Galaxy Variable Annuity
GALAXY VIP FUNDS
Semi-Annual Report
June 30, 1999
[LOGO] Galaxy Funds
<PAGE>
Chairman's Message
Dear Variable Annuity Policyholder:
Enclosed is the semi-annual report for The Galaxy VIP Fund for the six
months ended June 30, 1999. The report includes a Market Overview that describes
the economic and market changes that occurred during the period and how those
changes may have affected your returns. Following the Market Overview are
individual portfolio reviews that describe how Fleet Investment Advisors Inc.
and Columbia Management Co. managed Fund assets in this environment. Financial
statements for each portfolio and a list of each portfolio's investments as of
June 30, 1999 appear at the end of the report.
A brightening in the economic outlook during the reporting period pushed
stock prices sharply higher. With greater confidence in the economy, investors
shifted from the large-cap stocks that had led the market's advance for many
quarters into stocks of small- and mid-sized firms and issues with greater
economic sensitivity. Bond prices fell in this environment, due to heightened
concern about inflation, with some sectors losing more ground than others. As in
previous market transitions, experienced investors held to their long-term
strategies and kept their portfolios well diversified.
During this time, Fleet Investment Advisors Inc. has worked with us to
expand the information we provide to our shareholders. By giving you more
information that is easier to access, we hope to help you manage current market
conditions more effectively and develop investment plans that bring you closer
to your financial goals.
At the end of 1998, we launched The Galaxy, America's first mutual fund
newspaper. Sent to more than 200,000 retail shareholders of the Galaxy Fund
family, this quarterly publication provides in-depth coverage of key market
trends, investment issues, and planning tools. There are also interviews with
Galaxy Fund portfolio managers, as well as announcements of new products and
services for shareholders.
In addition, we are expanding our web site (www.galaxyfunds.com). The
revised site -- which should be completed by the end of this summer -- will
include more educational articles, interactive services, and market reports.
Shareholders will also be able to access many of the articles from The Galaxy on
the site.
We hope these new shareholder services will help you make the most of your
Galaxy VIP Fund investments. We encourage you to contact us for any additional
information you may need, including questions about the material in this report,
by calling the Galaxy Information Center toll-free at 1-877-BUY-GALAXY
(1-877-289-4252). You can also visit a Senior Financial Consultant* located at
Fleet Bank branches, or consult your financial advisor.
Sincerely,
/s/ Dwight E Vicks, Jr.
Dwight E Vicks, Jr.
Chairman of the Board of Trustees
The Galaxy VIP Fund
* Senior Financial Consultants are registered representatives of FIS Securities,
Inc. or Fleet Enterprises Inc. (members NASD/SIPC), which are Fleet Bank
affiliates.
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Mutual Funds:
o are not bank deposits
o are not FDIC insured
o are not obligations of Fleet Bank
o are not guaranteed by Fleet Bank
o are subject to investment risk including possible loss of principal amount
invested
- --------------------------------------------------------------------------------
This report relates to the Sub-Accounts of American Skandia Life Assurance
Corporation Variable Account E. The underlying mutual fund portfolios in which
the Sub-Accounts invest include the following portfolios of The Galaxy VIP Fund:
Money Market Fund, Equity Fund, Growth and Income Fund, Small Company Growth
Fund, Columbia Real Estate Equity Fund II, Asset Allocation Fund, High Quality
Bond Fund and Columbia High Yield Fund II. This report relates to The Galaxy
VIP Fund only.
<PAGE>
"After growing at an annualized rate of 6% in the fourth quarter of 1998, the
gross domestic product ("GDP"), which measures the output of U.S. goods and
services, improved at an unexpectedly strong rate of 4.3% in the first quarter
of 1999."
Market Overview
Market Overview
By Fleet Investment Advisors Inc.
After falling sharply in the fall of 1998, stock prices advanced strongly
in the first six months of 1999. Prices improved as economic growth remained
unexpectedly robust at home and overseas economies continued to stabilize.
Although investors maintained their preference for large-cap growth stocks early
in the period, they later recognized the significant value available in small-
and mid-cap shares and stocks in economically sensitive "cyclical" sectors.
During the reporting period, the Standard & Poor's 500 Index ("S&P 500 Index"),
which represents large-cap stocks, earned a total return of 12.38%. The Russell
2000 Index ("Russell 2000"), which represents small-cap stocks, earned a total
return of 9.28%.
Because continued economic strength heightened concerns about inflation and
a rise in interest rates, bond prices fell during the period. Bonds also
suffered as some fixed-income investors shifted into stocks. For the six-month
period ended June 30, 1999, the Lehman Brothers Government/Corporate Bond Index
had a total return of -2.27%.
A New Economic Optimism
After growing at an annualized rate of 6% in the fourth quarter of 1998,
the gross domestic product ("GDP"), which measures the output of U.S. goods and
services, improved at an unexpectedly strong rate of 4.3% in the first quarter
of 1999. Heavy consumer spending remained the driving force behind the high
level of growth, encouraged in part by four years of record gains for U.S.
stocks.
With positive economic signals, including an inflation rate of 1.5%,
investors largely ignored a continued weakness in corporate earnings. Investors
were also cheered by increased stability in economies overseas. In this
environment, the S&P 500 Index gained nearly 5% in the first quarter of 1999.
Most of the gain came from an ever-narrowing group of large-company shares,
however. Despite attractive prices versus company earnings, stocks of most
smaller companies also remained out of favor, leaving the Russell 2000 with a
loss of -5.4% for the quarter.
For bond investors, the news of continued economic strength raised concerns
of higher inflation and interest rates. Following a total cut in short-term
rates of 75 basis points (0.75%) by the end of 1998, investors worried that the
monetary policy of the Federal Reserve (the "Fed") might be too loose. Although
inflation remained low, investors also feared that strong growth would put
further pressure on a tight labor market, forcing wages and inflation to rise.
With expectations that the Fed might boost short-term interest rates to preempt
future inflation, bond prices began to fall. By the end of the first quarter,
lower prices had driven the yield for 30-year Treasury bonds from 5.09% to
5.63%.
As a better economic picture eased the "flight to quality" of 1998,
investors shifted from Treasuries into higher-yielding mortgage-backed
securities and corporate bonds. Corporate bonds issued by firms in "cyclical"
industries that can especially benefit from strong economic growth performed
particularly well. The performance of mortgage-backed securities was enhanced as
rising interest rates reduced the risk of home-loan prepayments.
Economic optimism continued in the second quarter of 1999; with reports of
a 29-year low in unemployment, a continued rise in personal income and spending,
and gains in productivity and industrial production. Although inflation rose to
a rate of 2.2% for the first six months of the year, investors recognized that
the increase was due largely to gains in energy prices for April. Stock prices
advanced sharply in this environment, giving the S&P 500 Index a total return of
7.1% for the quarter. With better prospects for corporate earnings, investors
began to trade expensive stocks of large-cap growth firms for shares of small-
and mid-sized companies that offered better value. This rotation gave small-cap
stocks in the Russell 2000 an exceptional total return of 15.6% for the quarter.
Stocks in cyclical sectors also outperformed.
2
<PAGE>
"Domestically, the current economic expansion, now eight years old, represents
the longest continuous period of growth in 30 years. Although economies abroad
have stabilized, there are still many problems that could keep a lid on U.S.
exports. At the same time, it seems unlikely that U.S. consumers can continue to
spend more than they earn."
As investors became increasingly convinced that the Fed would have to raise
short-term interest rates to curb inflation, bond prices fell further. By June
30, when the Fed boosted rates by 25 basis points (0.25%), the yield for 30-year
Treasuries stood at 5.96%, having peaked at 6.16% several weeks before. After
worrying that several rate hikes might be needed, investors were calmed by the
Fed's announcement that it did not expect further hikes any time soon.
In a reverse of first-quarter trends, Treasuries outperformed corporates in
the second quarter. While supplies of corporates remained strong, supplies of
Treasuries continued to shrink due to a federal budget surplus. This left
returns for government bonds close to those for corporates for the six-month
reporting period. Mortgage-backed securities continued to perform well,
benefiting further from a reduced risk of loan prepayments.
Adjusting to Stronger Growth
As demand for stocks broadened into sectors that had been previously
ignored, where appropriate we continued to sell holdings of the Galaxy VIP
equity portfolios that had performed well and to add shares with better
performance potential. As always, we tended to focus on quality companies with
strong prospects for earnings growth and reasonable prices. With increased
demand for economically sensitive issues, we added investments in cyclical
shares in some portfolios.
The improved economic outlook also encouraged us to add selected
investments in corporate bonds, including debt from cyclical sectors. Because
prices for mortgage-backed securities and issues of U.S. government agencies
were also quite attractive, we increased investments in those issues.
Slower Growth Likely
At least one more 25-basis point rate hike may be needed in coming months
if continued economic strength suggests a sustained rise in inflation.
Eventually, however, growth should slow to a more moderate pace in the second
half of 1999, keeping the increase in the GDP below 3%. Domestically, the
current economic expansion, now eight years old, represents the longest
continuous period of growth in 30 years. Although economies abroad have
stabilized, there are still many problems that could keep a lid on U.S. exports.
At the same time, it seems unlikely that U.S. consumers can continue to spend
more than they earn.
Because many domestic stocks remain at high valuations relative to expected
earnings, any reduction in earnings forecasts could prompt a market correction.
Because the long-term prospects for stocks remain bright, a correction could
provide new investment opportunities for the Galaxy VIP equity portfolios. These
opportunities could be particularly attractive in small-cap stocks, whose
valuations are still low versus historic norms.
Slower growth should help curb inflation, prevent further hikes in
short-term interest rates, and help bond prices rebound. Bonds should also get
support as the U.S. budget surplus further reduces Treasury supplies. With
30-year Treasury yields near 6% and real (inflation-adjusted) yields near 4%, we
believe that bonds remain a good value for investors.
3
<PAGE>
PERFORMANCE AT-A-GLANCE
<TABLE>
<CAPTION>
GALAXY VIP FUNDS PERFORMANCE AT-A-GLANCE -- AVERAGE ANNUAL TOTAL RETURNS
Periods ended June 30, 1999 6 Months* 1 Year 3 Years 5 Years Life of Fund
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Money Market Fund
(Inception date 2/2/93) 2.23% 4.79% 4.95% 4.99% 4.58%
- ----------------------------------------------------------------------------------------------------------
Equity Fund
(Inception date 1/11/93) 13.16 25.70 25.94 23.42 18.29
- ----------------------------------------------------------------------------------------------------------
Growth and Income Fund
(Inception date 3/4/98) 13.26 17.34 N/A N/A 13.15
- ----------------------------------------------------------------------------------------------------------
Small Company Growth Fund
(Inception date 4/17/98) 9.53 4.16 N/A N/A -1.81
- ----------------------------------------------------------------------------------------------------------
Columbia Real Estate Equity Fund II
(Inception date 3/3/98) 4.42 -4.69 N/A N/A -4.23
- ----------------------------------------------------------------------------------------------------------
Asset Allocation Fund
(Inception date 2/6/93) 3.21 11.15 16.07 16.93 13.23
- ----------------------------------------------------------------------------------------------------------
High Quality Bond Fund
(Inception date 1/21/93) -3.29 1.76 6.65 7.70 5.93
- ----------------------------------------------------------------------------------------------------------
Columbia High Yield Fund II
(Inception date 3/3/98) 0.13 6.49 N/A N/A 7.27
==========================================================================================================
</TABLE>
*Not Annualized
<TABLE>
<CAPTION>
GALAXY VIP FUNDS PRODUCT PERFORMANCE AT-A-GLANCE -- AVERAGE ANNUAL TOTAL RETURNS
(Variable Account E Inception 1/8/93)
Periods ended June 30, 1999 6 Months* 1 Year 3 Years 5 Years Life of Fund
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Money Market Fund 1.94% 4.19% 4.33% 4.39% 3.98%
- ----------------------------------------------------------------------------------------------------------
Equity Fund 12.85 25.01 25.20 22.73 17.64
- ----------------------------------------------------------------------------------------------------------
Asset Allocation Fund 3.43 10.53 15.40 16.28 12.60
- ----------------------------------------------------------------------------------------------------------
High Quality Bond Fund -3.57 1.18 6.04 7.10 5.34
==========================================================================================================
</TABLE>
*Not Annualized
These results reflect the experience of the sub-accounts of Variable
Account E of American Skandia Life Assurance Corporation and include all
management fees and expenses and insurance costs and accordingly will be
different from the performance of the corresponding Galaxy VIP Fund. The
Variable Account E sub-accounts purchase shares of The Galaxy VIP Fund. The
sub-accounts are GAL Money Market, GAL Equity, GAL Asset Allocation, and
GAL High Quality Bond. The performance data quoted represents past
performance and 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. The Advisor and the Administrator
are presently waiving or reimbursing fees for the Galaxy VIP Money Market
Fund, Equity Fund, Asset Allocation Fund and High Quality Bond Fund.
Without such waivers or reimbursements, performance would be lower. An
investment in the Galaxy VIP Money Market Fund is neither insured nor
guaranteed by the FDIC or U.S. Government. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in this Fund.
Past performance is no guarantee of future results. Investment returns and
principal values will vary with market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
Investment Advisor and Administrator are presently waiving fees and/or
reimbursing expenses and may revise or discontinue such practice at any time.
Without such waivers and/or reimbursements, performance would be lower. Total
return figures in this report include changes in share price, reinvestment of
dividends and capital gains distributions and include the deduction of any sales
charges, where applicable, unless otherwise indicated. An investment in the
Galaxy VIP Money Market Fund is neither insured nor guaranteed by the FDIC or
U.S. Government. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, you could lose money by investing in this Fund.
4
<PAGE>
Portfolio Reviews
[PHOTO]
Karen M. Arneil has managed
the Galaxy VIP Money Market
Fund since September 1996. She
has managed money market
investments since 1993.
GALAXY VIP MONEY MARKET FUND
Portfolio Manager
Karen M. Arneil
The Galaxy VIP Money Market Fund seeks as high a level of current income as
is consistent with liquidity and stability of principal.
As changing economic expectations caused money market yields to fluctuate
in the past six months, we emphasized investments with strong credit quality in
the Galaxy VIP Money Market Fund. We also took advantage of special
opportunities to enhance yield that occurred in individual market sectors.
These strategies helped the Fund earn a total return of 2.23% for the six
months ended June 30, 1999, versus a total return of 2.09% for the average of
the money market funds tracked by Lipper Analytical Services ("Lipper"). On June
30, 1999, the Fund had an average maturity of 22 days, a 7-day Securities and
Exchange Commission ("SEC") effective yield of 4.60%, and a 30-day SEC effective
yield of 4.54%.
Adjusting to a Rise in Yields
At the end of 1998, when year-end technical factors increased yields for
issues that matured in the first few months of 1999, we added these securities
to the portfolio. This helped to enhance the Fund's yield at the start of the
reporting period. Due to a flat yield curve for most of the first quarter of
1999, we invested in securities with shorter maturities. As the anticipation of
a rate hike increased, we began investing in issues that matured near the next
Federal Reserve meeting on June 30.
As the June 30th meeting approached, the market had priced in a full
25-basis point increase in interest rates. At this point we added securities
that matured in July and August to pick up extra yield. As always, we focused on
investments with high credit quality and strong liquidity.
Preparing for Yields to Peak
We plan to keep maturities on the short side in the months ahead so that we
can make the most of any further rise in yields. However, we expect to continue
to look for opportunities to buy issues with longer maturities and higher yields
if we feel rates will decline due to slower growth.
Galaxy VIP Money Market Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Repurchase Agreement 2%
U.S. Agency Obligations 27%
Commercial Paper 71%
Galaxy VIP Money Market Fund
7-Day Average Yields
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
An investment in the Galaxy VIP Money Market Fund is neither insured nor
guaranteed by the FDIC or U.S. Government. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in this Fund.
5
<PAGE>
Portfolio Reviews
[PHOTO]
Robert G. Armknecht has
managed the Galaxy VIP Equity
Fund since July 1998. He has
managed equity portfolios for
Fleet Investment Advisors Inc.
since 1988.
GALAXY VIP EQUITY FUND
Portfolio Manager
Robert G. Armknecht
The Galaxy VIP Equity Fund seeks long-term growth by investing in stocks of
companies that Fleet Investment Advisors Inc. believes have the potential for
above-average earnings growth.
As investors moved from large-company growth stocks to shares of smaller
firms in more economically sensitive sectors, the Fund benefited from its
selection of high-quality companies and from overweightings in energy,
semiconductor, and capital goods stocks. This, plus added emphasis on sectors
that performed well during the quarter, helped drive Fund returns higher than
those for its benchmarks.
For the six months ended June 30, 1999, the Fund had a total return of
13.16%. That compares with total returns of 12.38% for the S&P 500 Index and
11.65% for the average of the growth funds tracked by Lipper.
Oil Price Rebound Boosts Returns
During the first quarter of 1999, the Fund enjoyed strong returns from an
overweighted position in energy stocks that rose sharply as oil prices
rebounded. This, plus overweightings in the strongly performing communications
and capital goods sectors, helped offset weaker returns from shares of consumer
cyclical and healthcare firms. At this time, we took profits in certain
technology positions and used the proceeds to upgrade holdings in broadcasting
and communications stocks. We also made several changes within the manufacturing
sector.
The Fund's energy position continued to boost returns in the second
quarter, along with an overweighted position in capital goods stocks. Strong
selectivity in these sectors -- as well as in consumer cyclical, consumer
staples, and financial shares -- further enhanced returns and helped offset
disappointing performance in the healthcare sector. Besides taking additional
profits in the technology sector, we sold shares of airlines and food companies.
These sales allowed us to buy shares of capital goods, consumer electronics,
manufacturing, cable television, and financial firms.
Investors Could Favor Growth Stocks Again
If economic growth and corporate earnings slow in coming quarters, and
stock prices weaken, investors may again favor the enhanced liquidity and
earnings reliability of large-company growth stocks. In the meantime, the Fund
should benefit from its emphasis on stocks that we think have good value,
including shares of energy firms. As in the past, we expect to use any period of
market weakness to make the most of new investment opportunities in issues with
strong potential for long-term growth.
