[Illustration of Acorn, Column, Graduation Cap and Handshake]
Galaxy Institutional Government Money Market Fund
Galaxy Funds
Semi-Annual Report
April 30, 1999
Galaxy Institutional Government
Money Market Fund
[GALAXY FUNDS LOGO]
<PAGE>
Institutional Government Money Market Fund
Portfolio of Investments
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PAR VALUE VALUE
--------- -----
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 83.80%
Federal Home Loan Mortgage Corporation - 27.02%
$ 8,000,000 4.80%, 05/06/99 (A) .......................... $ 7,994,667
7,000,000 4.75%, 05/14/99 (A) .......................... 6,987,993
8,000,000 4.76%, 05/20/99 (A) .......................... 7,979,902
6,116,000 4.73%, 06/15/99 (A) .......................... 6,079,839
8,000,000 4.69%, 06/21/99 (A) .......................... 7,946,847
8,000,000 4.71%, 07/12/99 (A) .......................... 7,924,640
10,000,000 4.73%, 08/27/99 (B) .......................... 9,995,340
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54,909,228
------------
Federal National Mortgage Association (A) - 26.81%
7,000,000 4.75%, 05/10/99 .......................... 6,991,688
7,000,000 4.74%, 05/11/99 .......................... 6,990,783
8,000,000 4.76%, 05/19/99 .......................... 7,980,960
7,000,000 4.81%, 05/24/99 .......................... 6,978,511
6,500,000 4.62%, 06/07/99 .......................... 6,469,136
4,247,000 4.70%, 06/18/99 .......................... 4,220,385
8,000,000 4.70%, 07/07/99 .......................... 7,930,022
7,000,000 4.72%, 07/13/99 .......................... 6,933,073
------------
54,494,558
------------
Federal Home Loan Bank - 25.05%
5,000,000 4.68%, 05/05/99 (A) .......................... 4,997,400
15,000,000 4.72%, 05/07/99 (A) .......................... 14,988,202
9,000,000 4.74%, 05/21/99 (A) .......................... 8,976,325
8,000,000 4.68%, 06/11/99 (A) .......................... 7,957,360
5,000,000 4.76%, 09/08/99 (B) .......................... 4,998,942
9,000,000 5.16%, 03/08/00 .......................... 8,993,356
------------
50,911,585
------------
Federal Farm Credit Bank (B) - 4.92%
10,000,000 4.60%, 05/03/99 .......................... 9,999,915
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Total U.S. Government and Agency Obligations .. 170,315,286
------------
(Cost $170,315,286)
REPURCHASE AGREEMENT - 18.08%
36,755,000 Repurchase Agreement with:
Goldman Sachs
4.90%, 05/03/99, dated 04/30/99
Repurchase Price $36,770,008
(Collateralized by U.S. Treasury Notes
5.500%, Due 08/15/28
Total Par $38,119,000
Market Value $37,490,383) ..................... 36,755,000
------------
Total Repurchase Agreement ................... 36,755,000
------------
(Cost $36,755,000)
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
Institutional Government Money Market Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
INVESTMENT COMPANY - 0.08%
161,284 Federated U.S. Treasury Cash Reserve .......... $ 161,284
------------
Total Investment Company ...................... 161,284
------------
(Cost $161,284)
Total Investments - 101.96% .................................... 207,231,570
------------
(Cost $207,231,570)*
Net Other Assets and Liabilities - (1.96)% ..................... (3,990,939)
------------
Net Assets - 100.00% ........................................... $203,240,631
============
</TABLE>
__________________________
* Aggregate cost for Federal tax purposes.
(A) Discount yields at time of purchase.
(B) Interest is reset at various time intervals. The interest rate shown
reflects the rate in effect at April 30, 1999.
See Notes to Financial Statements.
2
<PAGE>
Institutional Government Money Market Fund
Statement of Assets and Liabilities
April 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments
Investments at amortized cost (Note 2) ..................... $ 170,476,570
Repurchase agreement ....................................... 36,755,000
--------------
Total Investments at value ............................... 207,231,570
Receivable for shares sold ................................... 69,387
Interest and dividend receivable ............................. 339,744
--------------
Total Assets ............................................. 207,640,701
--------------
LIABILITIES:
Dividends payable ............................................ 778,462
Payable for shares repurchased ............................... 3,565,401
Advisory fee payable (Note 3) ................................ 13,330
Payable to Administrator (Note 3) ............................ 6,156
Trustees' fees and expenses payable (Note 3) ................. 8,348
Payable to custodian ......................................... 6,337
Accrued expenses and other payables .......................... 22,036
--------------
Total Liabilities ........................................ 4,400,070
--------------
NET ASSETS ..................................................... $ 203,240,631
==============
NET ASSETS consist of:
Par value (Note 5) ........................................... $ 203,241
Paid-in capital in excess of par value ....................... 203,037,392
Undistributed net investment income .......................... 5,152
Accumulated net realized (loss) on investments sold .......... (5,154)
--------------
TOTAL NET ASSETS ............................................... $ 203,240,631
==============
Shares of beneficial interest outstanding ...................... 203,240,633
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NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) ............................ $ 1.00
==============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Institutional Government Money Market Fund
Statement of Operations
For the six months ended April 30, 1999 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Note 2) ............................................ $ 5,636,494
Dividends (Note 2) ........................................... 3,432
------------
Total investment income ................................... 5,639,926
------------
EXPENSES:
Investment advisory fee (Note 3) ............................. 227,791
Administration fee (Note 3) .................................. 102,506
Custodian fee ................................................ 10,333
Fund accounting fee (Note 3) ................................. 18,668
Legal fee (Note 3) ........................................... 3,417
Audit fee .................................................... 6,833
Transfer agent fee (Note 3) .................................. 2,480
Trustees' fees and expenses (Note 3) ......................... 2,080
Reports to shareholders ...................................... 1,213
