Southwestern Energy Co. ........................... 313,906
59,500 Tel-Save Holdings, Inc. * ......................... 1,431,719
12,800 TNP Enterprises, Inc. ............................. 321,600
13,900 United Illuminating Co. ........................... 506,477
34,100 United Water Resources, Inc. ...................... 635,113
18,200 Wicor, Inc. ....................................... 786,013
------------
15,945,231
------------
TRANSPORTATION - 3.21%
33,850 Air Express International Corp. ................... 1,235,525
30,900 American Freightways Corp. * ...................... 587,100
19,300 Arkansas Best Corp. * ............................. 218,331
17,300 Central Parking Corp. ............................. 813,100
44,100 Comair Holdings, Inc. ............................. 1,185,188
24,000 Expeditors International of Washington, Inc. ...... 1,005,000
34,700 Fritz Cos., Inc. * ................................ 511,825
16,400 Frozen Food Express Industries, Inc. .............. 153,750
29,700 Heartland Express, Inc. * ......................... 820,463
11,200 Insurance Auto Auctions, Inc. * ................... 140,000
24,500 Kirby Corp. * ..................................... 470,094
11,900 M.S. Carriers, Inc. * ............................. 316,838
20,500 Pittston Burlington Group ......................... 581,688
9,100 Railtex, Inc. ..................................... 154,700
42,000 Rollins Truck Leasing Corp. ....................... 716,625
10,000 Skywest, Inc. ..................................... 197,500
16,600 Standard Products Co. ............................. 436,788
25,100 USFreightways Corp. ............................... 843,988
18,800 Wabash National Corp. ............................. 544,025
37,700 Werner Enterprises, Inc. .......................... 914,225
27,800 Yellow Corp. * .................................... 905,235
------------
12,751,988
------------
DURABLE GOODS - 1.04%
18,200 Figgie International, Inc., Class A * ...... 268,450
18,200 Halter Marine Group, Inc. * ....................... 880,425
17,000 Hyperion Software Corp. * ......................... 530,188
46,500 Read-Rite Corp. * ................................. 1,139,250
41,700 Valassis Communications, Inc. * ................... 1,329,184
------------
4,147,497
------------
BUILDING AND CONSTRUCTION - 0.28%
53,200 Morrison Knudsen Corp. * .......................... 645,050
17,300 TJ International, Inc. ............................ 442,231
------------
1,087,281
------------
BUSINESS SERVICES - 0.24%
15,400 Billing Information Concepts Corp. * .............. 539,000
13,000 New England Business Service, Inc. ................ 416,000
------------
955,000
------------
CONSUMER PRODUCTS - 0.20%
30,000 Footstar, Inc. * .................................. 808,125
------------
METALS AND MINING - 0.17%
21,700 Coeur d'Alene Mines Corp. * ....................... 353,981
54,600 HECLA Mining Co. * ................................ 331,013
------------
684,994
------------
ELECTRONICS - 0.12%
8,600 Fluke Corp. ....................................... 464,400
------------
AEROSPACE - AIRLINES - 0.04%
28,000 Mesa Air Group, Inc. * ............................ 180,250
------------
TOTAL COMMON STOCKS ............................... 363,273,494
(Cost $296,265,082) ------------
PAR VALUE
VALUE (NOTE 2)
----- --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 9.53%
FEDERAL HOME LOAN MORTGAGE (C) - 9.16%
$36,438,000 6.05%, 10/01/97 ................................... $ 36,438,000
------------
U.S. TREASURY BILL (B) - 0.37%
1,500,000 4.93%, 12/18/97 ................................... 1,483,994
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS ................................ 37,921,994
(Cost $37,921,993) ------------
TOTAL INVESTMENTS - 100.84% ............................ 401,195,488
------------
(Cost $334,187,075)
NET OTHER ASSETS AND LIABILITIES - (0.84)% ............. (3,334,492)
------------
NET ASSETS - 100% ...................................... $397,860,996
============
- --------------------------------------------
* Non-income producing security.
(A) Annualized yield at time of purchase.
(B) Security has been deposited as intial margin on open futures contracts.
(C) All or a portion of these shares are used as collateral on open futures
contracts.
At September 30, 1997 the Fund's open futures contracts were as follows:
NUMBER OF
CONTRACTS CONTRACT EXPIRATION OPENING CURRENT
PURCHASED (SOLD) TYPE DATE POSITION MARKET VALUE
---------------- -------- ---------- -------- ------------
153 Russell 2000 12/97 $ 34,645,580 $ 34,964,325
============ ============
See Notes to Financial Statements.
<PAGE>
UTILITY INDEX FUND
GALAXY PORTFOLIO OF INVESTMENTS
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 99.56%
UTILITIES - 89.05%
40,400 American Electric Power Co., Inc. ................. $ 1,838,200
31,600 Baltimore Gas & Electric Co. ...................... 876,900
32,300 Carolina Power & Light Co. ........................ 1,160,781
45,500 Central & South West Corp. ........................ 1,009,531
33,800 Cinergy Corp. ..................................... 1,130,188
11,900 Columbia Gas System, Inc. ......................... 833,000
50,300 Consolidated Edison Co. of New York ............... 1,710,200
20,300 Consolidated Natural Gas Co. ...................... 1,181,206
31,100 DTE Energy Co. .................................... 946,606
39,500 Dominion Resources, Inc. .......................... 1,496,063
77,000 Duke Energy Corp. ................................. 3,806,688
87,800 Edison International .............................. 2,216,950
50,900 Entergy Corp. ..................................... 1,326,581
39,100 FPL Group, Inc. ................................... 2,003,875
25,800 GPU, Inc. ......................................... 925,575
59,713 Houston Industries, Inc. .......................... 1,298,758
30,900 Niagara Mohawk Power Corp. * ...................... 295,481
10,500 NICOR, Inc. ....................................... 393,750
14,800 Northern States Power Co. ......................... 736,300
32,700 Ohio Edison Co. ................................... 766,406
6,000 Oneok, Inc. ....................................... 195,750
17,800 Pacific Enterprises ............................... 602,975
63,300 PacifiCorp ........................................ 1,416,338
47,700 PECO Energy Co. ................................... 1,117,969
7,500 Peoples Energy Corp. .............................. 282,656
93,900 PG & E Corp. ...................................... 2,177,306
35,200 PP & L Resources, Inc. ............................ 770,000
49,700 Public Service Enterprise Group, Inc. ............. 1,279,775
146,000 Southern Co. ...................................... 3,294,125
51,500 Texas Utilities Co. ............................... 1,854,000
46,300 Unicom Corp. ...................................... 1,082,263
21,900 Union Electric Co. ................................ 841,781
33,900 Williams Cos., Inc. ............................... 1,586,944
-----------
42,454,921
-----------
ENERGY - 10.51%
22,700 Coastal Corp. ..................................... 1,390,375
4,400 Eastern Enterprises ............................... 164,174
65,500 Enron Corp. ....................................... 2,521,750
18,400 Sonat, Inc. ....................................... 936,100
-----------
5,012,399
-----------
TOTAL INVESTMENTS - 99.56% ...................................... 47,467,320
(Cost $44,624,969) -----------
NET OTHER ASSETS AND LIABILITIES - 0.44% ........................ 210,558
-----------
NET ASSETS - 100.00% ............................................ $47,677,878
===========
- ----------
* Non-income producing security.