Galaxy VIP Equity Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Other Common Stocks & Net Other Assets and Liabilities 3%
Repurchase Agreement 3%
Consumer Staples 17%
Technology 27%
Energy 9%
Finance 13%
Capital Goods and Construction 14%
Consumer Cyclical 14%
Galaxy VIP Equity Fund
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 1/11/93. The S&P 500 Index is an unmanaged index of 500
leading stocks. Results for the index do not reflect investment management fees
and other expenses incurred by the Fund.
6
<PAGE>
Portfolio Reviews
[PHOTO]
Gregory M. Miller has managed
the Galaxy VIP Growth and
Income Fund since July 1998.
He has managed equity
portfolios for Fleet
Investment Advisors Inc. since
1989.
GALAXY VIP GROWTH AND INCOME FUND
Portfolio Manager
Gregory M. Miller
The Galaxy VIP Growth and Income Fund seeks to provide a relatively high
total return through long-term capital appreciation and current income. The Fund
invests in a diversified portfolio consisting primarily of common stocks
selected through traditional research techniques. The Fund's modest income
orientation is intended to both enhance returns and dampen share price
volatility.
At a time when many stocks were overvalued, the Galaxy VIP Growth and
Income Fund benefited from trading holdings that had performed well for
positions that we believed to have better potential for price gains over time.
Such a strategy proved particularly effective in the second quarter of 1999,
when investors began to favor value-oriented issues, and helped the Fund
outperform its benchmarks for the reporting period.
For the six months ended June 30, 1999, the Fund earned a total return of
13.26%. For the same period, the S&P 500 Index had a total return of 12.38%, and
the average of the growth and income funds tracked by Lipper had a total return
of 10.93%.
Strong Stock Selection
An overweighting in energy stocks and exceptional performance by individual
energy holdings made a large contribution to Fund returns as oil prices
rebounded during the period. In the first quarter of 1999, the Fund also
benefited from the robust returns of its retail and transportation stocks and an
underweighting in the poorly performing utility sector.
Overweightings and strong stock selection in cyclical issues boosted
returns in the second quarter -- along with the Fund's selection of technology
shares, its underweighting in the lesser-performing consumer staples group, and
takeovers involving several positions. These factors helped offset lagging
returns from technology shares in the first quarter and healthcare shares in the
second.
During the period, we used profits from healthcare, capital goods, and
consumer cyclical shares to increase existing positions with greater price
potential, especially shares of consumer staples firms.
New Opportunities
If higher interest rates bring slower growth, weaker earnings, and a stock
price correction, investors may again favor large-cap growth shares. Such a
shift may be tempered, however, by the attractive values still available in
other issues. If prices do weaken, we have cash that we can put to work in new
opportunities. We do not plan major shifts in the portfolio's sector weightings,
but may restructure holdings within certain sectors.
Galaxy VIP Growth and Income Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Repurchase Agreement 10%
Consumer Staples 17%
Consumer Cyclical 9%
Finance 17%
Other Common Stocks, Convertible
Preferred Stocks & Net Other
Assets and Liabilities 18%
Technology 13%
Energy 8%
Capital Goods and Construction 8%
Galaxy VIP Growth and Income Fund
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 3/4/98. The S&P 500 Index is an unmanaged index of 500
leading stocks. Results for the index do not reflect investment management fees
and other expenses incurred by the Fund.
7
<PAGE>
Portfolio Reviews
[PHOTO]
Stephen D. Barbaro has managed
the Galaxy VIP Small Company
Growth Fund since its
inception in April 1998. He
has managed small company
portfolios for Fleet
Investment Advisors Inc., and
its predecessors, since 1977.
GALAXY VIP SMALL COMPANY
GROWTH FUND
Portfolio Manager
Stephen D. Barbaro
The Galaxy VIP Small Company Growth Fund seeks to provide capital
appreciation by investing primarily in the securities of companies with market
capitalizations of $1.5 billion or less.
Despite an underperformance by small company issues early in the reporting
period, the Fund benefited from its ongoing attention to firms with attractive
fundamentals and the discovery by investors of the significant opportunities in
such small company stocks later in the period.
For the six months ended June 30, 1999, the Fund earned a total return of
9.53%. Over the same time period, the average of the small company growth funds
tracked by Lipper had a total return of 8.56%, and the Russell 2000 had a total
return of 9.28%.
Help From Energy, Capital Goods, Communications Shares
In the first quarter of 1999, the Fund enjoyed healthy returns from
investments in semi-conductor and networking stocks, as well as from several
holdings involved in mergers. For the most part, however, investors neglected
most Fund positions in their search for either very rapid earnings growth or
exceptional value. By remaining focused on stocks with sound fundamentals, the
Fund outperformed its benchmarks in the second quarter. Also of benefit during
this time was an increased weighting in energy stocks, which rebounded on rising
prices for oil and natural gas, as well as overweightings in the robust capital
goods and communications sectors.
During the first quarter, we adjusted technology holdings to give less
attention to hardware, service, and general software firms and greater attention
to networking and semi-conductor companies. Due to the rising costs for fuel, we
sold some of the Fund's trucking positions. In the second quarter, we used
profits from selected semi-conductor firms to add stocks of consumer companies
and other firms that could benefit from an improving economic outlook.
Small-Cap Sector Still Has Value
These changes should enhance Fund returns if investors continue to broaden
their holdings. If slower growth narrows market leadership again, the Fund
should benefit from the strong value still available in small-cap shares and
from positions in stocks whose growth potential is not tied to a strong economy.
As always, we would look for any new investment opportunities that a correction
might bring.
Galaxy VIP Small Company Growth Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Other Common Stocks & Net Other Assets and Liabilities 10%
Capital Goods and Construction 8%
Consumer Staples 11%
Repurchase Agreement 9%
Consumer Cyclical 17%
Energy 8%
Technology 37%
Galaxy VIP Small Company Growth Fund
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 4/17/98. The Russell 2000 Index is an unmanaged index of
2000 small company stocks. Results for the index do not reflect investment
management fees and other expenses incurred by the Fund.
8
<PAGE>
Portfolio Reviews
[PHOTO]
David W. Jellison has managed
the Galaxy VIP Columbia Real
Estate Equity Fund II since
its inception in March 1998. A
vice president with Columbia
Management Co., he has served
as a financial analyst and
portfolio manager there since
1992.
GALAXY VIP COLUMBIA
REAL ESTATE EQUITY FUND II
Portfolio Manager
David W. Jellison
The Galaxy VIP Columbia Real Estate Equity Fund II seeks, with equal
emphasis, capital appreciation and above-average current income. The Fund
invests primarily in the equity securities of real estate companies, including
real estate investment trusts (REITs).
For the six months ended June 30, 1999, the Fund had a total return of
4.42%. Over the same period, the National Association of Real Estate Investment
Trusts (NAREIT) Index earned a total return of 4.78% and the average of the real
estate stock funds tracked by Lipper earned a total return of 6.64%.
Emphasis on Larger-Cap Shares
The REIT market struggled early in the year, due to concern over a rapid
rate of new construction that caused fears of oversupply and an expected decline
in the growth of project cash flows. These fears were somewhat allayed by
healthy business trends that helped keep the demand for space in balance with
supply. REIT shares also benefited as publicly traded REITs sold at prices that
were lower than the value of their underlying property, which encouraged
managements to sell individual holdings and use the proceeds to repurchase their
stock.
REITs began to recover in April, as investors shifted away from larger-cap
growth stocks to shares with more reasonable prices and greater appreciation
potential. Investor confidence received an added boost when public filings with
the SEC revealed that acclaimed financier Warren Buffet had taken a personal
stake in two REIT stocks. Reports showing some abatement in new construction
also made REITs more attractive.
The Fund's emphasis on REITs with larger capitalizations helped it
outperform its market benchmarks in the first quarter of 1999 -- when investors
still favored large-cap stocks generally. Strong performances by several
individual issues further enhanced returns at this time. The focus on larger
REITs caused the Fund to lag its market benchmark slightly in the second
quarter, when investors moved into smaller-cap shares.
Throughout the period, the Fund focused its holdings on equity REITs, which
invest in property directly and derive income from rents and lease payments.
During the quarter, we took profits in a REIT that holds lodging properties and
added a REIT from the office sector.
Positive Trends Should Continue
The rebound in REITs supports our belief that the real estate market offers
earnings growth in the high single digits, plus a dividend yield near 7%. Even
if growth moderates in coming months, we expect the healthy balance between
property supply and demand to continue. The Fund could also benefit as slower
growth renews investor interest in REITs with larger capitalizations -- due to
their greater liquidity, geographic diversity, and management experience.
Galaxy VIP Columbia Real Estate Equity Fund II
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment Company & Net Other Assets and Liabilities 3%
Real Estate 97%
Galaxy VIP Columbia Real Estate Equity Fund II
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 3/3/98. The NAREIT Index is an unmanaged index of all tax
qualified REITs listed on the New York Stock Exchange, the American Stock
Exchange and the NASDAQ which have 75% or more of their gross invested book
assets invested directly or indirectly in the equity ownership of real estate.
Only common shares issued by a REIT are included in this market weighted index
which includes dividends in the month based upon their payment date. Results for
the NAREIT Index do not reflect the investment management fees and other
expenses incurred by the Fund.
9
<PAGE>
Portfolio Reviews
[PHOTO]
Donald Jones has managed the
Galaxy VIP Asset Allocation
Fund since its inception in
1993. He has managed
investment portfolios for
Fleet Investment Advisors
Inc., and its predecessors,
since 1988.
GALAXY VIP ASSET ALLOCATION FUND
Portfolio Manager
Donald Jones
The Galaxy VIP Asset Allocation Fund seeks a high total return by providing
both a current level of income that is greater than that provided by popular
stock market averages, and long-term growth in the value of its assets. The Fund
invests in a diversified portfolio of equity, bond, and short-term obligations.
When investors favored large-company growth shares early in the reporting
period, the Fund benefited from its emphasis on those issues. When investors
then moved to stocks of smaller, value-oriented firms, however, these
investments curbed performance and caused the Fund to lag its benchmarks
somewhat for the period as a whole.
For the six months ended June 30, 1999, the Fund earned a total return of
3.21%. That compares to a total return of 6.24% for the average of the flexible
funds tracked by Lipper. The S&P 500 Index, which tracks the performance of
stocks only, earned a total return of 12.38% during the same time.
Continued Focus on Growth
In the first quarter of 1999, the Fund benefited from an overweighting in
the strongly performing consumer staples and technology sectors and from
underweightings in the lesser-performing cyclical groups. The Fund's technology
stocks and consumer staples stocks, especially drug shares, then underperformed
in the second quarter. These disappointments were partially offset, however, by
additions of capital goods shares that outperformed. During the period, we also
added shares of money-center banks and Internet firms, as well as shares of
other positions that we think have strong growth potential.
Throughout the period, we kept about 40% of the portfolio in bonds. This
helped to stabilize returns when a less certain economic outlook caused stock
prices to fluctuate in the first quarter but reduced returns as bond prices fell
in the second quarter. During the period, we increased investments in
mortgage-backed securities, which outperformed, and found attractive
opportunities in corporate issues.
Positioned for Slower Growth
Because investors could return to the greater liquidity and earnings
reliability of large-cap growth stocks if growth slows, we plan to maintain the
Fund's emphasis on growth shares. If stock prices correct, we have cash reserves
that we could deploy to new opportunities. Because slower growth should
eventually help bond prices rebound, especially higher-quality issues, we expect
to maintain the 40% weighting in bonds -- with sizable investments in government
securities.
Galaxy VIP Asset Allocation Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Asset-Backed and Mortgage-Backed Securities 1%
Common Stocks and Convertible Preferred Stock 48%
Corporate Notes and Bonds 16%
Repurchase Agreement & Net Other Assets and Liablities 13%
U.S. Government and Agency Obligations 22%
Galaxy VIP Asset Allocation Fund
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 2/6/93. The S&P 500 Index is an unmanaged index of 500
leading stocks. Results for the index do not reflect investment management fees
and other expenses incurred by the Fund.
10
<PAGE>
Portfolio Reviews
[PHOTO]
Marie Schofield has managed
the Galaxy VIP High Quality
Bond Fund since March 1996. Ms
Schofield has been with Fleet
Investment Advisors Inc. since
1991 and has managed
fixed-income assets since
1975.
GALAXY VIP HIGH QUALITY BOND FUND
Portfolio Manager
Marie Schofield
The Galaxy VIP High Quality Bond Fund seeks a high level of current income
consistent with the prudent risk of capital. The Fund invests primarily in U.S.
government securities and corporate issues rated in the four highest
credit-rating categories by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poors. Ratings Group ("S&P"), with at least 65% of total assets
invested in issues rated in the two highest rating categories or unrated issues
of comparable quality.
For the six months ended June 30, 1999, the Fund returned -3.29%. That
compares to returns of -2.28% for the Lehman Brothers Government/Corporate Bond
Index and -2.43% for the average of the A-rated corporate bond fund tracked by
Lipper. On June 30, 1999, the Fund had a 30-day SEC yield of 5.67%.
Investment Strategy
As corporate, asset-backed, and mortgage-backed securities outperformed
Treasuries early in 1999, the Fund benefited from continued additions of
investments in these sectors. The higher yields of such securities, along with
those from issues of U.S. government agencies that we added, provided some
measure of protection for Fund returns as interest rates rose and bond prices
fell during the period.
Over this time we increased the Fund's allocation for corporate bonds from
25% to 40% -- concentrating our purchases on higher-rated issues in the utility,
telecommunications, and industrial groups while avoiding the financial area.
Additions of mortgage-backed securities increased the allocation in that sector
from 14% to 20%, the highest concentration in some time. To make these changes
we sold intermediate-term Treasuries, reducing the Fund's position in Treasuries
from 48% to 27%.
At the end of 1998, as the yield for 30-year Treasuries fell below 5%, we
had shortened the Fund's duration to less than one-quarter year longer than that
for its benchmark. As Treasury yields rose in 1999, we lengthened the duration
in both the first and second quarters. This left the Fund with a duration that
was about three-quarters of a year longer than that for its benchmark when the
period ended. While the longer duration positions the Fund to benefit from
declines in interest rates that could occur if economic growth slows in the
second half of 1999, as we expect, it caused the Fund to underperform its
benchmark during the reporting period.
Looking Ahead
Recent evidence confirms our belief that fears of much higher inflation
have been exaggerated. The Fed's shift to a neutral bias portends some stability
over the short term as members weigh the effects of their recent rate hike and
scrutinize upcoming data. As the year progresses, we will continue to monitor
inflation prospects carefully. Although we are currently comfortable with the
Fund's sector allocation, changes in the global environment or our domestic
economy as we approach the new millenium may prompt a shift in our allocation
strategy.
Galaxy VIP High Quality Bond Fund
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Mortgage-Backed Securities 19%
Asset-Backed Securities 7%
Repurchase Agreement & Net Other Assets and Liabilities 3%
U.S. Government and Agency Obligations 32%
Corporate Notes and Bonds 39%
Galaxy VIP High Quality Bond Fund
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 1/21/93. The Lehman Brothers Government/ Corporate Bond
Index is an unmanaged index of U.S. Treasury obligations and the debt of U.S.
Government agencies as well as all publicly issued, fixed rate, non-convertible
investment grade dollar-denominated, SEC-registered corporate debt. Results for
the index do not reflect investment management fees and other expenses incurred
by the Fund.
11
<PAGE>
Portfolio Reviews
[PHOTO]
Jeffrey L. Rippey has managed
the Galaxy VIP Columbia High
Yield Fund II since its
inception in March 1998. A
vice president of Columbia
Management Co. Mr. Rippey has
managed fixed income
portfolios since 1981.
GALAXY VIP COLUMBIA HIGH YIELD FUND II
Portfolio Manager
Jeffrey L. Rippey
The Galaxy VIP Columbia High Yield Fund II seeks a high level of current
income with a secondary objective of capital appreciation. The Fund invests
primarily in high-yielding corporate bonds rated BB or lower by S&P or Ba or
lower by Moody's ("junk bonds"), with no more than 10% of its assets in bonds
rated below B.
During the six months ended June 30, 1999, the Fund had a total return of
0.13%. That compares to total returns of -1.37% for the Lehman Brothers
Aggregate Bond Index and 3.57% for the average of the high-yield bond funds
tracked by Lipper. On June 30, the Fund had a 30-day SEC yield of 7.67%.
Lowest Quality Issues Outperform
As the economic outlook improved in the first half of 1999, and the "flight
to quality" that had dominated 1998 eased, investors flocked to the attractive
income and prices offered by high-yielding bonds. In this environment,
lower-quality junk bonds outperformed junk bonds of higher credit quality.
Lower-quality junk bonds also benefited from tighter supplies, which put upward
pressure on their prices. Because the Galaxy VIP Columbia High Yield Fund II
focuses on junk bonds of higher quality, it underperformed the average of the
high-yield bond funds tracked by Lipper.
During the period, we added bonds issued by a telecommunications firm. As
the recent increase in oil prices improved the fundamentals of the energy
sector, we increased the portion of energy holdings in the portfolio from 4.2%
to 7.3%.
Positioned for Slower Growth
After the recent gains for high-yield issues, the spreads between yields
for high-yield bonds and Treasuries have moved closer to their historic average.
We believe, however, that high-yield bonds continue to offer good value in the
current investment environment. Even if growth moderates, the economy should
remain strong enough to sustain a healthy demand for these issues. If slower
economic growth makes investors somewhat less willing to accept credit risk, the
Galaxy VIP Columbia High Yield Fund II should benefit from its emphasis on
high-yield bonds with better credit ratings.
