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INSTITUTIONAL GOVERNMENT MONEY MARKET FUND REPORT
SEMI-ANNUAL
REPORT
FOR THE SIX MONTHS
ENDED APRIL 30, 1998
<PAGE>
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce
McConnel, III, Esq.
Secretary
Jylanne Dunne
Vice President &
Assistant Treasurer
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
75 State Street
Boston, MA
02109
DISTRIBUTOR
First Data
Distributors, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581
ADMINISTRATOR
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund
PORTFOLIO OF INVESTMENTS
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- ---------- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 82.46%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 26.11%
<S> <C> <C>
$8,000,000 5.44% 05/06/98 (A)...................................................................................... $ 7,993,956
5,000,000 5.40% 05/11/98 (A)...................................................................................... 4,992,486
5,000,000 5.41% 07/10/98 (A)...................................................................................... 4,947,451
7,000,000 5.40% 07/17/98 (A)...................................................................................... 6,919,150
2,000,000 5.37% 08/12/98.......................................................................................... 1,998,557
5,000,000 5.37% 08/18/98 (A)...................................................................................... 4,918,704
----------
31,770,304
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (A) - 22.03%
1,000,000 5.40% 05/20/98.......................................................................................... 997,150
5,000,000 5.42% 05/29/98.......................................................................................... 4,978,922
7,000,000 5.40% 06/10/98.......................................................................................... 6,958,000
7,000,000 5.42% 06/19/98.......................................................................................... 6,948,550
7,000,000 5.40% 07/15/98.......................................................................................... 6,921,250
-----------
26,803,872
-----------
UNITED STATES TREASURY NOTES - 16.43%
15,000,000 6.13% 05/15/98.......................................................................................... 15,004,682
5,000,000 6.00% 05/31/98.......................................................................................... 5,001,518
-----------
20,006,200
-----------
FEDERAL HOME LOAN BANK (A) - 12.16%
4,925,000 5.43% 05/01/98.......................................................................................... 4,925,000
5,000,000 5.43% 05/06/98.......................................................................................... 4,996,229
5,000,000 5.32% 10/16/98.......................................................................................... 4,875,868
-----------
14,797,097
-----------
FEDERAL FARM CREDIT BANK (A) - 5.73%
7,000,000 5.39% 05/29/98.......................................................................................... 6,970,654
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS ........................................................... 100,348,127
(Cost $100,348,127) -----------
REPURCHASE AGREEMENT - 17.38%
21,146,000 Merrill Lynch Government Securities, Inc.
5.375%, 05/01/98, Dated 04/30/98
Repurchase Price $21,149,157
(Collateralized by U.S. Treasury Note
6.63%, Due 2002, Total Par $20,790,000
Market Value $21,569,625)............................................................................... 21,146,000
-----------
TOTAL REPURCHASE AGREEMENT.............................................................................. 21,146,000
(Cost $21,146,000) -----------
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- ---------- ---------
INVESTMENT COMPANY - 0.12%
<S> <C>
151,612 Federated U.S Treasury Cash Reserve..................................................................... $ 151,612
------------
TOTAL INVESTMENT COMPANY................................................................................ 151,612
(Cost $151,612) ------------
TOTAL INVESTMENTS - 99.96%............................................................................................ 121,645,739
(Cost $121,645,739)* ------------
NET OTHER ASSETS AND LIABILITIES - 0.04%.............................................................................. 46,295
------------
NET ASSETS - 100.00%.................................................................................................. $121,692,034
============
</TABLE>
- -------------------------------------------
* Aggregate cost for Federal tax purposes.
(A) Discount yields at time of purchase.
See Notes to Financial Statements.