See Notes to Financial Statements.
<PAGE>
U.S. TREASURY INDEX FUND
GALAXY PORTFOLIO OF INVESTMENTS
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 98.01%
U.S. TREASURY NOTES - 70.23%
$ 6,450,000 7.13%, 10/15/98 ................................... $ 6,544,422
3,000,000 5.13%, 12/31/98 ................................... 2,979,537
3,500,000 5.00%, 01/31/99 ................................... 3,467,797
1,550,000 5.50%, 02/28/99 ................................... 1,545,149
2,300,000 6.25%, 03/31/99 ................................... 2,316,951
2,350,000 7.00%, 04/15/99 ................................... 2,392,582
3,000,000 6.25%, 05/31/99 ................................... 3,021,780
3,900,000 6.38%, 07/15/99 ................................... 3,939,776
1,900,000 6.00%, 08/15/99 ................................... 1,905,814
3,800,000 7.75%, 01/31/00 ................................... 3,954,048
6,450,000 5.50%, 04/15/00 ................................... 6,398,716
1,400,000 6.00%, 08/15/00 ................................... 1,404,983
6,453,000 8.75%, 08/15/00 ................................... 6,935,162
3,100,000 6.50%, 05/31/01 ................................... 3,153,041
8,300,000 7.50%, 11/15/01 ................................... 8,750,939
500,000 6.38%, 08/15/02 ................................... 507,775
3,650,000 5.75%, 08/15/03 ................................... 3,594,480
4,150,000 7.25%, 05/15/04 ................................... 4,408,707
3,550,000 7.88%, 11/15/04 ................................... 3,904,925
8,200,000 6.50%, 10/15/06 ................................... 8,379,334
------------
79,505,918
------------
U.S. TREASURY BONDS - 26.39%
200,000 10.75%, 08/15/05 .................................. 256,555
3,430,000 11.75%, 11/15/14 .................................. 4,979,122
2,550,000 7.25%, 05/15/16 ................................... 2,769,017
5,364,000 8.88%, 08/15/17 ................................... 6,794,579
2,971,000 8.50%, 02/15/20 ................................... 3,670,311
10,100,000 7.50%, 11/15/24 ................................... 11,406,728
------------
29,876,312
------------
FEDERAL HOME LOAN BANK (A) - 1.39%
1,570,000 6.00%, 10/01/97 ................................... 1,570,000
------------
TOTAL INVESTMENTS - 98.01% ...................................... 110,952,230
(Cost $108,474,713) ------------
NET OTHER ASSETS AND LIABILITIES - 1.99% ........................ 2,256,669
------------
NET ASSETS - 100.00% ............................................ $113,208,899
============
- ----------
(A) Annualized yield at time of purchase.
See Notes to Financial Statements.
<PAGE>
MUNICIPAL BOND FUND
GALAXY PORTFOLIO OF INVESTMENTS
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
MUNICIPAL BONDS - 97.82%
ALABAMA - 4.22%
$ 800,000 Auburn University Athletics
5.20%, 04/01/04
Insured: MBIA ................................. $ 827,000
COLORADO - 2.72%
500,000 Jefferson County School District, GO
5.50%, 12/15/06
Insured: MBIA ................................. 533,123
FLORIDA - 5.43%
1,000,000 Florida State Board of Education
Capital Outlay
Public Education, Series A, GO
5.70%, 06/01/08
Insured: AMBAC ................................ 1,063,750
HAWAII - 1.30%
250,000 Hawaii State
Series CN, GO
5.25%, 03/01/11
Insured: FGIC ................................. 254,375
ILLINOIS - 12.16%
500,000 Chicago Metropolitan
Water Reclamation District
Greater Chicago, GO
5.10%, 12/01/03 ............................... 519,375
750,000 Illinois Health Facilities Authority Revenue
University of Chicago Hospitals
Series A
5.25%, 08/15/03
Insured: MBIA ................................. 777,188
500,000 Illinois State Sales Tax Revenue, Series V
6.00%, 06/15/08 ............................... 541,250
500,000 Kane County Community School District
Number 304
Geneva, GO
6.00%, 06/01/04
Insured: FGIC ................................. 543,750
-----------
2,381,563
-----------
MASSACHUSETTS - 4.20%
800,000 Springfield, Series B, GO
5.05%, 01/15/04
Insured: MBIA ................................. 824,000
MICHIGAN - 3.81%
750,000 Michigan State Hospital Finance Authority
Detroit Medical Group, Series A
5.10%, 08/15/11
Insured: AMBAC ................................ 747,188
MISSOURI - 9.47%
1,000,000 Sikeston Electric Revenue
6.00%, 06/01/04
Insured: MBIA ................................. 1,088,750
750,000 St. Louis Water Revenue
5.30%, 07/01/99
Insured: FGIC ................................. 766,875
-----------
1,855,625
-----------
NEVADA - 6.59%
750,000 Clark County School District Revenue
Series B, GO
5.00%, 05/01/02
Insured: FGIC ................................. 769,688
500,000 Las Vegas Valley
Water District Revenue, GO
5.40%, 09/01/04
Insured: AMBAC ................................ 520,625
-----------
1,290,313
-----------
NEW HAMPSHIRE - 2.66%
500,000 New Hampshire Municipal Bond Bank
Series A
5.25%, 11/15/03 ............................... 521,250
------------
NEW JERSEY - 6.88%
550,000 Mahwah Township School District, GO
5.10%, 07/15/13 ............................... 556,875
750,000 New Jersey Health Care Facilities
Financing Authority
Dover General Hospital and Medical Center
5.60%, 07/01/02
Insured: MBIA ................................. 790,313
-----------
1,347,188
-----------
NEW YORK - 2.78%
500,000 New York State Environmental
Facilities Corp., PCR
5.75%, 06/15/09 ............................... 543,750
------------
PENNSYLVANIA - 3.90%
750,000 Pennsylvania State IDA
Economic Development
5.00%, 01/01/00
Insured: AMBAC ................................ 765,000
------------
TEXAS - 6.66%
500,000 Carrollton Farmers Branch
Independent School District, GO
5.10%, 02/15/04 ............................... 509,375
250,000 Harlingen Waterworks and Sewer System Revenue
5.25%, 11/01/10
Insured: MBIA ................................. 254,375
