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GALAXY
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FUNDS
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[GRAPHIC OMITTED]
INSTITUTIONAL TREASURY MONEY MARKET FUND REPORT
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ANNUAL
REPORT
FOR THE YEAR ENDED
OCTOBER 31, 1997
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<PAGE>
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce
McConnel, III, Esq.
Secretary
Jylanne Dunne
Vice President &
Assistant Treasurer
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>
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INSTITUTIONAL TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND OCTOBER 31, 1997
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VALUE
PAR VALUE (NOTE 2)
----------- ------------
U.S. GOVERNMENT OBLIGATIONS - 95.54%
U.S. TREASURY BILLS (A) - 74.98%
$ 15,500,000 5.14%, 11/06/97 ................................ $ 15,489,263
28,000,000 5.04%, 11/13/97 ................................ 27,953,682
10,000,000 5.11%, 11/20/97 ................................ 9,974,033
15,000,000 4.91%, 11/28/97 ................................ 14,944,819
14,000,000 4.88%, 12/04/97 ................................ 13,937,153
7,000,000 5.17%, 12/11/97 ................................ 6,961,461
5,000,000 4.93%, 12/18/97 ................................ 4,967,818
4,000,000 4.89%, 12/26/97 ................................ 3,970,178
8,000,000 5.15%, 01/08/98 ................................ 7,925,502
11,000,000 4.90%, 01/15/98 ................................ 10,886,156
4,500,000 5.12%, 01/22/98 ................................ 4,447,520
10,000,000 5.12%, 02/05/98 ................................ 9,864,667
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131,322,252
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U.S. TREASURY NOTES - 20.56%
19,000,000 5.25%, 12/31/97 ................................ 18,995,263
5,000,000 6.00%, 12/31/97 ................................ 5,005,445
5,000,000 5.63%, 01/31/98 ................................ 5,002,076
7,000,000 5.88%, 04/30/98 ................................ 7,010,547
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36,013,331
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS .............. 167,335,583
(Cost $167,335,583) ------------
SHARES
----------
INVESTMENT COMPANIES - 4.59%
3,901 AIM Short Term Investment Company Treasury
Tax Advantage Portfolio ...................... 3,901
8,037,586 Federated U.S. Treasury Cash Reserve ........... 8,037,586
------------
TOTAL INVESTMENT COMPANIES ..................... 8,041,487
(Cost $8,041,487) ------------
TOTAL INVESTMENTS - 100.13% ..................................... 175,377,070
(Cost $175,377,070)* ------------
NET OTHER ASSETS AND LIABILITIES - (0.13)% ...................... (236,161)
------------
NET ASSETS - 100.00% ............................................ $175,140,909
============
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* Aggregate cost for federal tax purposes is $175,377,173.
(A) Discount yields at time of purchase.
See Notes to Financial Statements.
<PAGE>
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INSTITUTIONAL TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
THE GALAXY FUND OCTOBER 31, 1997
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ASSETS:
Investments at value (Note 2) (cost $175,377,070) ............ $175,377,070
Interest and dividend receivable ............................. 530,947
Deferred organizational expense (Note 2) ..................... 1,650
Receivable from Investment Adviser (Note 4) .................. 7,503
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Total Assets ............................................... 175,917,170
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LIABILITIES:
Dividends payable ........................................... 730,202
Advisory fee payable (Note 3) ............................... 15,351
Payable to Administrator (Note 3) ........................... 13,596
Trustees' fees and expenses payable (Note 3) ................ 5,872
Accrued expenses and other payables ......................... 11,240
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Total Liabilities ......................................... 776,261
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NET ASSETS .................................................... $175,140,909
============
NET ASSETS CONSIST OF:
Par value (Note 5) .......................................... $ 175,168
Paid-in capital in excess of par value ...................... 174,993,057
Undistributed net investment income ......................... 4,970
Accumulated net realized (loss) on investments sold ......... (32,286)
------------
TOTAL NET ASSETS ............................................... $175,140,909
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING ...................... 175,168,225
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) ............................ $ 1.00
============
See Notes to Financial Statements.
<PAGE>
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INSTITUTIONAL TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
THE GALAXY FUND FOR THE YEAR ENDED OCTOBER 31, 1997
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INVESTMENT INCOME:
Interest (Note 2) ........................................ $17,566,926
Dividends (Note 2) ....................................... 430,197
-----------
Total investment income ................................ 17,997,123
-----------
EXPENSES:
Investment advisory fee (Note 3) ......................... 701,803
Administration fee (Note 3) .............................. 315,811
Custodian fee ............................................ 12,063
Fund accounting fee (Note 3) ............................. 43,104
Legal fee (Note 3) ....................................... 10,693
Audit fee ................................................ 12,069
Transfer agent fee (Note 3) .............................. 4,747
Trustees' fees and expenses (Note 3) ..................... 9,765
Amortization of organization costs (Note 2) .............. 3,077
Reports to shareholders .................................. 5,200
Registration fees ........................................ 1,434
Insurance ................................................ 985
Miscellaneous ............................................ 48,268
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Total expenses before reimbursement/waiver (Note 4) .... 1,169,019
Less: reimbursement/waiver (Note 4) .................... (511,119)
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Total expenses net of reimbursement/waiver ............. 657,900
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NET INVESTMENT INCOME ....................................... 17,339,223
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NET REALIZED GAIN ON INVESTMENTS SOLD (NOTE 2) ............. 28,949
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $17,368,172
===========
See Notes to Financial Statements.