2
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments
Investments at amortized cost (Note 2)................................................................. $100,499,739
Repurchase agreement................................................................................... 21,146,000
------------
Total Investments at value............................................................................ 121,645,739
Cash.................................................................................................... 912
Interest and dividend receivable ....................................................................... 609,922
Deferred organizational expense (Note 2)................................................................ 429
Receivable from Investment Advisor (Note 4)............................................................. 5,400
------------
Total Assets .......................................................................................... 122,262,402
------------
LIABILITIES:
Dividends payable ...................................................................................... 526,153
Advisory fee payable (Note 3)........................................................................... 10,709
Payable to Administrator (Note 3)....................................................................... 8,651
Trustees' fees and expenses payable (Note 3)............................................................ 6,342
Accrued expenses and other payables..................................................................... 18,513
------------
Total Liabilities...................................................................................... 570,368
------------
NET ASSETS .............................................................................................. $121,692,034
============
NET ASSETS consist of:
Par value (Note 5)...................................................................................... $ 121,692
Paid-in capital in excess of par value.................................................................. 121,570,524
Undistributed net investment income..................................................................... 4,972
Accumulated net realized (loss) on investments sold..................................................... (5,154)
------------
TOTAL NET ASSETS......................................................................................... $121,692,034
============
Shares of beneficial interest outstanding................................................................ 121,692,216
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding)....................................................................... $ 1.00
============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund
STATEMENT OF OPERATIONS
For the six months ended April 30, 1998 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Note 2) ................................................................................................ $ 4,030,090
Dividends (Note 2) ............................................................................................... 55,018
------------
Total investment income ....................................................................................... 4,085,108
------------
EXPENSES:
Investment advisory fee (Note 3)................................................................................. 155,237
Administration fee (Note 3)...................................................................................... 69,373
Custodian fee.................................................................................................... 7,110
Fund accounting fee (Note 3)..................................................................................... 17,512
Legal fee (Note 3)............................................................................................... 3,663
Audit fee ....................................................................................................... 6,570
Transfer agent fee (Note 3) .................................................................................... 2,480
Trustees' fees and expenses (Note 3)............................................................................. 1,821
Amortization of organization costs (Note 2) .................................................................... 1,221
Reports to shareholders ......................................................................................... 4,774
Insurance ....................................................................................................... 1,893
Miscellaneous ................................................................................................... 4,961
------------
Total expenses before reimbursement/waiver (Note 4)............................................................ 276,615
Less: reimbursement/waiver (Note 4)............................................................................ (121,377)
------------
Total expenses net of reimbursement/waiver..................................................................... 155,238
------------
NET INVESTMENT INCOME ............................................................................................. 3,929,870
------------
NET REALIZED GAIN ON INVESTMENTS SOLD (Note 2)..................................................................... 27,132
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................................... $ 3,957,002
============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months ended Year ended
April 30, 1998 October 31,
(unaudited) 1997
------------------ -----------------
<S> <C> <C>
NET ASSETS at beginning of period........................................... $ 175,140,909 $ 500,927,090
------------------ -----------------
Increase in Net Assets resulting from operations:
Net investment income..................................................... 3,929,870 17,339,223
Net realized gain on investments sold..................................... 27,132 28,949
------------------ -----------------
Net increase in net assets resulting from operations.................... 3,957,002 17,368,172
------------------ -----------------
Dividends to shareholders from:
Net investment income .................................................... (3,929,868) (17,339,223)
------------------ -----------------
Share Transactions:
Net proceeds from sales of shares......................................... 228,422,271 1,530,804,105
Issued to shareholders in reinvestment of dividends....................... 104,775 1,312,718
Cost of shares repurchased................................................ (282,003,055) (1,857,931,953)
------------------ -----------------
Net (decrease) from share transactions.................................. (53,476,009) (325,815,130)
------------------ -----------------
Net (decrease) in net assets.......................................... (53,448,875) (325,786,181)