500,000 Houston Water and Sewer System Revenue
Junior Lien, Series A
5.75%, 12/01/03
Insured: MBIA ................................. 540,625
-----------
1,304,375
-----------
UTAH - 2.12%
400,000 Utah Associated
Municipal Power System Revenue
St. George Project
5.15%, 12/01/03
Insured: AMBAC ................................ 415,000
------------
VIRGINIA - 4.03%
750,000 Virginia State Transportation Board
Transportation Contract Revenue
Route 28 Project
6.00%, 04/01/10 ............................... 789,375
------------
WASHINGTON - 9.34%
1,000,000 Seattle Municipal Light & Power Revenue
Series B
5.75%, 08/01/07 ............................... 1,055,000
250,000 Seattle Water System
5.38%, 08/01/09 ............................... 260,000
500,000 Washington State Public Power
Supply System, Nuclear Project Number 1
Revenue, Series B
5.10%, 07/01/04
Insured: MBIA ................................. 514,375
-----------
1,829,375
-----------
WEST VIRGINIA - 4.24%
500,000 West Virginia School Building Authority
Refunding, Capital Improvement
5.30%, 07/01/09
Insured: AMBAC ................................ 518,750
300,000 West Virginia State Housing Development
Fund Housing Finance, Series A
5.55%, 11/01/10 ............................... 311,625
-----------
830,375
-----------
WISCONSIN - 5.31%
1,000,000 Milwaukee Corporate Purpose
Series A, GO
5.50%, 06/15/08 ............................... 1,040,000
-----------
TOTAL MUNICIPAL BONDS ......................... 19,162,625
(Cost $18,353,191) -----------
SHARES
------
INVESTMENT COMPANY - 4.27%
835,787 Federated Tax-Free Obligations Fund ........... 835,787
-----------
TOTAL INVESTMENT COMPANY ...................... 835,787
(Cost $835,787) -----------
TOTAL INVESTMENTS - 102.09% ................... 19,998,412
(Cost $19,188,978) -----------
NET OTHER ASSETS AND LIABILITIES - (2.09)% .... (409,922)
-----------
NET ASSETS - 100.00% .......................... $19,588,490
===========
- ----------
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guaranty Insurance Corp.
GO General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
See Notes to Financial Statements.
<PAGE>
<TABLE>
GALAXY STATEMENTS OF ASSETS AND LIABILITIES
FUND II SEPTEMBER 30, 1997 (UNAUDITED)
<CAPTION>
LARGE SMALL U.S.
COMPANY COMPANY UTILITY TREASURY MUNICIPAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND BOND FUND
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost ................................... $330,362,802 $334,187,075 $44,624,969 $108,474,713 $19,188,978
Net unrealized appreciation (depreciation) ............ 195,168,866 67,008,413 2,842,351 2,477,517 809,434
------------ ------------ ----------- ------------ -----------
Total investments at value ............................ 525,531,668 401,195,488 47,467,320 110,952,230 19,998,412
Cash .................................................... -- -- 79,820 2,748 --
Receivable for investments sold ......................... 305,135 678,800 -- -- 614,702
Receivable for shares sold .............................. 219,357 93,268 7,927 265,736 50
Receivable for daily variation margin
on futures contracts ................................... 83,445 247,775 -- -- --
Interest and dividend receivables ....................... 726,266 172,196 139,060 2,192,760 275,274
------------ ------------ ----------- ------------ -----------
Total Assets ........................................ 526,865,871 402,387,527 47,694,127 113,413,474 20,888,438
------------ ------------ ----------- ------------ -----------
LIABILITIES:
Payable for investments purchased ....................... -- 1,394,608 -- -- 1,275,925
Payable for shares repurchased .......................... 1,284,646 2,920,262 419 24,352 5,215
Payable to custodian .................................... 159,689 84,167 -- -- --
Distributions payable ................................... -- -- 180 142,686 8,985
Advisory fee payable (Note 4) ........................... 43,399 31,873 3,913 9,384 4,095
Administration fee payable (Note 4) ..................... 130,201 95,621 11,737 28,153 5,728
------------ ------------ ----------- ------------ -----------
Total Liabilities ................................... 1,617,935 4,526,531 16,249 204,575 1,299,948
------------ ------------ ----------- ------------ -----------
NET ASSETS ................................................ $525,247,936 $397,860,996 $47,677,878 $113,208,899 $19,588,490
============ ============ =========== ============ ===========
NET ASSETS CONSIST OF:
Par value (Note 3) ...................................... $ 18,054 $ 13,343 $ 3,770 $ 10,960 $ 1,879
Paid-in capital in excess of par value .................. 298,798,857 201,926,926 42,345,798 116,106,734 19,690,379
Undistributed net investment income ..................... 6,304,459 3,031,448 30,031 133,657 21,434
Accumulated net realized gain (loss) on investments sold
and futures contracts ................................. 24,964,620 125,562,121 2,455,928 (5,519,969) (934,636)
Unrealized appreciation (depreciation) of investments
and futures contracts ................................. 195,161,946 67,327,158 2,842,351 2,477,517 809,434
------------ ------------ ----------- ------------ -----------
TOTAL NET ASSETS .......................................... $525,247,936 $397,860,996 $47,677,878 $113,208,899 $19,588,490
============ ============ =========== ============ ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING ................. 18,054,426 13,343,133 3,770,133 10,959,968 1,878,812
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) ..................... $ 29.09 $ 29.82 $ 12.65 $ 10.33 $ 10.43
============ ============ =========== ============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
GALAXY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
FUND II (UNAUDITED)
<CAPTION>
LARGE SMALL U.S.