Galaxy VIP Columbia High Yield Fund II
Distribution of Total Net Assets as of June 30, 1999
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Government Obligation & Net Other Assets and Liabilities 2%
Investment Company 2%
Corporate Notes and Bonds 96%
Galaxy VIP Columbia High Yield Fund II
Growth of $10,000 investment*
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[PLOT POINTS TO COME]
* Since inception on 3/3/98. The Lehman Brothers Aggregate Bond Index is an
index composed of treasury issues, agency issues, corporate bond issues and
mortgage-backed securities. Results for the index do not reflect investment
management fees and other expenses incurred by the Fund.
12
<PAGE>
Money Market Fund
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
COMMERCIAL PAPER (A) - 71.14%
Consumer Staples - 34.55%
$ 800,000 Anheuser-Busch Cos., Inc.
5.10%, 07/07/99.............................. $ 799,320
750,000 Coca-Cola Enterprises, Inc.
4.88%, 07/12/99.............................. 748,882
750,000 DaimlerChrysler Corp. of North America
4.78%, 07/19/99.............................. 748,207
800,000 Gillette Co.
5.65%, 07/01/99 (B).......................... 800,000
750,000 Heinz (H.J.) Co.
4.79%, 07/06/99.............................. 749,501
800,000 McDonald's Corp.
5.60%, 07/01/99 (B).......................... 800,000
800,000 Pfizer, Inc.
5.70%, 07/01/99 (B).......................... 800,000
750,000 Sara Lee Corp.
4.80%, 07/01/99.............................. 750,000
------------------
6,195,910
------------------
Finance - 29.47%
750,000 American Express Credit Corp.
4.82%, 07/08/99.............................. 749,297
750,000 Associates Corp. of North America
4.93%, 07/16/99.............................. 748,459
750,000 Ford Motor Credit Co.
4.95%, 07/26/99.............................. 747,422
750,000 General Electric Capital Corp.
4.93%, 08/10/99.............................. 745,892
750,000 National Rural Utilities
Cooperative Finance Corp.
4.82%, 08/05/99.............................. 746,485
800,000 Novartis Financial Corp.
5.75%, 07/01/99 (B).......................... 800,000
750,000 USAA Capital Corp.
4.78%, 07/27/99.............................. 747,411
------------------
5,284,966
------------------
Utilities - 4.18%
750,000 AT&T Corp.
5.10%, 07/09/99.............................. 749,137
------------------
Technology - 2.94%
528,000 Lucent Technologies, Inc.
4.88%, 07/15/99.............................. 526,998
------------------
Total Commercial Paper....................... 12,757,011
------------------
(Cost $12,757,011)
U.S. AGENCY OBLIGATIONS (A) - 27.72%
Federal National
Mortgage Association - 16.60%
$ 1,000,000 4.90%, 08/13/99.............................. 994,147
1,000,000 4.82%, 08/27/99.............................. 992,368
1,000,000 4.97%, 09/15/99.............................. 989,508
------------------
2,976,023
------------------
Federal Home Loan
Mortgage Corporation - 11.12%
1,000,000 4.69%, 07/06/99.............................. 999,349
1,000,000 4.78%, 08/11/99.............................. 994,556
------------------
1,993,905
------------------
Total U.S. Agency Obligations................ 4,969,928
------------------
(Cost $4,969,928)
REPURCHASE AGREEMENT - 1.90%
340,000 State Street Bank
4.70%, 07/01/99, dated 06/30/99
Repurchase Price $340,044
(Collateralized by U.S. Treasury Note
8.50%, due 12/15/20;
Total Par $275,000
Market Value $358,606)....................... 340,000
------------------
Total Repurchase Agreement................... 340,000
------------------
(Cost $340,000)
Total Investments - 100.76%....................................... 18,066,939
------------------
(Cost $18,066,939)
Net Other Assets and Liabilities - (0.76)%........................ (135,553)
------------------
Net Assets - 100.00%.............................................. $ 17,931,386
==================
</TABLE>
- ----------
(A) Discount yield at time of purchase.
(B) Securities exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended. These securities may only be resold, in
transactions exempt from registration, to qualified buyers. At June 30,
1999, these securities amounted to $3,200,000 or 17.85% of net assets.
See Notes to Financial Statements.
13
<PAGE>
Equity Fund
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 97.11%
Technology - 27.02%
45,000 American Tower Corp., Class A *.............. $ 1,080,000
15,000 Applied Materials, Inc.*..................... 1,108,125
42,500 Automatic Data Processing, Inc............... 1,870,000
20,000 Cisco Systems, Inc.*......................... 1,286,250
10,000 EchoStar Communications Corp.
Class A *.................................... 1,534,375
30,000 EMC Corp.*................................... 1,650,000
10,000 Hewlett-Packard Co........................... 1,005,000
17,500 Intel Corp................................... 1,041,250
15,000 International Business Machines Corp......... 1,938,750
45,000 Loral Space & Communications, Ltd. *......... 810,000
25,000 Lucent Technologies, Inc..................... 1,685,937
22,000 Maxim Integrated Products, Inc.*............. 1,463,000
20,000 Microsoft Corp. *............................ 1,803,750
14,000 Nokia Corp., Class A, ADR.................... 1,281,875
15,000 Nortel Networks Corp......................... 1,302,188
40,000 PeopleSoft, Inc. *........................... 690,000
21,600 Tellabs, Inc.*............................... 1,459,350
25,500 Teradyne, Inc.*.............................. 1,829,625
10,000 Texas Instruments, Inc....................... 1,450,000
10,000 Unisys Corp. *............................... 389,375
30,000 Xerox Corp................................... 1,771,875
------------------
28,450,725
------------------
Consumer Staples - 16.59%
32,500 Abbott Laboratories.......................... 1,478,750
17,500 American Home Products Corp.................. 1,006,250
25,000 Becton Dickinson & Co........................ 750,000
23,000 Bristol-Myers Squibb Co...................... 1,620,062
45,000 Elan Corp. Plc, ADR*......................... 1,248,750
22,500 Guidant Corp................................. 1,157,344
15,000 Johnson & Johnson............................ 1,470,000
19,000 Lilly (Eli) & Co............................. 1,360,875
35,000 McDonald's Corp.............................. 1,445,937
22,000 Merck & Co., Inc............................. 1,628,000
25,000 PepsiCo, Inc................................. 967,188
8,000 Pfizer, Inc.................................. 878,000
14,000 Procter & Gamble Co.......................... 1,249,500
17,500 Warner-Lambert Co............................ 1,214,062
------------------
17,474,718
------------------
Capital Goods and Construction - 14.05%
17,500 AlliedSignal, Inc............................ 1,102,500
25,000 Dana Corp.................................... 1,151,562
30,000 Federal-Mogul Corp........................... 1,560,000
20,000 Ford Motor Co................................ 1,128,750
25,000 General Electric Co.......................... 2,825,000
10,000 Honeywell, Inc............................... 1,158,750
25,000 Tyco International, Ltd...................... 2,368,750
30,000 United Technologies Corp..................... 2,150,625
25,000 Waste Management, Inc........................ 1,343,750
------------------
14,789,687
------------------
Consumer Cyclical - 13.63%
30,000 AT&T Corp. - Liberty Media Group *........... 1,102,500
20,000 Capstar Broadcasting Corp., Class A*......... 547,500
10,000 Chancellor Media Corp.*...................... 551,250
9,000 Circuit City Stores-Circuit City Group....... 837,000
30,000 Comcast Corp., Class A....................... 1,153,125
40,000 CVS Corp..................................... 2,030,000
16,000 Dayton-Hudson Corp........................... 1,040,000
25,000 Home Depot, Inc.............................. 1,610,938
40,000 Infinity Broadcasting Corp., Class A*........ 1,190,000
20,000 MediaOne Group, Inc. *....................... 1,487,500
25,400 Tandy Corp................................... 1,241,425
46,800 TJX Cos., Inc................................ 1,559,025
------------------
14,350,263
------------------
Finance - 12.95%
15,000 American International Group, Inc............ 1,755,938
45,000 Associates First Capital Corp................ 1,994,062
22,500 Capital One Financial Corp................... 1,252,969
22,500 Chase Manhattan Corp......................... 1,949,063
40,000 Citigroup, Inc............................... 1,900,000
25,000 Fannie Mae................................... 1,709,375
25,000 UNUM Corp.................................... 1,368,750
40,000 Wells Fargo & Co............................. 1,710,000
------------------
13,640,157
------------------
Energy - 9.50%
40,000 Anadarko Petroleum Corp...................... 1,472,500
15,000 Atlantic Richfield Co........................ 1,253,438
30,000 Cooper Cameron Corp.*........................ 1,111,875
30,000 Halliburton Co............................... 1,357,500
25,000 Mobil Corp................................... 2,475,000
15,000 Schlumberger, Ltd............................ 955,312
52,500 Transocean Offshore, Inc..................... 1,378,125
------------------
10,003,750
------------------
Utilities - 2.56%
17,500 AT&T Corp.................................... 976,719
20,000 MCI Worldcom, Inc.*.......................... 1,721,250
------------------
2,697,969
------------------
Basic Materials - 0.81%
12,500 duPont (E.I.) deNemours & Co................. 853,906
------------------
Total Common Stocks.......................... 102,261,175
------------------
(Cost $74,671,754)
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Equity Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
REPURCHASE AGREEMENT - 2.92%
$ 3,081,000 State Street Bank
4.70%, 07/01/99, dated 06/30/99
Repurchase Price $3,081,402
(Collateralized by U.S. Treasury Note
8.50%, due 02/15/20;
Total Par $2,470,000
Market Value $3,220,937)..................... $ 3,081,000
------------------
Total Repurchase Agreement................... 3,081,000
------------------
(Cost $3,081,000)
Total Investments - 100.03%....................................... 105,342,175
------------------
(Cost $77,752,754)
Net Other Assets and Liabilities - (0.03)%........................ (36,341)
------------------
Net Assets - 100.00%.............................................. $ 105,305,834
==================
</TABLE>
- ----------
* Non-income producing security.
ADR American Depositary Receipt
See Notes to Financial Statements.
15
<PAGE>
Growth and Income Fund
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 88.65%
Consumer Staples - 17.44%
2,400 American Home Products Corp.................. $ 138,000
1,600 Anheuser-Busch Cos., Inc..................... 113,500
2,500 Bestfoods.................................... 123,750
6,800 Elan Corp. Plc, ADR*......................... 188,700
2,500 Forest Laboratories, Inc.*................... 115,625
3,000 Genzyme Corp.*............................... 145,500
537 Genzyme Surgical Products*................... 2,366
1,500 Hannaford Brothers Co........................ 80,250
8,000 HEALTHSOUTH Corp.*........................... 119,500
2,700 International Flavors & Fragrances, Inc...... 119,812
1,300 Johnson & Johnson Co......................... 127,400
3,000 McDonald's Corp.............................. 123,938
1,600 Merck & Co., Inc............................. 118,400
2,850 PepsiCo, Inc................................. 110,259
1,500 Pharmacia & Upjohn, Inc...................... 85,219
500 Stryker Corp.*............................... 30,062
1,400 United HealthCare Corp....................... 87,675
------------------
1,829,956
------------------
Finance - 17.37%
2,200 BankAmerica Corp............................. 161,288
2,500 Bank One Corp................................ 148,906
1,900 Chase Manhattan Corp......................... 164,588
1,500 Chubb Corp................................... 104,250
3,400 Citigroup, Inc............................... 161,500
3,000 Countrywide Credit Industries, Inc........... 128,250
1,600 Hartford Financial Services Group, Inc....... 93,300
2,400 Lincoln National Corp........................ 125,550
900 Morgan (J.P.) & Co........................... 126,450
3,000 Standard & Poor's Depositary Receipts........ 411,000
4,600 Wells Fargo & Co............................. 196,650
------------------
1,821,732
------------------
Technology - 13.47%
2,000 Avnet, Inc................................... 93,000
2,000 Cisco Systems, Inc.*......................... 128,625
4,000 Compaq Computer Corp......................... 94,750
1,700 Computer Sciences Corp.*..................... 117,619
2,500 Electronic Data Systems Corp................. 141,406
3,500 Harris Corp.................................. 137,156
1,900 Hewlett-Packard Co........................... 190,950
1,200 International Business Machines Corp......... 155,100
1,600 Motorola, Inc................................ 151,600
1,400 Texas Instruments, Inc....................... 203,000
------------------
1,413,206
------------------
Consumer Cyclical - 9.04%
1,700 Circuit City Stores-Circuit City Group....... 158,100
1,600 Eastman Kodak Co............................. 108,400
3,000 Lowe's Cos., Inc............................. 170,063
8,000 Office Depot, Inc.*.......................... 176,500
2,200 Penny (J.C.) Co., Inc........................ 106,837
4,500 Sherwin-Williams Co.......................... 124,875
5,000 Toys 'R' Us, Inc.*........................... 103,438
------------------
948,213
------------------
Energy - 8.23%
1,250 Atlantic Richfield Co........................ 104,453
4,200 Baker Hughes, Inc............................ 140,700
1,058 BP Amoco Plc................................. 114,793
2,600 Halliburton Co............................... 117,650
2,700 Kerr-McGee Corp.............................. 135,506
1,300 Mobil Corp................................... 128,700
1,900 Schlumberger, Ltd............................ 121,006
------------------
862,808
------------------
Capital Goods and Construction - 8.00%
3,000 Boeing Co.................................... 132,562
2,200 Deere & Co................................... 87,175
1,000 General Electric Co.......................... 113,000
1,200 Honeywell, Inc............................... 139,050
2,200 Hubbell, Inc., Class A....................... 87,725
1,309 Tyco International, Ltd...................... 124,028
2,899 Waste Management, Inc........................ 155,821
------------------
839,361
------------------
Basic Materials - 6.39%
3,600 Crown Cork & Seal, Inc....................... 102,600
2,600 Goodrich (B.F.) Co........................... 110,500
1,300 Minnesota Mining & Manufacturing Co.......... 113,019
5,800 Pall Corp.................................... 128,688
2,500 Praxair, Inc................................. 122,344
2,700 Sigma Aldrich Corp........................... 92,981
------------------
670,132
------------------
Utilities - 5.81%
2,100 AT&T Corp.................................... 117,206
3,100 CenturyTel, Inc.............................. 123,225
1,300 GTE Corp..................................... 98,475
1,800 MCI WorldCom, Inc.*.......................... 154,913
2,000 SBC Communications, Inc...................... 116,000
------------------
609,819
------------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Growth and Income Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
Transportation - 2.90%
1,600 British Airways Plc, ADR..................... $ 114,300
3,300 Burlington Northern Santa Fe Corp............ 102,300
1,500 Union Pacific Corp........................... 87,469
------------------
304,069
------------------
Total Common Stocks.......................... 9,299,296
------------------
(Cost $7,851,128)
CONVERTIBLE PREFERRED STOCK - 0.56%
1,200 Loral Space and
Communications, Ltd., 6.00% (A).............. 58,650
------------------
Total Convertible Preferred Stock............ 58,650
------------------
(Cost $81,318)
Par Value
--------------
REPURCHASE AGREEMENT - 9.87%
$ 1,035,000 State Street Bank
4.70%, 07/01/99, dated 06/30/99
Repurchase Price $1,035,135
(Collateralized by U.S. Treasury Note
8.50%, due 02/15/20;
Total Par $830,000
Market Value $1,082,339)..................... 1,035,000
------------------
Total Repurchase Agreement................... 1,035,000
------------------
(Cost $1,035,000)
Total Investments - 99.08%........................................ 10,392,946
------------------
(Cost $8,967,446)
Net Other Assets and Liabilities - 0.92%.......................... 96,264
------------------
Net Assets - 100.00%.............................................. $ 10,489,210
==================
</TABLE>
- ----------
* Non-income producing security.
(A) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. This security may only be resold, in a
transaction exempt from registration, to qualified institutional buyers. At
June 30, 1999, this security amount to $58,650 or 0.56% of net assets.
ADR American Depositary Receipt
See Notes to Financial Statements.