<PAGE>
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INSTITUTIONAL TREASURY MONEY MARKET FUND
THE GALAXY FUND STATEMENT OF CHANGES IN NET ASSETS
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YEARS ENDED OCTOBER 31,
----------------------------
1997 1996
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NET ASSETS AT BEGINNING OF PERIOD ............. $ 500,927,090 $ 506,691,864
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income ...................... 17,339,223 24,316,334
Net realized gain (loss) on investments
sold ..................................... 28,949 (23,590)
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Net increase in net assets resulting from
operations ............................. 17,368,172 24,292,744
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DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ...................... (17,339,223) (24,316,334)
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SHARE TRANSACTIONS:
Net proceeds from sales of shares .......... 1,530,804,105 1,824,149,469
Issued to shareholders in reinvestment of
dividends ................................ 1,312,718 1,914,180
Cost of shares repurchased ................. (1,857,931,953) (1,831,804,833)
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Net (decrease) from share transactions ... (325,815,130) (5,741,184)
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Net (decrease) in net assets ........... (325,786,181) (5,764,774)
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NET ASSETS AT END OF PERIOD (INCLUDING LINE A). $ 175,140,909 $ 500,927,090
============== =============
(A) Undistributed net investment income ....... $ 4,970 $ 4,970
============== =============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold ...................................... 1,530,804,105 1,824,149,469
Issued to shareholders in reinvestment of
dividends ................................ 1,312,718 1,914,180
Repurchased ................................ (1,857,931,953) (1,831,804,833)
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Net (decrease) in shares outstanding ..... (325,815,130) (5,741,184)
============== ==============
See Notes to Financial Statements.
<PAGE>
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INSTITUTIONAL TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ....................................... 0.05 0.05 0.05 0.04 0.02
Net realized and unrealized gain (loss) on investments .......... -- -- -- -- --
-------- -------- -------- -------- --------
Total from Investment Operations: ............................. 0.05 0.05 0.05 0.04 0.02
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ............................ (0.05) (0.05) (0.05) (0.04) (0.02)
Dividends from net realized capital gains ....................... -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: .............................................. (0.05) (0.05) (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 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return ...................................................... 5.09% 5.12% 5.53% 3.56% 1.59%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) .................................. $175,141 $500,927 $506,692 $326,225 $158,890
Ratios to average net assets:
Net investment income including reimbursement/waiver ............ 4.94% 5.00% 5.38% 3.63% 2.85%*
Operating expenses including reimbursement/waiver ............... 0.19% 0.19% 0.17% 0.17% 0.14%*
Operating expenses excluding reimbursement/waiver ............... 0.33% 0.33% 0.33% 0.39% 0.46%*
- -------------------------------------------------
* Annualized
** Not Annualized
(1) 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 years ended October 31,
1997, 1996, 1995 and 1994 and for the period ended October 31, 1993 were $
0.05, $ 0.05, $ 0.05, $ 0.04 and $ 0.01, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS
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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-four managed investment portfolios. The accompanying financial
statements and financial highlights are those of the 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.
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 any
of the initial shares purchased by the Fund's sponsor are redeemed during such
period, the Fund will be reimbursed by any 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 also 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 0.09% 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,
Chase Manhattan Bank, N.A. for its services.
Prior to September 5, 1996, Investor Services Group was entitled to receive
administration fees, 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, 0.085% of the next $2.5 billion
of combined average daily net assets and 0.08% of combined average daily net
assets over $5 billion.
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. 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 $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. Prior to November 1, 1996, each Trustee was entitled to
receive for services as a trustee of the Trust and VIP an aggregate fee of
$18,000 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 of the Trust and VIP and the President
and Treasurer of the Trust and VIP were entitled to additional annual fees for
their services in these capacities.
Each Trustee is eligible to participate in the Trust's 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. On January 1, 1997, the Plan
was merged into a combined Deferred Compensation Plan for the Trust, VIP and
Galaxy II.
Expenses for the year ended October 31, 1997 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
The Investment Advisor and Administrator 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 year ended October
31, 1997, the Investment Advisor and Administrator waived fees totaling $350,901
and $142,012, respectively, and the Investment Advisor reimbursed expenses of
$18,206 with respect to the Fund. The Investment Advisor and Administrator, 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-four classes of shares
consisting of one or more series of shares including: Class S - Institutional
Treasury Money Market Fund.
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.
- -------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
During the year ended October 31, 1997, 100% of the income earned by the Fund
was from direct obligations of the U.S. Government. Appropriate tax information
detailing this information on a calendar year basis will accompany each
shareholder's year-end tax statement. As each state's rules on the exemption of
this income differ, please consult your tax advisor regarding specific tax
treatment.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Shareholders and the Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statements of assets and liabilities
of the Institutional Treasury Money Market Fund, including the portfolio of
investments, as of October 31, 1997, and the related statement of operations,
the statements of changes in net assets, and financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of The Galaxy Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Institutional Treasury Money Market Fund as of October 31, 1997,
the results of its operations, the changes in its net assets, and its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 19, 1997
<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 funds are not deposits or obligations of, or guaranteed or
endorsed by Fleet Financial Group, Inc. or any of its affiliates, Fleet
Investment Advisors Inc., or any Fleet bank. Shares of the funds are not
federally insured by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. 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.
[LOGO OMITTED}
This report was printed on recycled paper.
<PAGE>
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BULK RATE
U.S. POSTAGE
GALAXY PAID
FUNDS 440 Computer Drive PERMIT NO. 105
===== Box 5108 N. READING, MA
Westboro, MA 01581-5108 ---------------
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FN-244 (12/97)