COMPANY COMPANY UTILITY TREASURY MUNICIPAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND BOND FUND
------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) ........................................... $ 828,132 $ 1,391,257 $ 4,092 $3,722,082 $510,640
Dividend (Note 2) ........................................... 4,177,537 1,496,737 1,097,400 -- --
Total Investment Income ................................... 5,005,669 2,887,994 1,101,492 3,722,082 510,640
------------ ----------- ---------- ---------- --------
EXPENSES:
Investment advisory fee (Note 4) ............................ 247,681 174,640 23,354 56,149 24,857
Administration fee (Note 4) ................................. 743,044 523,921 70,060 168,446 34,800
Trustees' fees (Note 4) ..................................... 4,540 3,202 428 1,029 182
------------ ----------- ---------- ---------- --------
Total expenses before reimbursement ....................... 995,265 701,763 93,842 225,624 59,839
Less: reimbursement by sub-administ ....................... (4,540) (3,202) (428) (1,029) (182)
------------ ----------- ---------- ---------- --------
Total expenses net of reimbursement ......................... 990,725 698,561 93,414 224,595 59,657
------------ ----------- ---------- ---------- --------
NET INVESTMENT INCOME ......................................... 4,014,944 2,189,433 1,008,078 3,497,487 450,983
------------ ----------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain on investment sold ........................ 809,344 102,488,364 2,610,786 (324,776) 58,298
Net realized gain on futures contract ....................... 1,091,235 9,089,105 -- -- --
Net change in unrealized appreciation (depreciation) on
investments sold and futures contracts .................... 104,418,524 (17,204,349) 2,287,527 4,131,077 470,063
------------ ----------- ---------- ---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ........ 106,319,103 94,373,120 4,898,313 3,806,301 528,361
------------ ----------- ---------- ---------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $110,334,047 $96,562,553 $5,906,391 $7,303,788 $979,344
============ =========== ========== ========== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
GALAXY
FUND II STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
LARGE COMPANY INDEX FUND SMALL COMPANY INDEX FUND
-------------------------------- -------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 MARCH 31, 1997 MARCH 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ........................ $421,651,872 $240,689,326 $309,473,671 $291,724,251
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income .................................. 4,014,944 7,101,571 2,189,433 4,957,269
Net realized gain (loss) on investments sold
and futures contracts ................................ 1,900,579 26,707,295 111,577,469 21,136,021
Net change in unrealized appreciation
(depreciation) of investments and futures contracts .. 104,418,524 20,512,222 (17,204,349) 1,822,970
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations .................................... 110,334,047 54,321,088 96,562,553 27,916,260
------------ ------------ ------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................. -- (5,762,133) -- (4,406,973)
Net realized gain on investments ....................... -- (6,412,382) -- (18,978,395)
------------ ------------ ------------ ------------
Total Dividends ...................................... -- (12,174,515) -- (23,385,368)
------------ ------------ ------------ ------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares ...................... 58,779,432 196,028,098 33,539,072 38,027,651
Issued to shareholders in reinvestment of dividends .... -- 10,568,314 -- 22,583,158
Costs of shares repurchased ............................ (65,517,415) (67,780,439) (41,714,300) (47,392,281)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from share
transactions ......................................... (6,737,983) 138,815,973 (8,175,228) 13,218,528
------------ ------------ ------------ ------------
Net increase (decrease) in net assets .................. 103,596,064 180,962,546 88,387,325 17,749,420
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) ........... $525,247,936 $421,651,872 $397,860,996 $309,473,671
============ ============ ============ ============
(A) Accumulated undistributed net investment income ...... $ 6,304,459 $ 2,289,515 $ 3,031,448 $ 842,015
============ ============ ============ ============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold ................................................... 2,194,036 8,814,388 1,246,075 1,624,791
Issued to shareholders in reinvestment of dividends .... -- 477,342 -- 990,057
Repurchased ............................................ (2,398,204) (3,031,843) (1,573,373) (2,027,836)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ........ (204,168) 6,259,887 (327,298) 587,012
============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
GALAXY
FUND II
<CAPTION>
UTILITY INDEX FUND U.S. TREASURY INDEX FUND MUNICIPAL BOND FUND
------------------ ------------------------ -------------------
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 MARCH 31, 1997 MARCH 31, 1997 MARCH 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
--------------- ---------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD .......... $45,582,419 $56,383,495 $111,312,677 $124,944,179 $19,921,203 $22,478,238
----------- ----------- ------------ ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income .................... 1,008,078 2,036,839 3,497,487 7,384,687 450,983 943,900
Net realized gain (loss) on investments
sold and futures contracts ............... 2,610,786 3,706,859 (324,776) 186,629 58,298 117,357
Net change in unrealized appreciation
(depreciation) of investments and
futures contracts ...................... 2,287,527 (3,930,293) 4,131,077 (3,069,827) 470,063 (228,249)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations ............ 5,906,391 1,813,405 7,303,788 4,501,489 979,344 833,008
----------- ----------- ------------ ------------ ----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................... (1,166,851) (1,928,333) (3,501,803) (7,380,371) (451,766) (943,276)
Net realized gain on investments ......... -- (2,272,644) -- -- -- --
----------- ----------- ------------ ------------ ----------- -----------
Total Dividends ........................ (1,166,851) (4,200,977) (3,501,803) (7,380,371) (451,766) (943,276)
----------- ----------- ------------ ------------ ----------- -----------
SHARE TRANSACTIONS:
Net proceeds from sales of shares ........ 1,173,995 2,858,430 7,065,201 16,091,716 744,711 4,660,657
Issued to shareholders in reinvestment of
dividends .............................. 1,068,325 3,936,226 2,697,122 5,812,718 400,097 822,158
Costs of shares repurchased .............. (4,886,401) (15,208,160) (11,668,086) (32,657,054) (2,005,099) (7,929,582)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
from share transactions .............. (2,644,081) (8,413,504) (1,905,763) (10,752,620) (860,291) (2,446,767)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets .. 2,095,459 (10,801,076) 1,896,222 (13,631,502) (332,713) (2,557,035)
----------- ----------- ------------ ------------ ----------- -----------
NET ASSETS AT END OF PERIOD
(INCLUDING LINE A) ....................... $47,677,878 $45,582,419 $113,208,899 $111,312,677 $19,588,490 $19,921,203
=========== =========== ============ ============ =========== ===========
(A) Accumulated undistributed net
investment income ........................ $ 30,031 $ 188,804 $ 133,657 $ 137,973 $ 21,434 $ 22,217
=========== =========== ============ ============ =========== ===========
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold ..................................... 95,954 241,502 693,765 1,594,728 72,231 455,952
Issued to shareholders in reinvestment of
dividends .............................. 86,499 341,447 364,176 573,428 38,753 80,682
Repurchased .............................. (403,042) (1,278,619) (1,145,764) (3,218,983) (194,124) (777,546)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in shares
outstanding ............................ (220,589) (695,670) (87,823) (1,050,827) (83,140) (240,912)
=========== =========== ============ ============ =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LARGE COMPANY INDEX FUND
GALAXY FINANCIAL HIGHLIGHTS
FUND II FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
SIX MONTHS ENDED YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1) 1993(1)
------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ............ $ 23.09 $ 20.06 $ 15.76 $ 14.36 $ 14.59 $ 13.04
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income(2) ...................... 0.22 0.43 0.38 0.37 0.36 0.34
Net realized and unrealized gain (loss)
on investments and futures contracts ........ 5.78 3.41 4.57 1.73 (0.20) 1.55
-------- -------- -------- -------- -------- --------
Total from Investment Operations .......... 6.00 3.84 4.95 2.10 0.16 1.89
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income .......... -- (0.38) (0.31) (0.37) (0.36) (0.34)
Dividends from net realized capital gains ..... -- (0.43) (0.34) (0.33) (0.03) --
-------- -------- -------- -------- -------- --------
Total Dividends ........................... -- (0.81) (0.65) (0.70) (0.39) (0.34)
-------- -------- -------- -------- -------- --------
Net Increase (decrease) in net asset value ...... 6.00 3.03 4.30 1.40 (0.23) 1.55
-------- -------- -------- -------- -------- --------
Net Asset Value, End of period .................. $ 29.09 $ 23.09 $ 20.06 $ 15.76 $ 14.36 $ 14.59
======== ======== ======== ======== ======== ========
Total Return .................................... 25.99%** 19.32% 31.80% 15.07% 1.02% 14.68%
Ratios/Supplemental Data:
Net assets, End of period (in 000's) ............ $525,248 $421,652 $240,689 $147,597 $143,828 $133,426
Ratios to average net assets:
Net investment income including reimbursement . 1.62%* 2.19% 2.11% 2.48% 2.41% 2.57%
Operating expenses including reimbursement .... 0.40%* 0.40% 0.40% 0.40% 0.40% 0.40%
Operating expenses excluding reimbursement .... 0.40%* 0.40% 0.41% 0.41% 0.40% 0.40%
Portfolio turnover rate ......................... 1%** 11% 5% 7% 4% 0%
Average Commission Rate Paid(3) ................. $ 0.0383 $ 0.0387 $ 0.0203 N/A N/A N/A
- ----------
* Annualized
** Not Annualized
(1) Audited by other auditors
(2) Net investment income per share before reimbursement by the
sub-administrator for the six months ended September 30, 1997 and the fiscal
years ended March 31, 1997, 1996 and 1995 was $0.22 , $0.43, $0.38 and
$0.37, respectively.
(3) For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for portfolio
transactions for which commissions are charged.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SMALL COMPANY INDEX FUND
GALAXY FINANCIAL HIGHLIGHTS
FUND II FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
SIX MONTHS ENDED YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1) 1993(1)
------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ............. $ 22.64 $ 22.30 $ 17.62 $ 17.49 $ 17.42 $ 15.39
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income(2) ....................... 0.17 0.38 0.32 0.32 0.26 0.25
Net realized and unrealized gain (loss)
on investments and futures contracts ......... 7.01 1.76 5.07 0.91 0.39 2.07
-------- -------- -------- -------- -------- --------
Total from Investment Operations ........... 7.18 2.14 5.39 1.23 0.65 2.32
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ........... -- (0.34) (0.38) (0.32) (0.25) (0.24)
Dividends from net realized capital gains ...... -- (1.46) (0.33) (0.78) (0.33) (0.05)
-------- -------- -------- -------- -------- --------
Total Dividends ............................ -- (1.80) (0.71) (1.10) (0.58) (0.29)
-------- -------- -------- -------- -------- --------
Net Increase (decrease) in net asset value ....... 7.18 0.34 4.68 0.13 0.07 2.03
-------- -------- -------- -------- -------- --------
Net Asset Value, End of period ................... $ 29.82 $ 22.64 $ 22.30 $ 17.62 $ 17.49 $ 17.42
======== ======== ======== ======== ======== ========
Total Return ..................................... 31.71%** 9.60% 30.85% 7.60% 3.64% 15.20%
Ratios/Supplemental Data:
Net assets, End of period (in 000's) ............. $397,861 $309,474 $291,724 $235,295 $255,347 $213,669
Ratios to average net assets:
Net investment income including reimbursement .. 1.25%* 1.59% 1.52% 1.72% 1.55% 1.80%
Operating expenses including reimbursement ..... 0.40%* 0.40% 0.40% 0.40% 0.40% 0.40%
Operating expenses excluding reimbursement ..... 0.40%* 0.40% 0.41% 0.40% 0.40% 0.40%
Portfolio turnover rate .......................... 94%** 8% 14% 10% 17% 5%
Average Commission Rate Paid(3) .................. $ 0.0293 $ 0.0480 $ 0.0225 N/A N/A N/A
- ----------
* Annualized
** Not Annualized
(1) Audited by other auditors
(2) Net investment income per share before reimbursement by the
sub-administrator for the six months ended September 30, 1997 and the fiscal
years ended March 31, 1997, 1996 and 1995 was $0.17, $0.38, $0.31 and $0.31,
respectively.