17
<PAGE>
Small Company Growth Fund
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 91.20%
Technology - 37.01%
520 Able Telcom Holding Corp.*................... $ 3,770
240 Actel Corp. *................................ 3,540
620 Advanced Fibre Communications, Inc. *........ 9,687
300 Advanced Radio Telecom Corp. *............... 4,312
760 Amkor Technology, Inc. *..................... 7,790
110 AnswerThink Consulting Group, Inc. *......... 2,777
70 Applied Micro Circuits Corp. *............... 5,757
119 Ardent Software, Inc. *...................... 2,529
100 Ask Jeeves, Inc. *........................... 1,400
370 Asyst Technologies, Inc. *................... 11,077
440 BancTec, Inc. *.............................. 7,892
760 BEA Systems, Inc. *.......................... 21,707
330 Best Software, Inc. *........................ 5,321
440 BindView Development Corp. *................. 10,450
80 BISYS Group, Inc. *.......................... 4,680
140 Brio Technolgy, Inc. *....................... 2,800
100 Clarent Corp. *.............................. 1,500
440 Clarify, Inc. *.............................. 18,150
260 Cognex Corp. *............................... 8,206
300 Cognizant Technology Solutions Corp. *....... 7,819
260 Complete Business Solutions, Inc. *.......... 4,664
300 Computer Network Technology Corp. *.......... 6,487
20 Concord Communications, Inc. *............... 900
730 Condor Technology Solutions, Inc. *.......... 3,422
110 Cree Research, Inc. *........................ 8,463
570 Deltek Systems, Inc. *....................... 5,629
630 The Descartes Systems Group, Inc. *.......... 3,189
220 Emulex Corp. *............................... 24,461
220 Etec Systems, Inc. *......................... 7,315
85 FactSet Research Systems, Inc................ 4,813
460 Forrester Research, Inc. *................... 11,500
70 Galileo Technology, Ltd. *................... 3,172
330 Genesys Telecommunications
Laboratories, Inc. *......................... 8,250
370 Gentex Corp. *............................... 10,360
150 Great Plains Software, Inc. *................ 7,078
800 H.T.E., Inc. *............................... 2,700
440 Helix Technology Corp........................ 10,532
20 hi/fn, Inc. *................................ 1,522
470 Hyperion Solutions Corp. *................... 8,372
330 ICG Communications, Inc. *................... 7,054
470 IMRglobal Corp. *............................ 9,047
470 International Telecommunication
Data Systems, Inc. *......................... 7,520
680 IntraNet Solutions, Inc. *................... 5,737
60 IONA Technologies Plc, ADR *................. 953
280 Kopin Corp. *................................ 6,703
260 LeCroy Corp. *............................... 6,159
220 Legato Systems, Inc. *....................... 12,705
600 Made2Manage Systems, Inc. *.................. 4,838
360 Mecon, Inc. *................................ 2,700
110 Mercury Interactive Corp. *.................. 3,891
760 META Group, Inc. *........................... 11,685
280 Metro Information Services, Inc. *........... 4,655
480 Millipore Corp............................... 19,470
220 MMC Networks, Inc. *......................... 9,845
150 Optical Coating Laboratory, Inc.............. 12,544
220 PairGain Technologies, Inc. *................ 2,530
390 Pervasive Software, Inc. *................... 9,701
260 PRI Automation, Inc. *....................... 9,425
130 ProBusiness Services, Inc. *................. 4,664
920 ProSoft I-Net Solutions, Inc. *.............. 2,300
130 Qlogic Corp. *............................... 17,160
340 Saville Systems Plc, ADR *................... 4,930
725 SPR, Inc. *.................................. 3,852
340 SPSS, Inc. *................................. 8,734
600 Student Advantage, Inc. *.................... 5,700
560 Tekelec *.................................... 6,825
600 TeleTech Holdings, Inc. *.................... 6,075
720 Tier Technologies, Inc. *.................... 5,040
390 Tollgrade Communications, Inc. *............. 5,948
165 TranSwitch Corp. *........................... 7,817
1,090 TSI International Software, Ltd. *........... 30,929
480 Unitrode Corp. *............................. 13,770
220 Vecco Instruments, Inc. *.................... 7,480
110 Visual Networks, Inc. *...................... 3,520
40 Vitesse Semiconductor Corp. *................ 2,698
220 Whittman-Hart, Inc. *........................ 6,985
710 Zygo Corp. *................................. 8,121
------------------
573,703
------------------
Consumer Cyclical - 16.89%
660 American Classic Voyages Co. *............... 15,840
620 Bally Total Fitness Holding Corp. *.......... 17,592
1,080 Bombay (The) Co., Inc. *..................... 8,302
880 Brass Eagle, Inc. *.......................... 16,500
550 Callaway Golf Co............................. 8,044
220 Carriage Services, Inc., Class A*............ 4,125
440 Cash America International, Inc.............. 5,665
110 Cheap Tickets, Inc. *........................ 4,015
190 Cost Plus, Inc. *............................ 8,645
390 First Years (The), Inc....................... 5,850
750 Funco, Inc. *................................ 13,828
440 Horton (D.R.), Inc........................... 7,315
300 InterTAN, Inc. *............................. 6,150
420 J. Jill Group, Inc. *........................ 6,143
710 Just For Feet, Inc. *........................ 4,571
320 Labor Ready, Inc. *.......................... 10,400
290 Maxim Group (The), Inc. *.................... 2,519
400 Men's Wearhouse (The), Inc. *................ 10,200
190 Oshkosh BOGosh, Inc., Class A................ 4,014
495 Pacific Sunwear of California, Inc. *........ 12,066
330 Pegasus Systems, Inc. *...................... 12,354
1,040 Players International, Inc. *................ 7,475
320 Pre-Paid Legal Services, Inc. *.............. 8,700
1,060 Silverleaf Resorts, Inc. *................... 6,824
550 Steiner Leisure, Ltd. *...................... 16,672
500 Tower Automotive, Inc. *..................... 12,719
490 Travis Boats & Motors, Inc. *................ 7,105
320 Wet Seal (The), Inc., Class A *.............. 9,160
330 World Color Press, Inc. *.................... 9,075
------------------
261,868
------------------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Small Company Growth Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
Consumer Staples - 10.75%
330 Alpharma, Inc., Class A...................... $ 11,736
380 Anesta Corp. *............................... 7,766
440 Aurora Foods, Inc. *......................... 7,700
240 CEC Entertainment, Inc. *.................... 10,140
480 Cytyc Corp. *................................ 9,360
210 Education Management Corp. *................. 4,357
370 FirstService Corp. *......................... 5,642
490 Geltex Pharmaceuticals, Inc. *............... 8,820
490 Isis Pharmaceuticals, Inc.*.................. 4,992
375 King Pharmaceuticals, Inc. *................. 9,703
680 Medaphis Corp. *............................. 3,910
500 Natrol, Inc. *............................... 3,750
130 NCS Healthcare, Inc., Class A *.............. 707
390 Ocular Sciences, Inc. *...................... 6,776
660 Orthodontic Centers of America, Inc. *....... 9,323
200 Osteotech, Inc. *............................ 5,750
100 Priority Healthcare Corp., Class B *......... 3,450
475 Renal Care Group, Inc. *..................... 12,291
330 Rexall Sundown, Inc. *....................... 4,022
330 Sonic Corp. *................................ 10,766
657 US Oncology, Inc. *.......................... 7,889
200 Varian Medical Systems, Inc.................. 5,050
170 Whole Foods Market, Inc. *................... 8,171
95 Xomed Surgical Products, Inc. *.............. 4,625
------------------
166,696
------------------
Capital Goods and Construction - 8.60%
290 AAR Corp..................................... 6,579
440 Aeroflex, Inc. *............................. 8,690
370 Astec Industries, Inc. *..................... 15,077
400 Aviation Sales Co. *......................... 15,800
300 Casella Waste Systems, Inc.*................. 7,800
405 CUNO, Inc. *................................. 7,746
100 Globespan, Inc. *............................ 3,975
140 HEICO Corp................................... 3,482
130 HEICO Corp., Class A......................... 3,152
520 Hexcel Corp. *............................... 5,265
550 Maverick Tube Corp. *........................ 7,666
660 Motivepower Industries, Inc. *............... 11,715
650 NS Group, Inc. *............................. 6,013
1,040 PCD, Inc. *.................................. 11,440
220 RTI International Metals, Inc. *............. 3,231
650 Titanium Metals Corp......................... 7,231
440 Wabash National Corp......................... 8,525
------------------
133,387
------------------
Energy - 7.85%
230 BJ Services Co. *............................ 6,771
730 Cabot Oil & Gas Corp., Class A............... 13,596
330 Devon Energy Corp............................ 11,797
300 Evergreen Resources, Inc. *.................. 7,556
330 Global Industries, Ltd. *.................... 4,228
760 Marine Drilling Cos., Inc. *................. 10,403
440 Newfield Exploration Co., *.................. 12,513
1,280 Newpark Resources, Inc. *.................... 11,360
430 Noble Affiliates, Inc........................ 12,121
500 Pennaco Energy, Inc. *....................... 5,875
1,500 Santa Fe Snyder Corp. *...................... 11,438
330 Stone Energy Corp. *......................... 13,984
------------------
121,642
------------------
Business Services - 3.79%
510 ASI Solutions, Inc. *........................ 4,207
390 Insurance Management
Solutions Group, Inc. *...................... 3,315
240 Kroll-O'Gara Co. *........................... 5,295
370 Metamor Worldwide, Inc. *.................... 8,903
300 Modis Professional Services, Inc. *.......... 4,125
350 On Assignment, Inc. *........................ 9,144
940 Romac International, Inc. *.................. 8,343
320 Source Information Management Co. *.......... 4,320
110 Superior Consultant Holdings Corp. *......... 2,716
1,060 Towne Services, Inc. *....................... 8,348
------------------
58,716
------------------
Transportation - 3.52%
330 Atlas Air, Inc. *............................ 10,642
1,095 Dynamex, Inc. *.............................. 3,148
330 Eagle USA Airfreight, Inc. *................. 14,004
220 Expeditors International of
Washington, Inc.............................. 5,995
160 Midwest Express Holdings, Inc. *............. 5,440
200 Tidewater, Inc............................... 6,100
860 Trico Marine Services, Inc. *................ 5,644
330 U.S. Xpress Enterprises, Inc. *.............. 3,527
------------------
54,500
------------------
Utilities - 1.45%
590 Boston Communications Group, Inc. *.......... 7,928
470 Davel Communication Corp..................... 2,526
220 Intermedia Communications, Inc. *............ 6,600
110 WinStar Communications, Inc. *............... 5,363
------------------
22,417
------------------
Broadcasting - 1.08%
220 Hispanic Broadcasting Corp. *................ 16,692
------------------
Finance - 0.26%
100 Prism Financial Corp. *...................... 2,044
100 Riggs National Corp.......................... 2,056
------------------
4,100
------------------
Total Common Stocks.......................... 1,413,721
------------------
(Cost $1,309,548)
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Small Company Growth Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
REPURCHASE AGREEMENT - 9.29%
$ 144,000 State Street Bank
4.70%, 06/30/99, dated 07/01/99
Repurchase Price $144,019
(Collateralized by U.S. Treasury Note
8.50%, Due 02/15/20;
Total Par $120,000
Market Value $152,679)....................... $ 144,000
------------------
Total Repurchase Agreement................... 144,000
------------------
(Cost $144,000)
Total Investments - 100.49%....................................... 1,557,721
------------------
(Cost $1,453,548)
Net Other Assets and Liabilities - (0.49)%........................ (7,628)
------------------
Net Assets - 100.00%.............................................. $ 1,550,093
==================
</TABLE>
- ----------
* Non-income producing security.
ADR American Depositary Receipts
See Notes to Financial Statements.
20
<PAGE>
Columbia Real Estate Equity Fund II
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 97.22%
Real Estate - 97.22%
700 Alexandria Real Estate Equities.............. $ 21,875
1,300 Apartment Investment &
Management Co................................ 55,575
1,900 Archstone Communities Trust.................. 41,681
1,007 Avalon Bay Communities, Inc.................. 37,259
700 Boston Properties, Inc....................... 25,112
1,000 Cabot Industrial Trust....................... 21,250
800 Capital Automotive........................... 10,600
1,900 Catellus Development Corp.*.................. 29,450
700 Colonial Properties Trust.................... 19,775
1,000 Duke Realty Investments, Inc................. 22,562
2,200 Equity Office Properties Trust............... 56,375
900 Equity Residential Properties Trust.......... 40,556
900 First Industrial Realty Trust................ 24,694
1,000 General Growth Properties.................... 35,500
500 Kimco Realty Corp............................ 19,563
1,400 Liberty Property Trust....................... 34,825
900 Mack-Cali Realty Corp........................ 27,844
800 Manufactured Home
Communities, Inc............................. 20,800
640 New Plan Excel Realty Trust.................. 11,520
1,100 Pan Pacific Retail Properties, Inc........... 21,381
1,100 Prentiss Properties Trust.................... 25,850
1,900 ProLogis Trust............................... 38,475
2,600 Public Storage, Inc.......................... 72,800
1,700 Reckson Associates Realty Corp............... 39,950
1,000 Security Capital Group, Inc., Class B*....... 14,563
600 Shurgard Storage
Centers, Inc., Class A....................... 16,275
1,600 Simon Property Group, Inc.................... 40,600
1,200 Spieker Properties, Inc...................... 46,650
700 The Macerich Co.............................. 18,375
700 TriNet Corporate Realty Trust, Inc........... 19,381
1,000 TrizecHahn Corp.............................. 20,375
1,400 Vornado Realty Trust......................... 49,438
------------------
Total Common Stocks.......................... 980,929
------------------
(Cost $1,021,957)
INVESTMENT COMPANY - 1.86%
18,759 Vista U.S. Government Money Market........... $ 18,759
------------------
Total Investment Company..................... 18,759
------------------
(Cost $18,759)
Total Investments - 99.08%........................................ 999,688
------------------
(Cost $1,040,716)
Net Other Assets and Liabilities - 0.92%.......................... 9,317
------------------
Net Assets - 100.00%.............................................. $ 1,009,005
==================
</TABLE>
- ----------
* Non-income producing security.
See Notes to Financial Statements.
21
<PAGE>
Asset Allocation Fund
Portfolio of Investments
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 48.26%
Consumer Staples - 11.86%
24,000 Becton, Dickinson & Co. ..................... $ 720,000
16,000 Bestfoods.................................... 792,000
22,000 Boston Scientific Corp.*..................... 966,625
30,000 Coca-Cola Entrerprises, Inc.................. 892,500
28,000 Elan Corp. Plc, ADR*......................... 777,000
14,000 Forest Laboratories, Inc.*................... 647,500
15,000 Genzyme Corp.*............................... 727,500
2,685 Genzyme Surgical Products*................... 11,831
11,000 Gillette Co.................................. 451,000
11,000 Lilly (Eli) & Co............................. 787,875
24,000 McDonald's Corp.............................. 991,500
15,000 Merck & Co., Inc............................. 1,110,000
15,000 PepsiCo, Inc................................. 580,312
8,000 Pfizer, Inc.................................. 878,000
5,000 Procter & Gamble Co.......................... 446,250
12,000 Warner-Lambert Co............................ 832,500
------------------
11,612,393
------------------
Technology - 9.75%
12,000 Altera Corp.*................................ 441,750
7,500 America On Line, Inc.*....................... 828,750
20,000 Automatic Data Processing, Inc............... 880,000
32,000 Cisco Systems, Inc.*......................... 2,058,000
10,000 Dell Computer Corp.*......................... 370,000
24,000 EMC Corp.*................................... 1,320,000
10,000 Hewlett-Packard Co........................... 1,005,000
14,000 Intel Corp................................... 833,000
18,000 Lucent Technologies, Inc..................... 1,213,875
10,000 Xerox Corp................................... 590,625
------------------
9,541,000
------------------
Finance - 7.58%
15,000 American International Group, Inc............ 1,755,938
11,000 Associates First Capital Corp................ 487,437
7,000 Bank One Corp................................ 416,938
6,000 Chase Manhattan Corp......................... 519,750
31,000 Citigroup, Inc............................... 1,472,500
15,000 Fannie Mae................................... 1,025,625
13,000 Hartford Financial Services Group, Inc....... 758,062
12,000 Washington Mutual, Inc....................... 424,500
13,000 Wells Fargo & Co............................. 555,750
------------------
7,416,500
------------------
Capital Goods and Construction - 4.66%
4,000 AlliedSignal, Inc............................ 252,000
21,000 Boeing Co.................................... 927,938
10,000 Caterpillar, Inc............................. 600,000
14,000 Deere & Co................................... 554,750
13,000 General Electric Co.......................... 1,469,000
8,000 Tyco International, Inc...................... 758,000
------------------
4,561,688
------------------
Consumer Cyclical - 4.66%
9,000 Black & Decker Corp.......................... 568,125
19,000 CVS Corp..................................... 964,250
10,000 Dayton Hudson Corp........................... 650,000
25,000 Home Depot, Inc.............................. 1,610,938
26,000 Walgreen Co.................................. 763,750
------------------
4,557,063
------------------
Energy - 4.07%
18,000 Anadarko Petroleum Corp...................... 662,625
5,000 Chevron Corp................................. 475,937
20,000 Halliburton Co............................... 905,000
8,000 Mobil Corp................................... 792,000
18,000 Schlumberger, Ltd............................ 1,146,375
------------------
3,981,937
------------------
Utilities - 3.61%
17,000 Frontier Corp................................ 1,003,000
22,000 MCI Worldcom, Inc.*.......................... 1,893,375
11,000 SBC Communications, Inc...................... 638,000
------------------
3,534,375
------------------
Transportation - 1.76%
12,000 AMR Corp.*................................... 819,000
29,000 Southwest Airlines Co........................ 902,625
------------------
1,721,625
------------------
Basic Materials - 0.31%
10,000 Sonoco Products Co........................... 299,375
------------------
Total Common Stocks.......................... 47,225,956
------------------
(Cost $32,011,820)
Par Value
--------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 21.64%
U.S. Treasury Notes - 10.30%
$ 250,000 5.75%, 11/15/00.............................. 251,122
1,650,000 4.50%, 01/31/01.............................. 1,626,702
500,000 5.25%, 05/31/01.............................. 497,730
500,000 5.25%, 08/15/03.............................. 490,360
550,000 5.75%, 08/15/03.............................. 548,961
500,000 5.25%, 05/15/04.............................. 491,965
2,250,000 5.63%, 02/15/06.............................. 2,211,457
800,000 7.00%, 07/15/06.............................. 847,704
550,000 6.13%, 08/15/07.............................. 556,083
1,100,000 5.50%, 05/15/09.............................. 1,076,988
1,190,000 6.13%, 11/15/27.............................. 1,181,182
335,000 5.25%, 11/15/28.............................. 296,699
------------------
10,076,953
------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
Asset Allocation Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
U.S. Treasury Bonds - 6.02%
$ 455,000 12.00%, 08/15/13............................. $ 637,123
1,550,000 7.50%, 11/15/16.............................. 1,746,323
100,000 7.88%, 02/15/21.............................. 118,451
300,000 8.13%, 08/15/21.............................. 365,247
250,000 8.00%, 11/15/21.............................. 300,930
950,000 7.25%, 08/15/22.............................. 1,064,019
450,000 7.63%, 11/15/22.............................. 524,840
400,000 7.13%, 02/15/23.............................. 443,404
675,000 6.38%, 08/15/27.............................. 691,477
------------------
5,891,814
------------------
Government National
Mortgage Association - 1.90%
444,783 6.50%, 05/15/13, Pool #473566................ 441,029
46,882 7.00%, 11/15/13, Pool #780921................ 47,321
43,608 9.00%, 12/15/17, Pool #780201................ 46,429
249,916 6.50%, 05/15/24, Pool #780168................ 242,339
279,116 6.50%, 12/15/28, Pool #495775................ 269,085
399,565 6.00%, 03/15/29, Pool #476986................ 374,465
461,481 6.50%, 04/15/29, Pool #474844................ 444,896
------------------
1,865,564
------------------
Federal National
Mortgage Association - 1.70%
500,000 5.13%, 02/13/04.............................. 479,375
580,000 5.25%, 01/15/09.............................. 531,738
654,743 7.00%, 12/01/12, Pool #251339................ 658,016
------------------
1,669,129
------------------
Federal Home Loan Bank - 1.01%
500,000 5.38%, 03/02/01.............................. 497,325
500,000 5.13%, 02/26/02.............................. 490,625
------------------
987,950
------------------
Other Government Agency Bonds - 0.52%
500,000 A.I.D. Israel, Series 8-C
Guaranteed: U.S. Government
6.63%, 08/15/03.............................. 507,380
------------------
Federal Home Loan
Mortgage Corporation - 0.19%
183,345 7.00%, 04/01/29, Pool #C00756, Gold.......... 181,854
------------------
Total U.S. Government and
Agency Obligations........................... 21,180,644
------------------
(Cost $21,690,341)
CORPORATE NOTES AND BONDS - 16.20%
$ 455,000 American Express Credit Corp.