------------------ -----------------
NET ASSETS at end of period (including line A).............................. $ 121,692,034 $ 175,140,909
================== =================
(A) Undistributed net investment income .................................... $ 4,972 $ 4,970
================== =================
OTHER INFORMATION:
Share Tramsactions:
Sold...................................................................... 228,422,271 1,530,804,105
Issued to shareholders in reinvestment of dividends....................... 104,775 1,312,718
Repurchased............................................................... (282,003,055) (1,857,931,953)
------------------ -----------------
Net (decrease) in shares outstanding.................................... (53,476,009) (325,815,130)
================== =================
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
THE GALAXY FUND
Institutional Government Money Market Fund(1)
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1998 ------------------------
(unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Income from Investment Operations:
Net investment income (A)................................. 0.03 0.05 0.05
Net realized and unrealized gain (loss) on investments.... -- -- --
---------- ---------- ----------
Total from Investment Operations:....................... 0.03 0.05 0.05
---------- ---------- ----------
Less Dividends:
Dividends from net investment income...................... (0.03) (0.05) (0.05)
Dividends from net realized capital gains................. -- -- --
---------- ---------- ----------
Total Dividends:........................................ (0.03) (0.05) (0.05)
---------- ---------- ----------
Net increase (decrease) in net asset value.................. -- -- --
---------- ---------- ----------
Net Asset Value, End of Period.............................. $1.00 $ 1.00 $ 1.00
========== ========== ==========
Total Return................................................ 2.56%** 5.09% 5.12%
Ratios/Supplemental Data:
Net Assets, End of Period (000's)........................... $ 121,692 $ 175,141 $ 500,927
Ratios to average net assets:
Net investment income including
reimbursement/waiver.................................... 5.06%* 4.94% 5.00%
Operating expenses including reimbursement/waiver......... 0.20%* 0.19% 0.19%
Operating expenses excluding reimbursement/waiver......... 0.36%* 0.33% 0.33%
<CAPTION>
Years ended October 31,
1995 1994 1993(2)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------
Income from Investment Operations:
Net investment income (A)................................. 0.05 0.04 0.02
Net realized and unrealized gain (loss) on investments.... -- -- --
---------- ---------- ---------
Total from Investment Operations:....................... 0.05 0.04 0.02
---------- ---------- ---------
Less Dividends:
Dividends from net investment income...................... (0.05) (0.04) (0.02)
Dividends from net realized capital gains................. -- -- --
---------- ---------- ---------
Total Dividends:........................................ (0.05) (0.04) (0.02)
---------- ---------- ---------
Net increase (decrease) in net asset value.................. -- -- --
---------- ---------- ---------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00
========== =========== =========
Total Return................................................ 5.53% 3.56% 1.59%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's)........................... $ 506,692 $ 326,225 $ 158,890
Ratios to average net assets:
Net investment income including
reimbursement/waiver.................................... 5.38% 3.63% 2.85%*
Operating expenses including reimbursement/waiver......... 0.17% 0.17% 0.14%*
Operating expenses excluding reimbursement/waiver......... 0.33% 0.39% 0.46%*
</TABLE>
- ---------------------------------------------------
* Annualized.
** Not Annualized.
(1) The Fund was formerly known as the Institutional Treasury Money Market Fund.
(2) The Fund commenced operations on April 15, 1993.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended April 30,
1998 (unaudited), the years ended October 31, 1997, 1996, 1995 and 1994 and
the period ended October 31, 1993 were $0.03, $0.05, $0.05, $0.05, $0.04
and $0.01, respectively.
See Notes to Financial Statements.
6
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. Organization
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. As of the date of this report, the Trust
offered twenty-six managed investment portfolios. The accompanying financial
statements and financial highlights are those of the Institutional Government
Money Market Fund (formerly known as Institutional Treasury Money Market Fund)
(the "Fund") only.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
Portfolio Valuation: Securities in the 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
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis.
Dividends to Shareholders: Dividends from net investment income are declared
daily and paid monthly. Net realized capital gains, if any, are distributed at
least annually.
Income dividends and capital gain dividends are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Federal Income Taxes: The Trust treats the Fund as a separate entity for
federal income tax purposes. The Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, the Fund will not be subject to federal
income taxes to the extent that it distributes substantially all of its taxable
or tax-exempt income, if any, for its tax year ending October 31. In addition,
by distributing in each calendar year substantially all of its net investment
income, capital gains, and certain other amounts, if any, the Fund will not be
subject to a federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
Expenses: The Trust accounts separately for the assets, liabilities and
operations of the Fund. Expenses directly attributable to the 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.
Repurchase Agreements: The Fund may engage in repurchase agreement transactions
with institutions that the Trust's investment advisor has determined are
creditworthy pursuant to guidelines established by the Trust's Board of
Trustees. Each repurchase agreement transaction is recorded at cost plus accrued
interest. The 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.
Organization Costs: The Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under federal and state securities laws. All
such costs are amortized using the straight-line method over a period of five
years beginning with the Fund's commencement of operation. In the event that
7
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
any of the initial shares purchased by the Fund's sponsor are redeemed during
such period by any holder thereof, the Fund will be reimbursed by such holder
for any unamortized organization costs in the same proportion as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption.