Miscellaneous ................................................ 14,940
------------
Total expenses before reimbursement/waiver (Note 4) ........ 390,261
------------
Less: reimbursement/waiver (Note 4) ........................ (163,293)
------------
Total expenses net of reimbursement/waiver ................. 226,968
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NET INVESTMENT INCOME .......................................... 5,412,958
------------
NET REALIZED GAIN ON INVESTMENTS SOLD (Note 2) ................. --
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 5,412,958
============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Institutional Government Money Market Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
April 30, 1999 Year ended
(unaudited) October 31, 1998
------------- ------------
<S> <C> <C>
NET ASSETS at beginning of period $ 200,319,062 $175,140,909
------------- ------------
Increase in Net Assets resulting from operations:
Net investment income ........................................ 5,412,958 7,840,721
Net realized gain on investments sold ........................ -- 27,132
------------- ------------
Net increase in net assets resulting from operations ....... 5,412,958 7,867,853
------------- ------------
Dividends to shareholders from:
Net investment income ........................................ (5,412,958) (7,840,539)
------------- ------------
Share Transactions:
Net proceeds from sales of shares ............................ 286,906,297 560,841,497
Issued to shareholders in reinvestment of dividends .......... 827,746 367,790
Cost of shares repurchased ................................... (284,812,474) (536,058,448)
------------- ------------
Net increase from share transactions ....................... 2,921,569 25,150,839
------------- ------------
Net increase in net assets ................................. 2,921,569 25,178,153
------------- ------------
NET ASSETS at end of period (including line A) ................. $ 203,240,631 $200,319,062
============= ============
(A) Undistributed net investment income ........................ $ 5,152 $ 5,152
============= ============
OTHER INFORMATION:
Share Transactions:
Sold ......................................................... 286,906,297 560,841,497
Issued to shareholders in reinvestment of dividends .......... 827,746 367,790
Repurchased .................................................. (284,812,474) (536,058,448)
------------- ------------
Net increase in shares outstanding ........................... 2,921,569 25,150,839
============= ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
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, 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 .......................................... 2.38%** 5.32% 5.09% 5.12% 5.53% 3.56%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ..................... $ 203,241 $ 200,319 $ 175,141 $500,927 $506,692 $326,225
Ratios to average net assets:
Net investment income including
reimbursement/waiver .............................. 4.75%* 5.17% 4.94% 5.00% 5.38% 3.63%
Operating expenses including reimbursement/waiver ... 0.20%* 0.20% 0.19% 0.19% 0.17% 0.17%
Operating expenses excluding reimbursement/waiver ... 0.34%* 0.36% 0.33% 0.33% 0.33% 0.39%
</TABLE>
_______________________________________
* Annualized.
** Not Annualized.
(1) The Fund was formerly known as the Institutional Treasury Money Market
Fund.
(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, 1999 (unaudited) and the years ended October 31, 1998, 1997,
1996, 1995 and 1994 were $0.02, $0.05, $ 0.05, $0.05, $ 0.05 and $ 0.04,
respectively.
See Notes to Financial Statements.
6
<PAGE>
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-nine managed investment portfolios. The accompanying financial
statements and financial highlights are those of the Institutional Government
Money Market Fund (formerly known as 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.
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.
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"), 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, effective September 10, 1998, of 0.09% of the first $2.5
billion of the combined average daily net assets of the
7
<PAGE>
Notes to Financial Statements
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, 0.075% of the next $7 billion of combined average
daily net assets, 0.065% of the next $3 billion of combined average daily net
assets, 0.06% of the next $3 billion of combined average daily net assets and
0.0575% of combined average daily net assets in excess of $18 billion. Prior to
September 10, 1998, Investor Services Group received administration fees at the
annual rate of 0.09% of the first $2.5 billion of 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 0.075% 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. In accordance with such 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, 1999 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 six
months ended April 30, 1999, the Investment Advisor and Administrator waived
fees totaling $113,896 and $45,558, respectively, and the Investment Advisor
reimbursed expenses of $3,839 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 thirty classes of shares
consisting of one or more series of shares including: Class S - Institutional
Government Money Market Fund.
6. Capital Loss Carryforward
As of October 31, 1998, the Fund had capital loss carryforwards of $5,154
expiring in 2004.
8
<PAGE>
Notes to Financial Statements
7. Change of Accountants
On January 13, 1999, the Trust dismissed PricewaterhouseCoopers LLP ("PwC") as
the Fund'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
Fund's financial statements for the fiscal years ended October 31, 1998 and
October 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 Fund's fiscal years ended October 31, 1998 and October
31, 1997 and the interim period commencing November 1, 1998 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 Fund'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 Funds financial statements for
the fiscal year ending October 31, 1999. During the Fund's fiscal years ended
October 31, 1998 and October 31, 1997 and the interim period commencing November
1, 1998 and ending January 13, 1999, neither the Trust, the Fund nor anyone on
their 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 Fund'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).
9
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NORTH READING, MA
[GALAXY FUNDS LOGO] 4400 Computer Drive --------------------
P.O. Box 5108
Westborough, MA 01581-5108
SAINSMM (7/1/99)