8.50%, 08/15/01.............................. 476,044
250,000 Associates Corp. of North America
7.88%, 09/30/01.............................. 258,437
100,000 Bank One Milwaukee, N.A., MTN
6.35%, 03/19/01.............................. 100,375
100,000 Becton Dickinson
7.00%, 08/01/27.............................. 97,375
150,000 Becton Dickinson
6.70%, 08/01/28.............................. 141,937
280,000 Boeing Co.
8.88%, 09/15/99.............................. 281,750
200,000 Burlington Northern Santa Fe Corp.
Debenture
6.88%, 02/15/16.............................. 190,750
500,000 Caterpillar Financial Services
Series F, MTN
6.00%, 05/23/02.............................. 496,250
300,000 Chase Manhattan Corp., MTN
5.50%, 02/15/01.............................. 297,000
250,000 CIT Group, Inc., MTN
5.80%, 02/26/01.............................. 249,062
200,000 Citicorp, Senior MTN
8.63%, 11/01/04.............................. 201,750
250,000 Coca-Cola Enterprises, Inc.
6.38%, 08/01/01.............................. 250,937
300,000 Colgate Palmolive Co.
Series C, MTN
5.27%, 12/01/03.............................. 286,011
750,000 Diageo Capital Plc
6.00%, 03/27/03.............................. 731,475
100,000 Diageo Capital Plc, Yankee
6.13%, 08/15/05.............................. 97,500
500,000 Disney (Walt) Co.
6.38%, 03/30/01.............................. 503,125
250,000 First Union Corp., Senior Note
6.60%, 06/15/00.............................. 251,563
250,000 Ford Motor Credit Co.
6.85%, 08/15/00.............................. 252,302
250,000 Ford Motor Credit Co.
6.38%, 12/15/05.............................. 245,000
250,000 General Electric Capital Corp.
Series A, MTN
5.96%, 05/14/01.............................. 250,168
250,000 General Motors Acceptance Corp.
6.88%, 07/15/01.............................. 252,812
150,000 Goldman Sachs Group
6.65%, 05/15/09.............................. 145,313
135,000 Hershey Foods Corp.
7.20%, 08/15/27.............................. 136,181
200,000 Illinois Tool Works
5.75%, 03/01/09.............................. 186,864
50,000 International Business Machines Corp.
5.38%, 02/01/09.............................. 45,687
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
Asset Allocation Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS (continued)
$ 100,000 International Business Machines Corp.
6.22%, 08/01/27.............................. $ 99,500
200,000 International Lease Finance Corp.
6.20%, 05/01/00.............................. 201,022
100,000 The May Department Stores Co.
7.45%, 10/15/16.............................. 103,125
250,000 McDonaldos Corp., Senior MTN
5.95%, 01/15/08.............................. 240,313
250,000 MCI Worldcom, Inc.
6.13%, 04/15/02.............................. 247,500
500,000 Mead Corp., Senior Note
6.60%, 03/01/02.............................. 498,125
200,000 Mellon Financial Co., Senior Note
7.63%, 11/15/99.............................. 201,530
250,000 Merck & Co., Senior Note
6.40%, 03/01/28.............................. 234,375
250,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28.............................. 231,250
165,000 National Rural Utilities, Collateral Trust
5.50%, 01/15/05.............................. 156,131
250,000 National Rural Utilities, Collateral Trust
6.13%, 05/15/05.............................. 243,437
250,000 National Rural Utilities, Collateral Trust
5.75%, 11/01/08.............................. 233,438
100,000 NationsBank Corp., Senior Note
7.00%, 05/15/03.............................. 101,875
300,000 Northern Telecom, Ltd.
Yankee Note
6.00%, 09/01/03.............................. 296,625
250,000 Norwest Corp.
Series H, MTN
5.63%, 02/05/01.............................. 248,437
400,000 Norwest Financial, Inc., Senior Note
7.75%, 08/15/01.............................. 412,000
200,000 Occidental Petroleum Corp., MTN
6.75%, 09/16/99.............................. 200,250
100,000 Paccar Financial Corp.
Series H, Senior MTN
5.86%, 03/15/01.............................. 99,750
100,000 Parker Hannifan Corp.
7.30%, 05/15/11.............................. 103,625
150,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A).......................... 142,687
250,000 Pepsico, Inc., MTN
5.75%, 01/01/03.............................. 245,625
250,000 Pepsico, Inc., MTN
5.75%, 01/15/08.............................. 234,063
200,000 Phillips Petroleum Co., Debenture
9.38%, 02/15/11.............................. 237,000
500,000 Pitney Bowes, Inc., MTN
5.50%, 04/15/04.............................. 486,250
250,000 Pitney Bowes Credit Corp.
6.63%, 06/01/02.............................. 253,125
250,000 Potomac Electric Power Co.
First Mortgage
6.50%, 09/15/05.............................. 248,125
250,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07.............................. 246,250
350,000 Quebec Province
Senior Subordinated Notes
5.75%, 02/15/09.............................. 322,014
250,000 Rite Aid Corp.
6.70%, 12/15/01.............................. 249,375
250,000 Sherwin-williams Co., Senior Note
6.50%, 02/01/02.............................. 250,312
150,000 Sprint Capital Corp.
5.88%, 05/01/04.............................. 145,125
150,000 Sprint Capital Corp.
6.90%, 05/01/19.............................. 140,250
60,000 Suntrust Bank of Central Florida, MTN
6.90%, 07/01/07.............................. 60,300
250,000 Sysco Corp.
7.25%, 04/15/07.............................. 258,438
75,000 Sysco Corp., Debenture
6.50%, 08/01/28.............................. 69,094
400,000 Tele-Communication, Inc.
7.25%, 08/01/05.............................. 408,000
100,000 Time Warner, Inc.
6.63%, 05/15/29.............................. 88,375
100,000 Union Oil Co. of California, MTN
Guaranteed: Unocal Corp.
6.70%, 10/15/07.............................. 96,750
250,000 Wachovia Bank NC, N.A.
6.30%, 03/15/01.............................. 250,313
250,000 Wal-Mart Stores, Senior Note
6.75%, 05/15/02.............................. 254,375
100,000 Xerox Corp.
7.20%, 04/01/16.............................. 101,250
500,000 Xerox Capital Europe PLC
5.88%, 05/15/04.............................. 486,867
------------------
Total Corporate Notes and Bonds.............. 15,851,939
------------------
(Cost $16,165,432)
ASSET-BACKED AND
MORTGAGE-BACKED SECURITIES - 0.74%
250,000 Discover Card Master Trust I
Series 1999-1, Class A
5.30%, 08/15/04.............................. 244,634
250,000 Ford Credit Auto Owner Trust
Series 1999-A, Class A4
5.31%, 11/15/01.............................. 248,936
170,000 Premier Auto Trust
Series 1999-3, Class A4
6.43%, 03/08/04.............................. 171,231
59,276 Rural Housing Trust, Cmo
Series 1987-1, Class D
6.33%, 04/01/26.............................. 58,230
------------------
Total Asset-Backed and
Mortgage-Backed Securities................... 723,031
------------------
(Cost $728,205)
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
Asset Allocation Fund
Portfolio of Investments (continued)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK - 0.15%
3,000 Loral Space and
Communications, Ltd., 6.00% (A).............. $ 146,625
------------------
Total Convertible Preferred Stock............ 146,625
------------------
(Cost $162,772)
Par Value
--------------
REPURCHASE AGREEMENT - 11.91%
$ 11,659,000 State Street Bank
4.70%, 07/01/99, Dated 06/30/99
Repurchase Price $11,660,522
(Collateralized by U.S. Treasury Note
7.50%, due 11/15/16
Total Par $10,575,000
Market Value $11,997,659).................... 11,659,000
------------------
Total Repurchase Agreement................... 11,659,000
------------------
(Cost $11,659,000)
Total Investments - 98.90%........................................ 96,787,195
------------------
(Cost $82,417,570)
Net Other Assets and Liabilities - 1.10%.......................... 1,078,093
------------------
Net Assets - 100.00%.............................................. $ 97,865,288
==================
</TABLE>
- ----------
* Non-income producing security.
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may only be resold, in transactions
exempt from registration, to qualified institutional buyers. At June 30,
1999, these securities amounted to $289,312 or 0.30% of net assets.
ADR American Depositary Receipt
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
25
<PAGE>
High Quality Bond Fund
Portfolio of Investments
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 39.41%
Utilities - 11.33%
$ 250,000 Baltimore Gas and Electric
First Mortgage
6.50%, 02/15/03.............................. $ 250,938
400,000 GTE Florida, Inc., Debenture, Series A
6.31%, 12/15/02.............................. 399,000
250,000 MCI WorldCom, Inc., Note
6.13%, 04/15/02.............................. 247,500
500,000 National Rural Utilities
Collateral Trust
6.38%, 10/15/04.............................. 495,625
250,000 National Rural Utilities
Collateral Trust
5.50%, 01/15/05.............................. 236,562
100,000 National Rural Utilities
Collateral Trust
6.20%, 02/01/08.............................. 96,625
500,000 Pacificorp
First Mortgage
6.38%, 05/15/08.............................. 483,125
150,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07.............................. 147,750
325,000 Sprint Capital Corp.
Company Guaranty
6.90%, 05/01/19.............................. 303,875
------------------
2,661,000
------------------
Technology - 8.12%
175,000 International Business
Machines Corp., MTN
5.95%, 06/02/03.............................. 172,375
195,000 International Business
Machines Corp., Note
5.38%, 02/01/09.............................. 178,181
100,000 International Business
Machines Corp., Debenture
6.22%, 08/01/27.............................. 99,500
300,000 Pitney Bowes Inc., Note
5.50%, 04/15/04.............................. 291,750
350,000 Telecom de Puerto Rico, Note
6.15%, 05/15/02 (B).......................... 346,634
250,000 Telecom de Puerto Rico, Note
6.65%, 05/15/06 (B).......................... 244,375
250,000 United Technologies Corp., Note
6.70%, 08/01/28.............................. 233,750
350,000 Xerox Corp., Note
5.50%, 11/15/03.............................. 339,063
------------------
1,905,628
------------------
Consumer Staples - 8.05%
$ 300,000 Heinz (H.J.) Co.
Euro-Dollar Debenture
5.75%, 02/03/03.............................. 290,730
440,000 Hershey Foods Corp., Debenture
7.20%, 08/15/27.............................. 443,850
200,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08.............................. 192,250
400,000 PepsiCo, Inc., MTN
5.75%, 01/15/08.............................. 374,500
400,000 Sysco Corp., Debenture
6.50%, 08/01/28.............................. 368,500
250,000 Time Warner, Inc.
Company Guaranty
6.63%, 05/15/29.............................. 220,938
------------------
1,890,768
------------------
Finance - 6.71%
250,000 American Express Co.
Senior Unsurbordinated Note
6.75%, 06/23/04.............................. 250,938
500,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01.............................. 501,875
500,000 Ford Motor Credit Co., Senior Note
6.50%, 02/28/02.............................. 501,250
75,000 Goldman Sachs Group, Note
6.65%, 05/15/09.............................. 72,656
100,000 SunTrust Bank Atlanta
Subordinated Note, MTN
7.25%, 09/15/06.............................. 101,500
150,000 Xerox Capital Europe, Plc
Company Guaranty
5.88%, 05/15/04.............................. 146,060
------------------
1,574,279
------------------
HealthCare - 2.73%
400,000 Abbott Laboratories
6.40%, 12/01/06.............................. 396,500
260,000 Merck & Co., Debenture
6.40%, 03/01/28.............................. 243,750
------------------
640,250
------------------
Capital Goods and Construction - 1.19%
300,000 Illinois Tool Works, Note
5.75%, 03/01/09.............................. 280,296
------------------
Basic Materials - 0.79%
200,000 Minnesota Mining &
Manufacturing Co., Debenture
6.38%, 02/15/28.............................. 185,000
------------------
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
High Quality Bond Fund
Portfolio of Investments (continued)
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
Regional Agencies - 0.49%
$ 125,000 Quebec Province
Senior Unsubordinated Notes
5.75% 02/15/09............................... $ 115,313
------------------
Total Corporate Notes and Bonds.............. 9,252,534
------------------
(Cost $9,573,465)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 32.04%
U.S. Treasury Bonds - 16.69%
435,000 12.00%, 08/15/13............................. 609,117
90,000 7.50%, 11/15/16.............................. 101,399
400,000 9.00%, 11/15/18.............................. 520,364
325,000 7.88%, 02/15/21.............................. 384,966
200,000 8.13%, 08/15/21.............................. 243,498
875,000 7.25%, 08/15/22.............................. 980,018
250,000 7.13%, 02/15/23.............................. 277,128
695,000 6.38%, 08/15/27.............................. 711,965
100,000 5.25%, 02/15/29.............................. 89,788
------------------
3,918,243
------------------
U.S. Treasury Notes - 8.48%
350,000 6.63%, 06/30/01.............................. 357,151
75,000 5.88%, 11/30/01.............................. 75,405
50,000 5.88%, 09/30/02.............................. 50,236
100,000 5.88%, 02/15/04.............................. 100,372
50,000 5.25%, 05/15/04.............................. 49,197
100,000 5.63%, 05/15/08.............................. 97,978
375,000 5.50%, 05/15/09.............................. 367,155
290,000 6.13%, 11/15/27.............................. 287,851
685,000 5.25%, 11/15/28.............................. 606,684
------------------
1,992,029
------------------
Other Government Agency Bonds - 3.63%
150,000 A.I.D. Israel, Series 8-C
Guaranteed: U.S. Government
6.63%, 08/15/03.............................. 152,214
200,000 A.I.D. State of Israel, Series 7-A
Guaranteed: U.S. Government
5.45%, 02/15/01.............................. 198,624
200,000 Private Export Funding Corp.
6.49%, 07/15/07.............................. 203,000
300,000 Tennessee Valley Authority Power Board
Class 1993, Series C
6.13%, 07/15/03.............................. 297,375
------------------
851,213
------------------
Federal National
Mortgage Association - 1.99%
205,000 5.25%, 01/15/09.............................. 187,942
300,000 6.16%, 08/07/28.............................. 280,038
------------------
467,980
------------------
U.S Treasury Strips - 1.25%
500,000 4.86%, 05/15/08 Interest only (A)............ 294,395
------------------
Total U.S. Government and
Agency Obligations........................... 7,523,860
------------------
(Cost $7,690,779)
MORTGAGE-BACKED SECURITIES - 18.51%
Government National
Mortgage Association - 11.05%
243,111 6.50%, 10/15/13, Pool # 446759............... 240,984
305,677 6.63%, 07/20/22, Pool # 008022 (C)........... 309,592
217,420 7.50%, 10/15/27, Pool # 455324............... 219,933
247,633 7.00%, 01/15/29, Pool # 499333............... 244,923
242,718 7.00%, 02/15/29, Pool # 486937............... 240,062
763,839 7.00%, 02/15/29, Pool # 492173............... 755,483
241,303 6.00%, 03/15/29, Pool # 464632............... 226,144
371,341 6.50%, 04/15/29, Pool # 474844............... 357,995
------------------
2,595,116
------------------
Structured Mortgage Product - 5.59%
700,000 FHLMC
5.50%, 03/15/14
Pool # 002134, Class PM...................... 644,217
202,152 FHLMC
6.50%, 10/15/23, Pool # 001990............... 202,025
173,793 Prudential Home Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11.............................. 173,901
296,382 Rural Housing Trust 1987-1
Series 1, Class D, CMO
6.33%, 04/01/26.............................. 291,149
------------------
1,311,292
------------------
Federal Home Loan
Mortgage Corporation - 1.15%
269,013 7.00%, 11/01/13, Pool # E00586, Gold......... 270,525
------------------
Federal National
Mortgage Association - 0.72%
167,993 7.00%, 12/01/12, Pool # 251339............... 168,833
------------------
Total Mortgage-Backed Securities............. 4,345,766
------------------
(Cost $4,172,231)
ASSET-BACKED SECURITIES - 7.33%
100,000 Capital Auto Receivables Asset Trust
Series 1999-1, Class A2
5.58%, 06/15/02.............................. 99,532
400,000 Citibank Credit Card Master Trust I
Series 1998-6
5.85%, 04/10/03.............................. 398,124
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
High Quality Bond Fund
Portfolio of Investments (continued)
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
ASSET-BACKED SECURITIES (continued)
$ 600,000 Ford Auto Owner Credit Trust
Series 1999-A, Class A4
5.31%, 11/15/01.............................. $ 597,447
150,000 MBNA Master Credit Card Trust
Series 1998-D, Class A
5.80%, 12/15/05.............................. 147,812
500,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06.............................. 478,435
------------------
Total Asset-Backed Securities................ 1,721,350
------------------
(Cost $2,034,653)
REPURCHASE AGREEMENT - 1.94%
455,000 State Street Bank
4.70%, 07/01/99, DATED 06/30/99
Repurchase Price $455,059
(Collateralized by U.S. Treasury Note
8.50%, Due 02/15/20;
Total Par $365,000
Market Value $475,968)....................... 455,000
------------------
Total Repurchase Agreement................... 455,000
------------------
(Cost $455,000)
Total Investments - 99.23%........................................ 23,298,510
------------------
(Cost $23,926,128)
Net Other Assets and Liabilities - 0.77%.......................... 181,278
------------------
Net Assets - 100.00%.............................................. $ 23,479,788
==================
</TABLE>
- ----------
(A) Stripped securities represent the splitting of cash flows into interest and
principal. Holders, as indicated, are entitled to that portion of the
payment representing interest only or principal only.