(3) For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for portfolio
transactions for which commissions are charged.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UTILITY INDEX FUND
GALAXY FINANCIAL HIGHLIGHTS
FUND II FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
SIX MONTHS ENDED YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1) 1993(1)(2)
------------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ............. $ 11.42 $ 12.03 $ 9.88 $ 9.99 $ 10.93 $ 10.00
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income(3) ....................... 0.27 0.49 0.44 0.47 0.43 0.06
Net realized and unrealized gain (loss)
on investments ............................... 1.27 (0.09) 2.15 (0.03) (0.93) 0.93
-------- -------- -------- -------- -------- --------
Total from Investment Operations ........... 1.54 0.40 2.59 0.44 (0.50) 0.99
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ........... (0.31) (0.46) (0.44) (0.46) (0.43) (0.06)
Dividends from net realized capital gains ...... -- (0.55) -- (0.08) (0.01) --
Dividends in excess of net realized capital
gains ........................................ -- -- -- (0.01) -- --
-------- -------- -------- -------- -------- --------
Total Dividends ............................ (0.31) (1.01) (0.44) (0.55) (0.44) (0.06)
-------- -------- -------- -------- -------- --------
Net Increase (decrease) in net asset value ....... 1.23 (0.61) 2.15 (0.11) (0.94) 0.93
-------- -------- -------- -------- -------- --------
Net Asset Value, End of period ................... $ 12.65 $ 11.42 $ 12.03 $ 9.88 $ 9.99 $ 10.93
======== ======== ======== ======== ======== ========
Total Return ..................................... 13.54%** 3.46% 26.61% 4.67% 4.83% 9.85%**
Ratios/Supplemental Data:
Net assets, End of period (in 000's) ............. $ 47,678 $ 45,582 $ 56,383 $ 52,831 $ 68,445 $ 38,151
Ratios to average net assets:
Net investment income .......................... 4.32%* 3.96% 3.79% 4.62% 4.08% 4.66%*
Net operating expenses(3) ...................... 0.40%* 0.40% 0.40% 0.40% 0.40% 0.40%*
Operating expenses excluding reimbursement ..... 0.40%* 0.40% 0.41% 0.41% 0.40% 0.40%*
Portfolio turnover rate .......................... 73%** 170% 12% 5% 19% 0%**
Average Commissions Rate Paid(4) ................. $ 0.0507 $ 0.0572 $ 0.0230 N/A N/A N/A
- ----------
* Annualized
** Not Annualized
(1) Audited by other auditors
(2) The Fund commenced operations on January 5, 1993.
(3) Net investment income per share before reimbursement by the
sub-administrator for the six months ended September 30, 1997 and the fiscal
years ended March 31, 1997, 1996 and 1995 was $0.27, $0.49, $0.44 and $0.47,
respectively.
(4)For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for portfolio
transactions for which commissions are charged.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
U.S. TREASURY INDEX FUND
GALAXY FINANCIAL HIGHLIGHTS
FUND II FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
SIX MONTHS ENDED YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1) 1993(1)
------------------ -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ............. $ 9.99 $ 10.24 $ 9.91 $ 10.38 $ 11.01 $ 10.39
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income(2) ....................... 0.32 0.64 0.66 0.65 0.58 0.63
Net realized and unrealized gain (loss)
on investments ............................... 0.34 (0.25) 0.33 (0.29) (0.29) 0.75
-------- -------- -------- -------- -------- --------
Total from Investment Operations ........... 0.66 0.39 0.99 0.36 0.29 1.38
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ........... (0.32) (0.64) (0.65) (0.66) (0.58) (0.63)
Dividends in excess of net investment income ... -- -- (0.01) (0.01) -- --
Dividends from net realized capital gains ...... -- -- -- -- (0.34) (0.13)
Dividends in excess of net realized capital
gains ........................................ -- -- -- (0.16) -- --
-------- -------- -------- -------- -------- --------
Total Dividends ............................ (0.32) (0.64) (0.66) (0.83) (0.92) (0.76)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value ....... 0.34 (0.25) 0.33 (0.47) (0.63) 0.62
-------- -------- -------- -------- -------- --------
Net Asset Value, End of period ................... $ 10.33 $ 9.99 $ 10.24 $ 9.91 $ 10.38 $ 11.01
======== ======== ======== ======== ======== ========
Total Return ..................................... 6.67%** 3.91% 10.09% 3.81% 2.40% 13.69%
Ratios/Supplemental Data:
Net assets, End of period (in 000's) ............. $113,209 $111,313 $124,944 $104,251 $138,225 $145,353
Ratios to average net assets:
Net investment income including reimbursement .. 6.23%* 6.31% 6.35% 6.43% 5.21% 5.87%
Operating expenses including reimbursement ..... 0.40%* 0.40% 0.40% 0.40% 0.40% 0.40%
Operating expenses excluding reimbursement ..... 0.40%* 0.40% 0.41% 0.41% 0.40% 0.40%
Portfolio turnover rate .......................... 26%** 39% 35% 50% 75% 35%
- ----------
* Annualized
** Not Annualized
(1) Audited by other auditors
(2) Net investment income per share before reimbursement by the
sub-administrator for the six months ended September 30, 1997 and the fiscal
years ended March 31, 1997, 1996 and 1995 was $0.32, $0.64, $0.66 and $0.65,
respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL BOND FUND
GALAXY FINANCIAL HIGHLIGHTS
FUND II FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
SIX MONTHS ENDED YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 ----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1)(2)
------------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period .................. $10.15 $10.20 $ 9.94 $ 9.89 $10.00
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income(3) ............................ 0.23 0.47 0.46 0.46 0.43
Net realized and unrealized gain (loss) on
investments ....................................... 0.28 (0.05) 0.26 0.05 (0.11)
------ ------ ------ ------ ------
Total from Investment Operations ................ 0.51 0.42 0.72 0.51 0.32
------ ------ ------ ------ ------
Less Dividends:
Dividends from net investment income ................ (0.23) (0.47) (0.46) (0.46) (0.43)
Dividends from net realized capital gains ........... -- -- -- -- --
------ ------ ------ ------ ------
Total Dividends ................................. (0.23) (0.47) (0.46) (0.46) (0.43)
------ ------ ------ ------ ------
Net Increase (decrease) in net asset value ............ 0.28 (0.05) 0.26 0.05 (0.11)
------ ------ ------ ------ ------
Net Asset Value, End of period ........................ $10.43 $10.15 $10.20 $ 9.94 $ 9.89
====== ====== ====== ====== ======
Total Return .......................................... 5.12%** 4.15% 7.36% 5.34% 3.10%**
Ratios/Supplemental Data:
Net assets, End of period (in 000's) .................. $19,588 $19,921 $22,478 $24,560 $33,352
Ratios to average net assets:
Net investment income including reimbursement ....... 4.54%* 4.57% 4.54% 4.72% 4.35%*
Operating expenses including reimbursement .......... 0.60%* 0.60% 0.60% 0.60% 0.60%*
Operating expenses excluding reimbursement .......... 0.60%* 0.60% 0.61% 0.63% 0.60%*
Portfolio turnover rate ............................... 9%** 7% 2% 47% 56%**
- ----------
* Annualized.