3. Investment Advisory, Administration and Other Fees
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor"), an
indirect wholly-owned subsidiary of Fleet Financial Group, Inc., are parties to
an investment advisory agreement under which the Investment Advisor provides
advisory services for a fee, computed daily and paid monthly, at the annual rate
of 0.20% of the average daily net assets of the Fund (see Note 4).
The Trust and First Data Investor Services Group, Inc. ("Investor Services
Group" or "Fleet"), 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 0.09% of the first $2.5 billion of the combined average
daily net assets of the Fund and the other funds offered by the Trust (whose
financial statements are provided in separate reports), 0.085% of the next $2.5
billion of combined average daily net assets and 0.075% of combined average
daily net assets over $5 billion. In addition, Investor Services Group also
provides certain fund accounting, custody administration and transfer agency
services pursuant to certain fee arrangements. Pursuant to 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 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 Advisor serves as an
officer, trustee or employee of the Trust. Effective March 5, 1998, each Trustee
is entitled to receive for services as a trustee of the Trust, The Galaxy VIP
Fund ("VIP") and Galaxy Fund II ("Galaxy II") an aggregate fee of $40,000 per
annum plus certain other fees for attending or participating in meetings as well
as reimbursement for expenses incurred in attending meetings. Prior to March 5,
1998, each trustee was entitled to receive for services as a Trustee of the
Trust, VIP and Galaxy II an aggregate fee of $29,000 per annum plus certain
other fees for attending or participating in meetings as well as reimbursement
for expenses incurred in attending meetings. The Chairman of the Boards of
Trustees and the President and Treasurer of the Trust, VIP and Galaxy II are
also entitled to additional fees for their services in these capacities. These
fees are allocated among the funds of the Trust, VIP and Galaxy II based on
their relative net assets.
In addition, each Trustee is eligible to participate in The Galaxy Fund/The
Galaxy VIP Fund/Galaxy Fund II Deferred Compensation Plan (the "Plan"), an
unfunded, non-qualified deferred compensation plan. The Plan allows each
Trustee to defer receipt of all or a percentage of fees which otherwise would be
payable for services performed. Expenses for the six months ended April 30, 1998
include legal fees paid to Drinker Biddle & Reath LLP. A partner of that firm is
Secretary of the Trust.
4. Waiver of Fees and Reimbursement of Expenses
Fleet and/or Investor Services Group voluntarily agreed to waive a portion of
their fees and/or to reimburse certain expenses so that total expenses of the
Fund would not exceed certain expense limitations. For the six months ended
April 30, 1998, fees waived amounted to $109,129 and expenses reimbursed
amounted to $12,248 with respect to the Fund. The respective parties, at their
discretion, may revise or discontinue the voluntary fee waivers and/or expense
reimbursements at anytime.
5. Shares of Beneficial Interest
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest in the Fund, each with a par value of
$0.001. The Trust's shares are classified into twenty-seven classes of shares
consisting of one or more series of shares including: Class S - Institutional
Government Money Market Fund.
8
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
6 CAPITAL LOSS CARRYFORWARD
As of October 31, 1997, the Fund had capital loss carryforwards of $10,327
expiring in 2002 and $21,856 expiring in 2004.
7. Results of Special Meeting of Shareholders of the
Institutional Treasury Money Market Fund
At a special meeting of shareholders of the Galaxy Institutional Treasury Money
Market Fund held on February 26, 1998, shareholders of the Fund approved a
change in the Fund's fundamental investment limitation with respect to the
making of loans to permit the Fund to enter into repurchase agreements. The
results of the shareholder vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
79,515,189 0 1,790,128
</TABLE>
As a result of the foregoing approval and the approval by the Board of Trustees
of changes to certain other non-fundamental investment policies, the Fund
changed its name to Institutional Government Money Market Fund effective
February 28, 1998.
9
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<PAGE>
This report is submitted for the general information of shareholders of The
Galaxy Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for the Fund, which
contains more information concerning the Fund's investment policies, as well as
fees and expenses and other pertinent information. Read the prospectus carefully
before you invest.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by Fleet Financial Group, Inc. or any of its affiliates, Fleet Investment
Advisors Inc., or any Fleet bank. Shares of the Fund are not federally insured
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 Fund, when redeemed, may be worth more or less than their original cost.
An investment in the Fund involves investment risks, including the possible loss
of principal amount invested. There is no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share.
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<PAGE>
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