(B) Securities exempt from registration under Rule 144A of the securities act
of 1933, as amended. These securities may only be resold, in transactions
exempt from registration, to qualified institutional buyers. At June 30,
1999, these securities amounted to $591,009 or 2.52% of net assets.
(C) Variable rate bond. Rate shown reflects the rate in effect at June 30,
1999.
CMO Collateralized Mortgage Obligation
FHLMC Federal Home Loan Mortgage Corporation
MTN Medium Term Note
See Notes to Financial Statements.
28
<PAGE>
Columbia High Yield Fund II
Portfolio of Investments
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 95.72%
Capital Goods - 26.78%
$ 100,000 AES Corp.
Senior Subordinated Notes
8.38%, 08/15/07.............................. $ 95,000
15,000 Aviation Sales
Senior Subordinated Notes
8.13%, 02/15/08 (A).......................... 14,287
40,000 Federal-Mogul Corp.
7.75%, 07/01/06.............................. 38,350
35,000 Hayes Wheels International, Inc.
Series B
9.13%, 07/15/07.............................. 35,262
100,000 Newpark Resources, Inc.
Series B
8.63%, 12/15/07.............................. 95,125
40,000 Rental Services Corp.
Senior Subordinated Notes
9.00%, 05/15/08 (A).......................... 39,850
35,000 Silgan Holdings, Inc.
Senior Subordinated Debentures
9.00%, 06/01/09.............................. 35,875
100,000 Titan Wheel International, Inc.
Senior Subordinated Notes
8.75%, 04/01/07.............................. 95,875
100,000 United Stationers Supply
Senior Subordinated Notes
8.38%, 04/15/08 (A).......................... 96,250
100,000 Westpoint Stevens, Inc.
Senior Notes
7.88%, 06/15/05 (A).......................... 98,000
------------------
643,874
------------------
Communication - 25.39%
35,000 Adelphia Communications
Senior Notes, Series B
10.50%, 07/15/04............................. 37,537
140,000 Century Communications
Senior Notes
8.64%, 03/15/03 (B).......................... 98,350
35,000 Comcast Corp.
Senior Subordinated Debentures
9.50%, 01/15/08.............................. 36,837
50,000 Crown Castle International Corp.
Senior Notes
9.00%, 05/15/11.............................. 49,125
25,000 Jacor Communications Co.
Series B
8.75%, 06/15/07.............................. 26,687
25,000 Jones Intercable, Inc.
Senior Notes
8.88%, 04/01/07.............................. 27,688
50,000 Lenfest Communications
Senior Notes
8.38%, 11/01/05.............................. 52,250
100,000 Level 3 Communications, Inc.
Senior Notes
9.13%, 05/01/08 (A).......................... 98,750
50,000 Nextlink Communications
Senior Discount Note
9.45% (0% until 2003), 04/15/08 (A).......... 29,125
100,000 Sinclair Broadcasting Group
Senior Subordinated Notes
8.75%, 12/15/07.............................. 98,250
50,000 Unisys Corp.
Senior Notes
11.75%, 10/15/04............................. 55,875
------------------
610,474
------------------
Consumer Cyclical - 16.93%
100,000 Hollinger International Publishing
8.63%, 03/15/05.............................. 101,500
50,000 International Game Technology
Senior Notes
7.88%, 05/15/04 (A).......................... 49,125
100,000 Outdoor Systems, Inc.
Senior Subordinated Notes
9.38%, 10/15/06.............................. 106,250
50,000 Protection One Alarm
Senior Notes
7.38%, 08/15/05 (A).......................... 47,625
100,000 Zale Corp.
Senior Notes, Series B
8.50%, 10/01/07.............................. 102,375
------------------
406,875
------------------
Utilities - 9.75%
15,000 CMS Energy Corp.
Coupon Pass-Through Certificates
7.00%, 01/15/05.............................. 14,194
100,000 Flag, Ltd.
Senior Notes
8.25%, 01/30/08 (A).......................... 94,500
50,000 Niagara Mohawk Power
Senior Notes, Series D
7.25%, 10/01/02.............................. 50,188
25,000 Pride International, Inc.
Senior Notes
10.00%, 06/01/09............................. 25,563
50,000 Santa Fe Snyder Corp.
Senior Notes
8.05%, 06/15/04.............................. 49,813
------------------
234,258
------------------
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
Columbia High Yield Fund II
Portfolio of Investments (continued)
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Par Value Value
------------- -------------
<S> <C> <C>
HealthCare - 6.61%
$ 40,000 Conmed Corp.
9.00%, 03/15/08.............................. $ 40,100
35,000 HEALTHSOUTH Corp.
Senior Subordinated Notes
9.50%, 04/01/01.............................. 36,006
25,000 Quorum Health Group, Inc.
Senior Subordinated Notes
8.75%, 11/01/05.............................. 24,438
10,000 Tenet Healthcare Corp.
Senior Notes
8.63%, 12/01/03.............................. 10,100
50,000 Tenet Healthcare Corp.
Senior Subordinated Notes
8.13%, 12/01/08 (A).......................... 48,250
------------------
158,894
------------------
Consumer Staples - 4.72%
50,000 Ames Department Stores
Senior Notes
10.00%, 04/15/06 (A)......................... 49,000
25,000 Cinemark USA, Inc.
Senior Subordinated Notes, Series B
9.63%, 08/01/08.............................. 24,875
50,000 Purina Mills, Inc.
Senior Subordinated Notes
9.00%, 03/15/10 (A).......................... 39,500
------------------
113,375
------------------
Basic Materials - 4.55%
100,000 Ball Corp.
Senior Notes
7.75%, 08/01/06 (A).......................... 99,500
10,000 Webb (Del E.)
Senior Subordinated Debentures
9.00%, 02/15/06.............................. 9,975
------------------
109,475
------------------
Transportation - 0.99%
25,000 Teekay Shipping Corp.
Yankee Notes
8.32%, 02/01/08.............................. 23,718
------------------
Total Corporate Notes and Bonds.............. 2,300,943
------------------
(Cost $2,321,172)
U.S. GOVERNMENT OBLIGATION (C) - 1.66%
U.S. Treasury Bill - 1.66%
$ 40,000 3.75%, 07/08/99.............................. $ 39,971
------------------
Total U.S. Government Obligation............. 39,971
------------------
(Cost $39,971)
Shares
-------------
INVESTMENT COMPANY - 1.66%
39,959 Vista U.S. Government Money Market........... 39,959
------------------
Total Investment Company..................... 39,959
------------------
(Cost $39,959)
Total Investments - 99.04%........................................ 2,380,873
------------------
(Cost $2,401,102)
Net Other Assets and Liabilities - 0.96%.......................... 23,123
------------------
Net Assets - 100.00%.............................................. $ 2,403,996
==================
</TABLE>
- ----------
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may only be resold, in transactions
exempt from registration, to qualified institutional buyers. At June 30,
1999, these securities amounted to $803,762 or 33.43% of net assets.
(B) Zero Coupon Bond. Rate shown reflects effective yield to maturity at time
of purchase.
(C) Discount yield at time of purchase.
See Notes to Financial Statements.
30
<PAGE>
This page intentionally left blank.
31
<PAGE>
The Galaxy VIP Fund
Statements of Assets and Liabilities
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Money Market Equity Growth and Income Small Company
Fund Fund Fund Growth Fund
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost ............................... $ 17,726,939 $ 74,671,754 $ 7,932,446 $ 1,309,548
Repurchase Agreement .............................. 340,000 3,081,000 1,035,000 144,000
Net unrealized appreciation (depreciation) ........ -- 27,589,421 1,425,500 104,173
------------- ------------- ------------- -------------
Total investments at value ..................... 18,066,939 105,342,175 10,392,946 1,557,721
Cash ................................................. 453 2,002 409 609
Receivable for investments sold ...................... -- -- 78,435 7,443
Receivable for shares sold ........................... -- 35,494 19,034 --
Interest and dividend receivable ..................... 44 29,110 15,930 72
Receivable from Investment Advisor (Note 4) .......... -- -- -- 7,864
Deferred organizational expense (Note 2) ............. -- -- 8,086 8,351
------------- ------------- ------------- -------------
Total Assets ...................................... 18,067,436 105,408,781 10,514,840 1,582,060
------------- ------------- ------------- -------------
LIABILITIES:
Dividends Payable .................................... 66,203 -- -- --
Payable for investments purchased .................... -- -- -- 22,869
Payable to custodian ................................. -- -- -- --
Payable for shares repurchased ....................... 37,044 -- -- --
Advisory fee payable (Notes 3 & 4) ................... 2,232 62,486 12,855 --
Payable to Administrator (Notes 3 & 4) ............... 840 5,754 2,479 663
TrusteesO fees and expenses payable (Note 3) ......... 2,738 3,458 130 87
Accrued expenses and other payables .................. 26,993 31,249 10,166 8,348
------------- ------------- ------------- -------------
Total Liabilities ................................. 136,050 102,947 25,630 31,967
------------- ------------- ------------- -------------
NET ASSETS .............................................. $ 17,931,386 $ 105,305,834 $ 10,489,210 $ 1,550,093
============= ============= ============= =============
NET ASSETS consist of:
Par value (Note 5) ................................... $ 17,931 $ 4,906 $ 897 $ 159
Paid-in capital in excess of par value ............... 17,913,295 69,608,673 8,969,086 1,414,944
Undistributed (overdistributed) net
investment income ................................. 263 (39,426) 559 (7,341)
Accumulated net realized gain (loss)
on investments sold .............................. (103) 8,142,260 93,168 38,158
Net unrealized appreciation (depreciation)
of investments .................................... -- 27,589,421 1,425,500 104,173
------------- ------------- ------------- -------------
TOTAL NET ASSETS ........................................ $ 17,931,386 $ 105,305,834 $ 10,489,210 $ 1,550,093
============= ============= ============= =============
Shares of beneficial interest outstanding ............... 17,931,226 4,906,192 896,909 158,616
NET ASSET VALUE:
offering and redemption price per share
(Net Assets [div] Shares Outstanding) .. ............. $ 1.00 $ 21.46 $ 11.69 $ 9.77
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
Columbia Real Asset
Estate Allocation High Quality Columbia High
Equity Fund II Fund Bond Fund Yield Fund II
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost ............................... $ 1,040,716 $ 70,758,570 $ 23,471,128 $ 2,401,102
Repurchase Agreement .............................. -- 11,659,000 455,000 --
Net unrealized appreciation (depreciation) ........ (41,028) 14,369,625 (627,618) (20,229)
------------ ------------ ------------ ------------
Total investments at value ..................... 999,688 96,787,195 23,298,510 2,380,873
Cash ................................................. -- 1,160 1,725 --
Receivable for investments sold ...................... -- 1,454,609 75,589 --
Receivable for shares sold ........................... -- 263,737 -- --
Interest and dividend receivable ..................... 6,965 668,757 326,303 44,377
Receivable from Investment Advisor (Note 4) .......... 2,392 -- -- 235
Deferred organizational expense (Note 2) ............. 8,080 -- -- 8,080
------------ ------------ ------------ ------------
Total Assets ...................................... 1,017,125 99,175,458 23,702,127 2,433,565
------------ ------------ ------------ ------------
LIABILITIES:
Dividends Payable .................................... -- -- 111,659 16,586
Payable for investments purchased .................... -- 1,216,149 74,945 --
Payable to custodian ................................. -- -- -- 284
Payable for shares repurchased ....................... -- 75 13,180 266
Advisory fee payable (Notes 3 & 4) ................... -- 58,145 7,619 --
Payable to Administrator (Notes 3 & 4) ............... 2,175 519 2,059 845
TrusteesO fees and expenses payable (Note 3) ......... 90 2,724 2,725 107
Accrued expenses and other payables .................. 5,855 32,558 10,152 11,481
------------ ------------ ------------ ------------
Total Liabilities ................................. 8,120 1,310,170 222,339 29,569
------------ ------------ ------------ ------------
NET ASSETS .............................................. $ 1,009,005 $ 97,865,288 $ 23,479,788 $ 2,403,996
============ ============ ============ ============
NET ASSETS consist of:
Par value (Note 5) ................................... $ 112 $ 5,852 $ 2,336 $ 240
Paid-in capital in excess of par value ............... 1,055,024 83,037,971 24,190,705 2,420,090
Undistributed (overdistributed) net
investment income ................................. 7,301 120,401 30,396 1,854
Accumulated net realized gain (loss)
on investments sold .............................. (12,404) 331,439 (116,031) 2,041
Net unrealized appreciation (depreciation)
of investments .................................... (41,028) 14,369,625 (627,618) (20,229)
------------ ------------ ------------ ------------
TOTAL NET ASSETS ........................................ $ 1,009,005 $ 97,865,288 $ 23,479,788 $ 2,403,996
============ ============ ============ ============
Shares of beneficial interest outstanding ............... 111,699 5,851,550 2,336,052 239,589
NET ASSET VALUE:
offering and redemption price per share
(Net Assets [div] Shares Outstanding) ................ $ 9.03 $ 16.72 $ 10.05 $ 10.03
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
The Galaxy VIP Fund
Statements of Operations
For the six months ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Money Market Equity Growth and Income Small Company
Fund Fund Fund Growth Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) ................................. $ 427,491 $ 68,574 $ 22,173 $ 2,117
Dividends (Note 2) ................................. -- 360,278 60,742 470
------------ ------------ ------------ ------------
Total investment income ........................ 427,491 428,852 82,915 2,587
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note 3) .................. 34,716 365,735 33,065 4,654
Administration fees (Note 3) ....................... 7,377 41,450 3,747 527
Custody fees ....................................... 8,932 9,361 8,992 12,693
Fund accounting fees (Note 3) ...................... 12,636 18,056 14,422 16,695
Professional fees .................................. 10,415 6,781 4,803 6,358
TrusteesO fees (Note 3) ............................ 241 970 69 9
Amortization of organization costs (Note 2) ........ -- -- 1,090 1,090
Reports to shareholders ............................ 3,477 13,990 1,005 136
Miscellaneous ...................................... 309 1,242 89 13
------------ ------------ ------------ ------------
Total expenses before
reimbursement/waiver ....................... 78,103 457,585 67,282 42,175
Less: reimbursement/waiver (Note 4) ............ (36,574) -- (1,153) (32,247)
------------ ------------ ------------ ------------
Total expenses net of
reimbursement/waiver ....................... 41,529 457,585 66,129 9,928
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ........................... 385,962 (28,733) 16,786 (7,341)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ....... -- 8,196,802 121,164 110,304
Net change in unrealized
appreciation (depreciation) of investments ......... -- 4,157,667 1,014,332 43,059
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS ............................. -- 12,354,469 1,135,496 153,363
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 385,962 $ 12,325,736 $ 1,152,282 $ 146,022
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
Columbia Real Estate Asset Allocation High Quality Columbia High
Equity Fund II Fund Bond Fund Yield Fund II
-------------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) .................................. $ 2,218 $ 1,310,099 $ 739,440 $ 97,414
Dividends (Note 2) .................................. 23,828 187,829 -- 883
----------- ----------- ----------- -----------
Total investment income ......................... 26,046 1,497,928 739,440 98,297
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees (Note 3) ................... 3,321 324,905 64,932 7,271
Administration fees (Note 3) ........................ 376 36,823 10,035 1,030
Custody fees ........................................ 2,035 15,186 8,029 2,834
Fund accounting fees (Note 3) ....................... 13,273 24,779 15,895 14,896
Professional fees ................................... 5,176 23,587 11,455 5,229
TrusteesO fees (Note 3) ............................. 9 861 261 34
Amortization of organization costs (Note 2) ......... 1,090 -- -- 1,090
Reports to shareholders ............................. 129 12,424 3,756 509
Miscellaneous ....................................... 12 1,102 334 45
----------- ----------- ----------- -----------
Total expenses before
reimbursement/waiver ........................ 25,421 439,667 114,697 32,938
Less: reimbursement/waiver (Note 4) ............. (17,889) -- (57,399) (13,555)
----------- ----------- ----------- -----------
Total expenses net of
reimbursement/waiver ........................ 7,532 439,667 57,298 19,383
----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ............................ 18,514 1,058,261 682,142 78,914
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ........ (10,897) 584,840 (97,579) 2,045
Net change in unrealized
appreciation (depreciation) of investments .......... 38,440 1,048,961 (1,391,990) (79,024)
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .............................. 27,543 1,633,801 (1,489,569) (76,979)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 46,057 $ 2,692,062 $ (807,427) $ 1,935
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
The Galaxy VIP Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Money Market Fund Equity Fund Growth and Income Fund
--------------------------- ---------------------------- --------------------------
Six months Year Six months Year Six months Period
ended June 30, ended ended June 30, ended ended June 30, ended
1999 December 31, 1999 December 31, 1999 December 31,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998(1)
----------- ------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS at beginning of period ........... $16,821,240 $ 15,329,905 $ 92,619,906 $ 69,862,961 $ 7,636,750 $ 10(a)
----------- ------------ ------------ ------------ ----------- ----------
Increase (decrease) in Net Assets resulting
from operations:
Net investment income (loss) ............ 385,962 816,571 (28,733) 489,109 16,786 24,019
Net realized gain (loss) on
investments sold .................... -- -- 8,196,802 19,517,742 121,164 (27,996)
Net change in unrealized appreciation
(depreciation) of investments ....... -- -- 4,157,667 (2,709,366) 1,014,332 411,168
----------- ------------ ------------ ------------ ----------- ----------
Net increase (decrease) in net assets
resulting from operations ....... 385,962 816,571 12,325,736 17,297,485 1,152,282 407,191
----------- ------------ ------------ ------------ ----------- ----------
Dividends to shareholders from:
Net investment income ................... (385,962) (816,592) (10,693) (505,469) (16,227) (24,019)
In excess of net investment income ...... -- -- -- -- -- (2,926)
Net realized gain on investments ........ -- -- (1,222,729) (18,138,988) -- --
In excess of net realized gain
on investments ...................... -- -- -- -- -- --
----------- ------------ ------------ ------------ ----------- ----------
Total Dividends ..................... (385,962) (816,592) (1,233,422) (18,644,457) (16,227) (26,945)
----------- ------------ ------------ ------------ ----------- ----------
Share Transactions:
Net proceeds from sale of shares ........ 6,212,490 12,419,269 4,159,758 12,269,094 2,049,445 7,580,935
Issued to shareholders in reinvestment
of dividends ........................ 319,778 816,592 1,233,422 18,644,457 16,227 26,945
Cost of shares repurchased .............. (5,422,122) (11,744,505) (3,799,566) (6,809,634) (349,267) (351,386)
----------- ------------ ------------ ------------ ----------- ----------
Net increase from share transactions 1,110,146 1,491,356 1,593,614 24,103,917 1,716,405 7,256,494
----------- ------------ ------------ ------------ ----------- ----------
Net increase in net assets .......... 1,110,146 1,491,335 12,685,928 22,756,945 2,852,460 7,636,740
----------- ------------ ------------ ------------ ----------- ----------
NET ASSETS at end of period
(including line A) .. ................... $17,931,386 $ 16,821,240 $105,305,834 $ 92,619,906 $10,489,210 $7,636,750
=========== ============ ============ ============ =========== ==========
(A) Undistributed (overdistributed) net
investment income ................... $ 263 $ 263 $ (39,426) $ -- $ 559 $ --
=========== ============ ============ ============ =========== ==========
OTHER INFORMATION:
Share Transactions:
Sold .................................... 6,212,490 12,419,269 205,535 581,676 188,832 773,404
Issued to shareholders in reinvestment
of dividends ........................ 319,778 816,592 61,031 1,012,617 1,478 2,801
Repurchased ............................. (5,422,122) (11,744,505) (184,053) (321,065) (32,238) (37,369)
----------- ------------ ------------ ------------ ----------- ----------
Net increase in shares outstanding .. 1,110,146 1,491,356 82,513 1,273,228 158,072 738,836
=========== ============ ============ ============ =========== ==========
</TABLE>
- ----------
(1) The Fund commenced operations on March 4, 1998.