** Not Annualized.
(1) Audited by other auditors
(2) The Fund commenced operations on April 15, 1993.
(3) Net investment income per share before reimbursement by the
sub-administrator for the six months ended September 30, 1997 and the
fiscal years ended March 31, 1997, 1996 and 1995 was $0.23, $0.47, $0.46
and $0.46, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
GALAXY
FUND II NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION:
Galaxy Fund II ("Galaxy II" or the "Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end
investment company. As of the date of this report, the Trust offered five
managed investment portfolios. The accompanying financial statements and
financial highlights are those of the Large Company Index Fund, the Small
Company Index Fund, the Utility Index Fund, the U.S. Treasury Index Fund, and
the Municipal Bond Fund (individually a "Fund," collectively the "Funds").
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 Trust in the preparation of its
financial statements.
PORTFOLIO VALUATION: Listed investment securities are valued by an independent
pricing service approved by the Trust's Board of Trustees at the last quoted
sale price on the principal exchange where such securities are traded. Unlisted
securities or listed securities for which last sales prices are not available
are valued at the closing bid price in the principal market where such
securities trade. U.S. Government securities (other than short-term investments)
are valued at the mean of the quoted bid and asked prices in the
over-the-counter market. Debt securities of U.S. issuers (other than U.S.
Government securities and short-term securities), including municipal
securities, are valued at the mean between the quoted bid price and the asked
price. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which approximates market value. Futures contracts are valued at
the settlement price established each day by the board of trade or exchange on
which they are traded.
Investments for which market quotations are not readily available are valued
based on fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
FUTURES CONTRACTS: Each Fund, except the U.S. Treasury Index Fund, may enter
into futures contracts for the delayed delivery of securities at a fixed price
at some future date or the change in the value of a specified financial index
over a predetermined time period. Cash or securities are deposited with brokers
in order to establish and maintain a position. Subsequent payments made or
received by the Fund based on the daily change in the market value of the
position are recorded as unrealized gains or losses until the contract is closed
out, at which time the gains or losses are realized.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted
for on a trade date basis. Net realized gains or losses on sales of securities
are determined on the identified cost method. Interest income and expenses are
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income are declared daily and paid monthly for the U.S. Treasury Index Fund and
the Municipal Bond Fund, declared and paid quarterly for the Utility Index Fund
and declared and paid annually for the Small Company Index Fund and the Large
Company Index Fund. 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
of 1986, as amended. By so qualifying, each Fund will not be subject to federal
income taxes to the extent that it distributes substantially all of its taxable
or tax-exempt income, if any, for its tax year ending March 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 tax provision is
recorded.
3. SHARES OF BENEFICIAL INTEREST:
The Trust's Declaration of Trust authorizes the Trust to issue an unlimited
number of shares of beneficial interest, with $0.001 par value. The Trust's
shares are classified into five series.
4. INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS:
The Trust and Fleet Investment Advisors Inc. (the "Investment Adviser"), an
indirect wholly-owned subsidiary of Fleet Financial Group, Inc., are parties to
an investment advisory agreement under which the Investment Adviser provides
advisory services for a fee, computed daily and paid monthly, at the annual
rate of 0.10% of the average daily net assets of the Large Company Index, Small
Company Index, Utility Index and U.S. Treasury Index Funds, and 0.25% of the
average daily net assets of the Municipal Bond Fund.
The Trust and Fleet National Bank (the "Administrator") are parties to an
administration agreement. Under the agreement, the Administrator pays all
expenses of the Funds, except the fees and expenses of the Trustees who are not
interested persons of the Trust, brokerage fees and commissions, interest on
borrowings, taxes and such extraordinary, non-recurring expenses as may arise,
including litigation, to which the Trust may be a party. For its services as
administrator, the Administrator receives a fee at an annual rate of 0.30% of
the average daily net assets of each of the Large Company Index, Small Company
Index, Utility Index and U.S. Treasury Index Funds, and 0.35% of the average
daily net assets of the Municipal Bond Fund.
The Administrator has entered into a sub-administration agreement with First
Data Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation ("First Data"), under which Investor
Services Group provides administrative, accounting and transfer agent services
to the Trust. The Administrator bears the fees of Investor Services Group for
serving in this capacity.
First Data Distributors, Inc., a wholly-owned subsidiary
of Investor Services Group and an indirect wholly-owned subsidiary of First
Data, acts as the exclusive distributor of the Trust's shares.
Certain officers of the Trust may be officers of Investor Services Group and/or
First Data Distributors, Inc.. Such officers receive no compensation from the
Trust for serving in their respective roles. No officer, director or employee of
the Investment Adviser serves as an officer, Trustee or employee of the Trust.
Effective November 1, 1996, each Trustee is entitled to receive for services as
a Trustee of the Trust, The Galaxy Fund ("Galaxy") and The Galaxy VIP Fund
("VIP") an aggregate fee of $29,000 per annum plus certain other fees for
attending or participating in meetings as well as reimbursement for expenses
incurred in attending meetings. The Chairman of the Boards of Trustees and the
President and Treasurer of the Trust, Galaxy and VIP are also entitled to
additional fees for their services in these capacities. These fees are allocated
among the funds of the Trust, Galaxy and VIP based on their relative net assets.
Prior to October 31, 1996, each Trustee was entitled to receive for services as
a Trustee of the Trust a fee of $5,000 per annum plus certain other fees for
attending or participating in meetings as well as reimbursement for expenses
incurred in attending meetings.
In addition, effective March 1, 1996, each Trustee became eligible to
participate in the Trust's Deferred Compensation Plan (the "Plan"), an unfunded,
nonqualified deferred compensation plan. The Plan allows each Trustee to defer
receipt of all or a percentage of fees that would otherwise be payable for
services performed. Effective January 1, 1997, the Plan was merged into a
combined Deferred Compensation Plan for the Trust, Galaxy and VIP.
Investor Services Group voluntarily agreed to reimburse the funds for Trustees'
fees so that total expenses will not exceed certain expense limitations.
Investor Services Group at its discretion may revise or discontinue the
voluntary expense reimbursement at any time.
5. SECURITIES TRANSACTIONS:
The cost of purchases and the proceeds from sales of securities (excluding
short-term investments and futures contracts) for the six months ended September
30, 1997 for each Fund were as follows:
<TABLE>
<CAPTION>
U.S. Government Other Investment
Securities Securities
----------------------- -------------------------------
Purchases Sales Purchases Sales
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Large Company Index .......... $ -- $ -- $ 68,908,450 $ 2,617,205
Small Company Index .......... -- -- 300,927,193 280,338,350
Utility Index ................ -- -- 33,920,255 36,953,177
U.S. Treasury Index .......... 28,048,343 30,095,573 -- --
Municipal Bond ............... -- -- 1,825,925 2,688,173
</TABLE>
The aggregate cost, gross unrealized appreciation and depreciation and net
unrealized appreciation (depreciation) for all securities at September 30, 1997
for each Fund were as follows:
<TABLE>
<CAPTION>
Cost Appreciation (Depreciation) Net
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large Company Index .................... $330,362,802 $199,036,706 $(3,867,840) $195,168,866
Small Company Index .................... 334,187,075 72,992,066 (5,983,653) 67,008,413
Utility Index .......................... 44,624,969 3,359,004 (516,653) 2,842,351
U.S. Treasury Index .................... 108,474,713 2,985,042 (507,525) 2,477,517
Municipal Bond ......................... 19,188,978 809,629 (195) 809,434
</TABLE>
During the fiscal year ended March 31, 1997, the Large Company Index Fund, the
Small Company Index Fund and the Utility Index Fund made distributions from
long-term capital gains of $4,930,176, $16,084,089 and $2,272,644, respectively.
At March 31, 1997, the following Funds had capital loss carryforwards:
Capital loss Expiration
Carryforward Date
--------------- ----------
U.S. Treasury Index ..... $ 4,601,076 2003
548,015 2004
Municipal Bond .......... 789,593 2003
203,341 2004
6. FINANCIAL INSTRUMENTS:
The Large Company Index, Small Company Index and Utility Index Funds may enter
into stock index futures contracts that are traded on a national exchange. These
Funds will enter into stock index futures contracts only for bona fide hedging
purposes or as otherwise permitted by the Commodities Futures Trading Commission
("CFTC"). If permitted, these Funds may use stock index futures to maintain cash
reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs or to seek higher investment returns when a stock index
futures contract is priced more attractively than the securities in the
underlying index. The Municipal Bond Fund may enter into interest rate futures
contracts and municipal bond index futures contracts only for bona fide hedging
purposes or as otherwise permitted by CFTC regulations. In addition, the
Municipal Bond Fund may purchase put or call options on interest rate and
municipal bond index futures contracts, which are traded on a United States
exchange, as a hedge against changes in interest rates, and may enter into
closing transactions with respect to such options to terminate existing
positions. A Fund will segregate assets to cover its commitments on purchased
futures contracts.
Risks associated with using financial instruments such as futures as a hedge
include an imperfect correlation between the movements in the price of the
instruments and the price of the underlying securities and interest rates, an
illiquid secondary market for the instruments or the inability of counterparties
to perform under the terms of the contract.
7. CONCENTRATION OF CREDIT RISK:
The Utility Index Fund will concentrate its investments in the utility industry.
As a result, the Fund's investments may be subject to greater risk and market
fluctuation than a fund that has securities representing a broader range of
investment alternatives.
8. SHAREHOLDERS MEETING:
At a Special Meeting of Shareholders of the Small Company Index Fund and the
Utility Index Fund held on May 9, 1997, shareholders approved (i) the change of
the index stated in the investment objective of the Small Company Index Fund to
the Standard & Poor's Small Cap 600 Index and (ii) the change of the index
stated in the investment objective of the Utility Index Fund to the Standard &
Poor's Utility Index. The results of the shareholder voting were as follows:
Shares Shares Shares Shares of
For Against Abstaining Broker Non-Votes
--------- ------- ---------- ----------------
Small Company Index Fund ... 6,848,626 271,148 115,887 0
Utility Index Fund ......... 2,089,828 77,925 49,091 0
Capital gains resulting from changes in securities holdings will be distributed
to shareholders in 1997 to the extent not offset by other realized losses.
<PAGE>
------------------
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P.O. Box 5108 U. S. POSTAGE PAID
Westborough, MA 01581-5108 PERMIT NO. 105
NORTH READING, MA
------------------
FN-346 (11/97) Date of first use: December 1, 1997