(2) The Fund commenced operations on April 17, 1998.
(3) The Fund commenced operations on March 3, 1998.
(a) Amount represents initial seed money.
See Notes to Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
Small Company Columbia Real Estate Asset Allocation
Growth Fund Equity Fund II Fund
--------------------------- ---------------------------- ---------------------------
Six months Year Six months Year Six months Period
ended June 30, ended ended June 30, ended ended June 30, ended
1999 December 31, 1999 December 31, 1999 December 31,
(unaudited) 1998(2) (unaudited) 1998(3) (unaudited) 1998
-------------- ------------ -------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS at beginning of period .............. $1,142,673 $ 10(a) $ 784,016 $250,000(a) $78,586,004 $42,535,206
---------- ---------- ---------- -------- ----------- -----------
Increase (decrease) in Net Assets resulting
from operations:
Net investment income (loss) ............... (7,341) (3,245) 18,514 21,823 1,058,261 1,646,677
Net realized gain (loss) on investments sold 110,304 (72,146) (10,897) (1,622) 584,840 668,851
Net change in unrealized appreciation
(depreciation) of investments .......... 43,059 61,114 38,440 (79,468) 1,048,961 7,770,082
---------- ---------- ---------- -------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .......... 146,022 (14,277) 46,057 (59,267) 2,692,062 10,085,610
---------- ---------- ---------- -------- ----------- -----------
Dividends to shareholders from:
Net investment income ...................... -- -- (14,354) (20,397) (937,860) (1,658,095)
In excess of net investment income ......... -- (666) -- -- -- (7,406)
Net realized gain on investments ........... -- -- -- -- -- (954,596)
In excess of net realized gain
on investments ......................... -- -- -- -- -- (241,887)
---------- ---------- ---------- -------- ----------- -----------
Total Dividends ........................ -- (666) (14,354) (20,397) (937,860) (2,861,984)
---------- ---------- ---------- -------- ----------- -----------
Share Transactions:
Net proceeds from sale of shares ........... 305,599 1,167,022 243,610 643,056 17,580,626 29,289,514
Issued to shareholders in reinvestment
of dividends ........................... -- 666 14,353 20,397 937,860 2,861,984
Cost of shares repurchased ................. (44,201) (10,082) (64,677) (49,773) (993,404) (3,324,326)
---------- ---------- ---------- -------- ----------- -----------
Net increase from share transactions ... 261,398 1,157,606 193,286 613,680 17,525,082 28,827,172
---------- ---------- ---------- -------- ----------- -----------
Net increase in net assets ............. 407,420 1,142,663 224,989 534,016 19,279,284 36,050,798
---------- ---------- ---------- -------- ----------- -----------
NET ASSETS at end of period (including line A) . $1,550,093 $1,142,673 $1,009,005 $784,016 $97,865,288 $78,586,004
========== ========== ========== ======== =========== ===========
(A) Undistributed (overdistributed) net
investment income ...................... $ (7,341) $ -- $ 7,301 $ 3,141 $ 120,401 $ --
========== ========== ========== ======== =========== ===========
OTHER INFORMATION:
Share Transactions:
Sold ....................................... 35,748 129,312 27,993 67,305 1,055,204 1,909,181
Issued to shareholders in reinvestment
of dividends ........................... -- 73 1,609 2,377 56,970 182,716
Repurchased ................................ (5,165) (1,353) (7,148) (5,437) (60,481) (217,344)
---------- ---------- ---------- -------- ----------- -----------
Net increase in shares outstanding ..... 30,583 128,032 22,454 64,245 1,051,693 1,874,553
========== ========== ========== ======== =========== ===========
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
The Galaxy VIP Fund
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
High Quality Columbia High
Bond Fund Yield Fund II
------------------------------ ----------------------------
Six months Year Six months Period
ended June 30, ended ended June 30, ended
1999 December 31, 1999 December 31,
(unaudited) 1998 (unaudited) 1998(1)
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ............................... $ 23,288,822 $ 14,457,126 $ 2,453,694 $ 250,000(a)
------------ ------------ ------------ ------------
Increase in Net Assets resulting from operations:
Net investment income ....................................... 682,142 985,174 78,914 83,002
Net realized gain (loss) on investments sold ................ (97,579) 273,906 2,045 26,477
Net change in unrealized appreciation
(depreciation) of investments ........................... (1,391,990) 394,647 (79,024) 58,795
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ............................ (807,427) 1,653,727 1,935 168,274
------------ ------------ ------------ ------------
Dividends to shareholders from:
Net investment income ....................................... (656,905) (985,105) (78,914) (82,994)
Net realized gain on investments ............................ (34,809) -- (3,087) (23,378)
------------ ------------ ------------ ------------
Total Dividends ......................................... (691,714) (985,105) (82,001) (106,372)
------------ ------------ ------------ ------------
Share Transactions:
Net proceeds from sale of shares ............................ 2,445,531 8,645,811 619,525 2,822,796
Issued to shareholders in reinvestment of dividends ......... 580,130 985,105 65,416 106,372
Cost of shares repurchased .................................. (1,335,554) (1,467,842) (654,573) (787,376)
------------ ------------ ------------ ------------
Net increase from share transactions .................... 1,690,107 8,163,074 30,368 2,141,792
------------ ------------ ------------ ------------
Net increase (decrease) in net assets ................... 190,966 8,831,696 (49,698) 2,203,694
------------ ------------ ------------ ------------
NET ASSETS at end of period (including line A) .................. $ 23,479,788 $ 23,288,822 $ 2,403,996 $ 2,453,694
============ ============ ============ ============
(A) Undistributed net investment income ......................... $ 30,396 $ 5,159 $ 1,854 $ 1,854
============ ============ ============ ============
OTHER INFORMATION:
Share Transactions:
Sold ........................................................ 234,553 817,807 60,194 278,284
Issued to shareholders in reinvestment of dividends ......... 55,946 93,544 6,368 10,351
Repurchased ................................................. (130,313) (137,176) (63,811) (76,797)
------------ ------------ ------------ ------------
Net increase in shares outstanding ...................... 160,186 774,175 2,751 211,838
============ ============ ============ ============
</TABLE>
- ----------
(1) The Fund commenced operations on March 3, 1998.
(a) Amount represents initial seed money.
See Notes to Financial Statements.
38
<PAGE>
Money Market Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1999 ----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (A) ........... 0.02 0.05 0.05 0.05 0.05 0.04
Net realized and unrealized
gain (loss) on investments ....... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations . 0.02 0.05 0.05 0.05 0.05 0.04
---------- ---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net
investment income ................ (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
Dividends from net realized
capital gains .................... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Dividends .................. (0.02) (0.05) (0.05) (0.05) (0.05) (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net asset value .................. -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return ........................... 2.23%** 5.16% 4.99% 4.91% 5.38% 3.89%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...... $ 17,931 $ 16,821 $ 15,330 $ 16,295 $ 17,925 $ 13,276
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............. 4.44%* 4.95% 4.88% 4.80% 5.25% 3.85%
Operating expenses including
reimbursement/waiver ............. 0.48%* 0.55% 0.67% 0.60% 0.63% 0.42%
Operating expenses excluding
reimbursement/waiver ............. 0.90%* 0.98% 1.12% 1.02% 1.11% 1.21%
</TABLE>
- ----------
* Annualized
** Not Annualized
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended June 30,
1999 (unaudited) and the years ended December 31, 1998, 1997, 1996, 1995
and 1994 was $0.02, $0.05, $0.05, $0.05, $0.05 and $0.03, respectively.
See Notes to Financial Statements.
39
<PAGE>
Equity Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1999 -----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 19.20 $ 19.68 $ 15.58 $ 12.99 $ 10.40 $ 10.25
----------- ----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income (loss) (A) ... (0.01) 0.13 0.21 0.19 0.18 0.20
Net realized and unrealized
gain on investments ............. 2.52 4.25 4.10 2.59 2.59 0.15
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment Operations 2.51 4.38 4.31 2.78 2.77 0.35
----------- ----------- ----------- ----------- ----------- -----------
Less Dividends:
Dividends from net
investment income ............... --(1) (0.13) (0.21) (0.19) (0.18) (0.20)
Dividends from net realized
capital gains ................... (0.25) (4.73) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends ................. (0.25) (4.86) (0.21) (0.19) (0.18) (0.20)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net asset value ................. 2.26 (0.48) 4.10 2.59 2.59 0.15
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ........ $ 21.46 $ 19.20 $ 19.68 $ 15.58 $ 12.99 $ 10.40
=========== =========== =========== =========== =========== ===========
Total Return .......................... 13.16%** 23.52% 27.74% 21.49% 26.76% 3.47%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ..... $ 105,306 $ 92,620 $ 69,863 $ 46,242 $ 30,826 $ 19,391
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............ (0.06)%* 0.61% 1.20% 1.34% 1.55% 2.06%
Operating expenses including
reimbursement/waiver ............ 0.94%* 1.05% 1.08% 1.10% 1.21% 0.71%
Operating expenses excluding
reimbursement/waiver ............ 0.94%* 1.05% 1.08% 1.10% 1.24% 1.42%
Portfolio Turnover Rate ............... 38%** 75% 1% 8% 3% 2%
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) Amount is less than $0.005 per share.
(A) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for the six months ended
June 30, 1999 (unaudited) and the years ended December 31, 1998, 1997,
1996, 1995 and 1994 was $(0.01), $0.13, $0.21, $0.19, $0.18 and $0.13,
respectively.
See Notes to Financial Statements.
40
<PAGE>
Growth and Income Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Period ended
June 30, 1999 December 31,
(unaudited) 1998(1)
---------- ----------
<S> <C> <C>
Net Asset Value, Beginning of Period .............................. $ 10.34 $ 10.00
---------- ----------
Income from Investment Operations:
Net investment income (A) ...................................... 0.02 0.05
Net realized and unrealized gain on investments ................ 1.35 0.34
---------- ----------
Total from Investment Operations ............................ 1.37 0.39
---------- ----------
Less Dividends:
Dividends from net investment income ........................... (0.02) (0.05)
Dividends in excess of net investment income ................... -- --(2)
Dividends from net realized capital gains ...................... -- --
---------- ----------
Total Dividends ............................................. (0.02) (0.05)
---------- ----------
Net increase in net asset value ................................... 1.35 0.34
---------- ----------
Net Asset Value, End of Period .................................... $ 11.69 $ 10.34
========== ==========
Total Return ...................................................... 13.26%** 3.72%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................................. $ 10,489 $ 7,637
Ratios to average net assets:
Net investment income including reimbursement/waiver ........... 0.38%* 0.69%*
Operating expenses including reimbursement/waiver .............. 1.50%* 1.50%*
Operating expenses excluding reimbursement/waiver .............. 1.52%* 2.58%*
Portfolio Turnover Rate ........................................... 10%** 30%**
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 4, 1998.
(2) Amount is less than $0.005 per share.
(A) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for the six months ended
June 30, 1999 (unaudited) and the period ended December 31, 1998 was $0.02
and $(0.03), respectively.
See Notes to Financial Statements.
41
<PAGE>
Small Company Growth Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Period ended
June 30, 1999 December 31,
(unaudited) 1998(1)
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period ................................. $ 8.92 $ 10.00
--------- ---------
Income from Investment Operations:
Net investment (loss) (A) ......................................... (0.05) (0.02)
Net realized and unrealized gain (loss) on investments ............ 0.90 (1.05)
--------- ---------
Total from Investment Operations ............................... 0.85 (1.07)
--------- ---------
Less Dividends:
Dividends from net investment income .............................. -- --
Dividends in excess of net investment income ...................... -- (0.01)
Dividends from net realized capital gains ......................... -- --
--------- ---------
Total Dividends ................................................ -- (0.01)
--------- ---------
Net increase (decrease) in net asset value ........................... 0.85 (1.08)
--------- ---------
Net Asset Value, End of Period ....................................... $ 9.77 $ 8.92
========= =========
Total Return ......................................................... 9.53%** (10.68)%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) .................................... $ 1,550 $ 1,143
Ratios to average net assets:
Net investment (loss) including reimbursement/waiver .............. (1.18)%* (0.65)%*
Operating expenses including reimbursement/waiver ................. 1.60%* 1.60%*
Operating expenses excluding reimbursement/waiver ................. 6.79%* 12.86%*
Portfolio Turnover Rate .............................................. 96%** 87%**
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) The Fund commenced operations on April 17, 1998.
(A) Net investment (loss) per share before reimbursement/waiver of fees by the
Investment Advisor and/or Adminstrator for the six months ended June 30,
1999 (unaudited) and the period ended December 31, 1998 was $(0.27) and
$(0.36), respectively.
See Notes to Financial Statements.
42
<PAGE>
Columbia Real Estate Equity Fund II
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Period ended
June 30, 1999 December 31,
(unaudited) 1998(1)
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period ................................ $ 8.78 $ 10.00
--------- ---------
Income from Investment Operations:
Net investment income (A) ........................................ 0.17 0.28
Net realized and unrealized gain (loss) on investments ........... 0.22 (1.24)
--------- ---------
Total from Investment Operations .............................. 0.39 (0.96)
--------- ---------
Less Dividends:
Dividends from net investment income ............................. (0.14) (0.26)
Dividends from net realized capital gains ........................ -- --
--------- ---------
Total Dividends ............................................... (0.14) (0.26)
--------- ---------
Net increase (decrease) in net asset value .......................... 0.25 (1.22)
--------- ---------
Net Asset Value, End of Period ...................................... $ 9.03 $ 8.78
========= =========
Total Return ........................................................ 4.42%** (9.57)%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................................... $ 1,009 $ 784
Ratios to average net assets:
Net investment income including reimbursement/waiver ............. 4.17%* 4.62%*
Operating expenses including reimbursement/waiver ................ 1.70%* 1.70%*
Operating expenses excluding reimbursement/waiver ................ 5.73%* 10.49%*
Portfolio Turnover Rate ............................................. 7%** 3%**
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 3, 1998.
(A) Net investment income (loss) per share before reimbursement/waiver of fees
by the Investment Advisor and/or Administrator for the six months ended
June 30, 1999 (unaudited) and the period ended December 31, 1998 was $0.01
and $(0.26), respectively.
See Notes to Financial Statements.
43
<PAGE>
Asset Allocation Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1999 ----------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 16.37 $ 14.54 $ 13.37 $ 12.38 $ 9.80 $ 10.33
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (A) ........... 0.19 0.33 0.40 0.30 0.28 0.31
Net realized and unrealized
gain (loss) on investments ....... 0.33 2.17 2.11 1.53 2.58 (0.53)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations . 0.52 2.50 2.51 1.83 2.86 (0.22)
---------- ---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net
investment income ................ (0.17) (0.39) (0.40) (0.30) (0.28) (0.31)
Dividends in excess of net
investment income ................ -- --(1) -- -- -- --
Dividends from net realized
capital gains .................... -- (0.22) (0.94) (0.54) -- --
Dividends in excess of net realized
capital gains .................... -- (0.06) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Dividends .................. (0.17) (0.67) (1.34) (0.84) (0.28) (0.31)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net asset value ..................... 0.35 1.83 1.17 0.99 2.58 (0.53)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ......... $ 16.72 $ 16.37 $ 14.54 $ 13.37 $ 12.38 $ 9.80
========== ========== ========== ========== ========== ==========
Total Return ........................... 3.21%** 17.51% 19.03% 14.64% 29.42% (2.15)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...... $ 97,865 $ 78,586 $ 42,535 $ 24,114 $ 17,246 $ 10,572
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............. 2.44%* 2.69% 2.90% 2.31% 2.54% 3.02%
Operating expenses including
reimbursement/waiver ............. 1.01%* 1.07% 1.19% 1.33% 1.37% 0.78%
Operating expenses excluding
reimbursement/waiver ............. 1.01%* 1.07% 1.25% 1.33% 1.54% 1.68%
Portfolio Turnover Rate ................ 55%** 88% 74% 45% 46% 28%
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) Amount is less than $0.005.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended June 30,
1999 (unaudited) and the years ended December 31, 1998, 1997, 1996, 1995
and 1994 was $0.19, $0.33, $0.39, $0.30, $0.26 and $0.22, respectively.
See Notes to Financial Statements.
44
<PAGE>
High Quality Bond Fund
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1999 ---------------------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 10.70 $ 10.31 $ 9.99 $ 10.37 $ 8.97 $ 10.11
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (A) ............ 0.30 0.58 0.58 0.58 0.57 0.56
Net realized and unrealized
gain (loss) on investments ........ (0.65) 0.39 0.32 (0.38) 1.40 (1.14)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations .. (0.35) 0.97 0.90 0.20 1.97 (0.58)
---------- ---------- ---------- ---------- ---------- ----------
Less Dividends:
Dividends from net
investment income ................. (0.29) (0.58) (0.58) (0.58) (0.57) (0.56)
Dividends from net realized
capital gains ..................... (0.01) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Dividends ................... (0.30) (0.58) (0.58) (0.58) (0.57) (0.56)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net asset value ................... (0.65) 0.39 0.32 (0.38) 1.40 (1.14)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .......... $ 10.05 $ 10.70 $ 10.31 $ 9.99 $ 10.37 $ 8.97
========== ========== ========== ========== ========== ==========
Total Return ............................ (3.29)%** 9.70% 9.36% 1.57% 22.55% (5.85)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....... $ 23,480 $ 23,289 $ 14,457 $ 11,814 $ 11,067 $ 8,012
Ratios to average net assets:
Net investment income including
reimbursement/waiver .............. 5.78%* 5.55% 5.82% 5.78% 5.86% 5.90%
Operating expenses including
reimbursement/waiver .............. 0.49%* 0.54% 0.77% 0.72% 0.80% 0.57%
Operating expenses excluding
reimbursement/waiver .............. 0.97%* 1.10% 1.44% 1.38% 1.57% 1.63%
Portfolio Turnover Rate ................. 117%** 194% 160% 132% 21% 32%
</TABLE>
- ----------
* Annualized
** Not Annualized
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended June 30,
1999 (unaudited) and the years ended December 31, 1998, 1997, 1996, 1995
and 1994 was $0.27, $0.52, $0.51, $0.51, $0.50 and $0.46, respectively.
See Notes to Financial Statements.
45
<PAGE>
Columbia High Yield Fund II
Financial Highlights
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six months ended Period ended
June 30, 1999 December 31,
(unaudited) 1998(1)
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period ............................ $ 10.36 $ 10.00
--------- ---------
Income from Investment Operations:
Net investment income (A) .................................... 0.33 0.49
Net realized and unrealized gain (loss) on investments ....... (0.32) 0.45
--------- ---------
Total from Investment Operations .......................... 0.01 0.94
--------- ---------
Less Dividends:
Dividends from net investment income ......................... (0.33) (0.49)
Dividends from net realized capital gains .................... (0.01) (0.09)
--------- ---------
Total Dividends ........................................... (0.34) (0.58)
--------- ---------
Net increase (decrease) in net asset value ...................... (0.33) 0.36
--------- ---------
Net Asset Value, End of Period .................................. $ 10.03 $ 10.36
========= =========
Total Return .................................................... 0.13%** 9.61%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............................... $ 2,404 $ 2,454
Ratios to average net assets:
Net investment income including reimbursement/waiver ......... 6.51%* 6.18%*
Operating expenses including reimbursement/waiver ............ 1.60%* 1.60%*
Operating expenses excluding reimbursement/waiver ............ 2.72%* 4.25%*
Portfolio Turnover Rate ......................................... 9%** 89%**
</TABLE>
- ----------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 3, 1998.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended June 30,
1999 (unaudited) and the period ended December 31, 1998 were $0.27 and
$0.28, respectively.
See Notes to Financial Statements.
46
<PAGE>
Notes to Financial Statements (unaudited)
1. Organization
The Galaxy VIP Fund, a Massachusetts business trust (the "Trust"), is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified open-end, management investment company, for the purpose
of providing a vehicle for the investment of assets of various separate accounts
established to fund variable annuity contracts and variable life insurance
policies. Currently, shares of the Trust are offered only to separate accounts
in connection with variable annuity contracts issued by American Skandia Life
Assurance Corporation and its affiliated life assurance companies. The
accompanying financial statements and financial highlights are those of the
Money Market Fund, Equity Fund, Growth and Income Fund, Small Company Growth
Fund, Columbia Real Estate Equity Fund II, Asset Allocation Fund, High Quality
Bond Fund and Columbia High Yield Fund II (individually a "Fund,"collectively,
the "Funds"), the eight managed investment portfolios offered by the Trust as of
the date of this report.
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 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: Investments in securities which are traded on a
recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded, or at the last sale
price on the national securities market. Securities traded on over-the-counter
markets are valued at the last sales price. Short-term obligations that mature
in 60 days or less are valued at amortized cost, which approximates fair value.
Corporate debt securities and debt securities of U.S. issuers (other than
short-term investments), including municipal securities, are valued by an
independent pricing service approved by the Board of Trustees. When, in the
judgment of the service, quoted bid prices for securities are readily available
and are representative of the bid side of the market, these investments are
valued at the mean between quoted bid prices and asked prices. Investments with
prices that cannot be readily obtained, if any, are carried at fair value as
determined by the service based on methods which include consideration of yields
or prices of bonds of comparable quality, coupon maturity and type, indications
as to values from dealers, and general market conditions. All other securities
and assets are appraised at their fair value as determined in good faith under
consistently applied procedures established by and under the general supervision
of the Board of Trustees. The investments of the Money Market Fund are valued
utilizing the amortized cost valuation method permitted in accordance with Rule
2a-7 under the 1940 Act. This method involves valuing a portfolio security
initially at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium.
Securities Transactions and Investment Income: Securities transactions are
recorded on a trade date basis. Net realized gains and losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared daily and paid monthly with respect to the Money Market
Fund, High Quality Bond Fund and Columbia High Yield Fund II, and declared and
paid quarterly with respect to the Equity Fund, Growth and Income Fund, Small
Company Growth Fund, Columbia Real Estate Equity Fund II, and Asset Allocation
Fund. Net realized capital gains, if any, are distributed at least annually.
Income dividends and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions with institutions that the Fund's investment advisor has determined
are credit-worthy pursuant to guidelines established by the Trust's Board of
Trustees. Each repurchase agreement transaction is recorded at cost plus accrued
interest. Each Fund requires that the securities collateralizing a repurchase
agreement transaction be transferred to the Trust's custodian in a manner that
is intended to enable the Fund to obtain those securities in the event of a
counterparty default. The value of the collateral securities is monitored daily
to ensure that the value of the collateral, including accrued interest, equals
or exceeds the repurchase price. Repurchase agreement transactions involve
certain risks in the event of default or insolvency of the counterparty,
including possible delays or restrictions upon a Fund's ability to dispose of
the underlying securities, and a possible decline in the value of the underlying
securities during the period while the Fund seeks to assert its rights.
Federal Income Taxes: The Trust treats each Fund as a separate entity for
federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
By so qualifying,
47
<PAGE>
Notes to Financial Statements
each Fund will not be subject to federal income taxes to the extent it
distributes substantially all of its taxable or tax-exempt income, if any, for
the tax year ending December 31. In addition, by distributing during 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.
Expenses: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a particular Fund are
charged to the Fund, while expenses which are attributable to more than one Fund
of the Trust are allocated among the respective Funds.
Organization Costs: Each Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under federal securities laws. All such costs are being
amortized using the straight-line method over a period of five years beginning
with the commencement of each Fund's operation.
3. Investment Advisory, Administration and Other Related Party Transactions
The Trust has entered into separate investment advisory agreements with
Fleet Investment Advisors Inc. ("Fleet") and Columbia Management Co.
("Columbia"). Fleet and Columbia (the "Investment Advisors") are indirect
wholly-owned subsidiaries of Fleet Financial Group, Inc. Under the terms of its
agreement with the Trust, Fleet provides services for a fee, computed daily and
paid monthly, at an annual rate based upon the following percentages of average
daily net asset value: 0.40% for the Money Market Fund, 0.75% for the Equity,
Growth and Income, Small Company Growth and Asset Allocation Funds and 0.55% for
the High Quality Bond Fund. Under the terms of its agreement with the Trust,
Columbia provides services for a fee, computed daily and paid monthly, at an
annual rate based upon the following percentages of average daily net asset
value: 0.75% for the Columbia Real Estate Equity Fund II and 0.60% for the
Columbia High Yield Fund II (see Note 4).
The Trust and First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly-owned subsidiary of First Data Corporation, are parties to an
administration agreement under which Investor Services Group (the
"Administrator") provides services for a fee, computed daily and paid monthly,
at the annual rate of 0.085% of the first $1 billion of the combined average
daily net assets of the Funds, plus 0.078% of the next $1.5 billion of the
combined average daily net assets of the Funds, plus 0.073% of the combined
average daily net assets of the Funds in excess of $2.5 billion. The minimum
aggregate annual fee payable for administration of the Funds is $100,000. In
addition, Investor Services Group also provides certain fund accounting and
custody administration services pursuant to certain fee arrangements. Pursuant
to these fee arrangements, Investor Services Group compensates the Trust's
custodian bank, The Chase Manhattan Bank, for its services.
First Data Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of Investor Services Group and an indirect wholly-owned subsidiary of
First Data Corporation, acts as the exclusive distributor of the Trust's shares.
Certain officers of the Trust may be officers of the Administrator. Such
officers receive no compensation from the Trust for serving in their respective
roles. No officer, director or employee of the Investment Advisors serves as an
officer, trustee or employee of the Trust. Effective May 28, 1999, each Trustee
is entitled to receive for services as a trustee of the Trust, The Galaxy Fund
("Galaxy") and Galaxy Fund II ("Galaxy II") an aggregate fee of $45,000 per
annum plus certain other fees for attending or participating in meetings as well
as reimbursement for expenses incurred in attending meetings. Prior to May 28,
1999, each Trustee was entitled to receive for services as a trustee of the
Trust, Galaxy and Galaxy II an aggregate fee of $40,000 per annum plus certain
other fees for attending or participating in meetings as well as reimbursement
for expenses incurred in attending meetings. The Chairman of the Boards of
Trustees and the President and Treasurer of the Trust, Galaxy and Galaxy II are
also entitled to additional fees for their services in these capacities. These
fees are allocated among the funds of the Trust, Galaxy and Galaxy II, based on
their relative net assets.
Each Trustee is eligible to participate in The Galaxy Fund/The Galaxy VIP
Fund/Galaxy Fund II Deferred Compensation Plan (the "Plan"), an unfunded,
non-qualified deferred compensation plan. The Plan allows each Trustee to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
Expenses for the six months ended June 30, 1999 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
Pursuant to procedures adopted by the Board of Trustees and in accordance
with the 1940 Act, certain Funds placed a portion of their portfolio
transactions with Quick & Reilly Institutional Trading, a division of Fleet
Securities, Inc., an affiliate of the
48
<PAGE>
Notes to Financial Statements
Funds' Advisor. The commissions paid to Quick & Reilly Institutional Trading for
the period January 1, 1999 through June 30, 1999 were as follows:
Fund Commissions
---- -----------
Equity $ 5,146
Asset Allocation 11,931
4. Waiver of Fees and Reimbursement of Expenses
The Investment Advisors and Administrator may voluntarily waive all or a
portion of the fees payable to them by the Funds. The Investment Advisors and
Administrator may, at their discretion, revise or discontinue the voluntary fee
waivers at any time.
For the six months ended June 30, 1999, Fleet and the Administrator
voluntarily waived advisory, fund accounting and custody fees as follows:
Fees waived by Fees waived by
Fund Fleet Administrator
---- -------------- --------------
Money Market $ 21,697 $ 14,877
High Quality Bond 42,523 14,876
The Investment Advisors may, from time to time agree to reimburse a Fund
for expenses above a specified percentage of average net assets. For the year
ended June 30, 1999, the Investment Advisors agreed to reimburse the Growth and
Income Fund, the Small Company Growth Fund, the Columbia Real Estate Equity Fund
II and the Columbia High Yield Fund II in the amounts of $1,153, $32,247,
$17,889 and $13,555, respectively.
5. Shares of Beneficial Interest
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of shares of beneficial interest, each with a par value of
$0.001. Shares of the Trust are currently classified into eight classes of
shares including: Class A - Money Market Fund; Class B - Equity Fund; Class C -
Asset Allocation Fund; Class D - High Quality Bond Fund; Class E - Small Company
Growth Fund; Class F - Growth and Income Fund; Class G - Columbia Real Estate
Equity Fund II; and Class H - Columbia High Yield Fund II. Each share represents
an equal proportionate interest in the respective Fund, bears the same fees and
expenses and is entitled to such dividends and distributions of income earned as
are declared at the discretion of the Trust's Board of Trustees. Shareholders
are entitled to one vote for each full share held and will vote in the aggregate
and not by class, except as otherwise expressly required by law or when the
Board of Trustees determines that the matter to be voted on affects only the
interests of shareholders of a particular class.
6. Purchases and Sales of Securities
The costs of purchases and proceeds from sales of securities, excluding
short-term investments, for the period ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
Fund Other Government Other Government
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity $35,998,092 $ -- $37,783,042 $ --
Growth and Income 2,089,057 -- 788,770 --
Small Company Growth 1,284,433 -- 1,097,602 --
Columbia Real Estate Equity II 281,725 -- 57,992 --
Asset Allocation 21,985,685 34,167,475 15,971,439 26,538,237
High Quality Bond 11,047,579 18,016,554 5,855,882 21,449,877
Columbia High Yield II 223,905 -- 208,462 --
</TABLE>
The aggregate gross unrealized appreciation (depreciation), net unrealized
appreciation (depreciation) and cost for all securities, as computed on a
federal income tax basis, at June 30, 1999 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Appreciation (Depreciation) Net Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market $ -- $ -- $ -- $ 18,066,939
Equity 29,445,911 (1,856,490) 27,589,421 77,752,754
Growth and Income 1,766,014 (340,514) 1,425,500 8,967,446
Small Company Growth 256,689 (152,516) 104,173 1,453,548
Columbia Real Estate Equity II 19,670 (60,698) (41,028) 1,040,716
Asset Allocation 16,325,159 (1,955,534) 14,369,625 82,417,570
High Quality Bond 130,945 (758,563) (627,618) 23,926,128
Columbia High Yield II 24,981 (45,210) (20,229) 2,401,102
</TABLE>
49
<PAGE>
Notes to Financial Statements
7. Capital Loss Carryforward
At December 31, 1998, the Funds had capital loss carry forwards as follows:
Fund Amount Expiration
---- ------ ----------
Money Market $ 74 2002
29 2003
Growth and Income 26,528 2006
Small Company Growth 67,971 2006
Columbia Real Estate
Equity II 1,507 2006
8. Change of Accountants
On January 13, 1999, the Trust dismissed PricewaterhouseCoopers LLP ("PwC")
as the Trust's independent auditors by action of the Trust's Board of Trustees
upon the recommendation of a Special Committee of the Board. PwC's reports on
the Trust's financial statements for the fiscal years ended December 31, 1998
and December 31, 1997 contained no adverse opinion or disclaimer of opinion nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. During the Trust's fiscal years ended December 31, 1998 and December
31, 1997 and the interim period commencing January 1, 1999 and ending January
13, 1999, (i) there were no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of PwC,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the Trust's financial statements
for such years, and (ii) there were no "reportable events" of the kind described
in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of
1934, as amended.
On January 13, 1999, the Trust by action of its Board of Trustees upon the
recommendation of a Special Committee of the Board engaged Ernst & Young LLP
("E&Y") as the independent auditors to audit the Trust's financial statements
for the fiscal year ending December 31, 1999. During the Trust's fiscal years
ended December 31, 1998 and December 31, 1997 and the interim period commencing
January 1, 1999 and ending January 13, 1999, neither the Trust nor anyone on its
behalf has consulted E&Y on items which (i) concerned the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Trust's financial
statements or (ii) concerned the subject of a disagreement (as defined in
paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as
described in paragraph (a)(1)(v) of said Item 304).
50
<PAGE>
This page left blank intentionally.
51
<PAGE>
Galaxy VIP Fund 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 and Assistant Treasurer
William Greilich Vice President
Investment Advisors
Fleet Investment Advisors Inc.
75 State Street
Boston, MA 02109
Columbia Management Co. 1300 S.W. Sixth Avenue
P.O. Box 1530
Portland, OR 97207-1350
Distributor
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581-5108
Administrator
First Data Investor
Services Group, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
This report is submitted for the general information of shareholders of The
Galaxy VIP Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for The Galaxy VIP
Fund and for American Skandia Life Assurance Corporation Variable Account E,
which contain more information concerning investment policies, fees and expenses
and other pertinent information. Read the prospectuses carefully before you
invest.
Shares of the Funds are not bank deposits or obligations of, or guaranteed or
endorsed by, Fleet Financial Group, Inc. or any of its affiliates, Fleet
Investment Advisors Inc., Columbia Management Co., or any Fleet bank. Shares of
the Funds are not federally insured by, guaranteed by, obligations of or
otherwise supported by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental agency.
Investment return and principal value will vary as a result of market conditions
or other factors so that shares of the Funds, when redeemed, may be worth more
or less than their original cost. An investment in the Funds involves investment
risks, including the possible loss of principal amount invested.
This report was printed on recycled paper.
<PAGE>
[LOGO] Galaxy Funds
--------------------
STANDARD RATE
4400 Computer Drive U. S. POSTAGE PAID
P.O. Box 5108 PERMIT NO. 9
Westborough, MA 01581-5108 BOSTON, MA
--------------------
(6/99) Date of first use September 1, 1999
