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Galaxy Institutional Government Money Market Funds
Galaxy Funds
Annual Report
October 31, 1999
[LOGO] Galaxy
Funds
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Institutional Government Money Market Fund
Portfolio of Investments
October 31, 1999
Par Value Value
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U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 85.64%
Federal Home Loan Mortgage Corporation - 32.58%
$ 7,000,000 5.20%, 11/03/99 (A) ........................... $ 6,997,978
8,000,000 5.26%, 11/04/99 (A) ........................... 7,996,493
8,000,000 5.24%, 11/10/99 (A) ........................... 7,989,520
16,000,000 5.22%, 11/16/99 (A) ........................... 15,965,233
10,000,000 5.21%, 11/19/99 (A) ........................... 9,973,950
10,000,000 5.24%, 12/01/99 (A) ........................... 9,956,333
10,000,000 5.26%, 12/17/99 (A) ........................... 9,932,789
3,640,000 6.54%, 05/19/00 ............................... 3,660,143
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72,472,439
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Federal Home Loan Bank - 26.45%
8,000,000 5.23%, 11/05/99 (A) ........................... 7,995,351
5,000,000 5.11%, 11/17/99 (A) ........................... 4,988,644
10,000,000 5.24%, 12/17/99 (A) ........................... 9,933,044
5,000,000 5.52%, 01/21/00 (A) ........................... 4,937,900
9,000,000 5.16%, 03/08/00 ............................... 8,997,274
2,000,000 5.20%, 05/26/00 ............................... 1,999,582
5,000,000 5.23%, 07/28/00 (B) ........................... 4,997,787
5,000,000 5.71%, 08/09/00 ............................... 4,997,573
5,000,000 5.92%, 10/04/00 (B) ........................... 4,996,825
5,000,000 5.92%, 10/13/00 ............................... 4,995,639
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58,839,619
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Federal National Mortgage Association - 24.36%
8,000,000 5.25%, 11/03/99 (A) ........................... 7,997,667
8,000,000 5.22%, 11/12/99 (A) ........................... 7,987,240
8,000,000 5.22%, 11/23/99 (A) ........................... 7,974,480
7,000,000 5.21%, 11/26/99 (A) ........................... 6,974,674
8,300,000 5.22%, 12/02/99 (A) ........................... 8,262,692
6,000,000 4.86%, 02/10/00, MTN .......................... 5,987,973
4,000,000 5.23%, 07/26/00 (B) ........................... 3,998,169
5,000,000 5.18%, 08/04/00 (B) ........................... 4,997,730
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54,180,625
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Federal Farm Credit Bank (B) - 2.25%
5,000,000 5.24%, 09/01/00 ............................... 4,998,750
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Total U.S. Government and Agency Obligations .. 190,491,433
(Cost $190,491,433) ------------
See Notes to Financial Statements.
1
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Institutional Government Money Market Fund
Portfolio of Investments (continued)
October 31, 1999
Par Value Value
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REPURCHASE AGREEMENT - 13.94%
$ 31,009,000 Repurchase Agreement with:
J.P. Morgan
5.22%, 11/01/99, dated 10/29/99
Repurchase Price $31,022,489
(Collateralized by U.S. Treasury Notes
7.50%, Due 11/15/16
Total Par $28,128,000
Market Value $31,630,058) ..................... $ 31,009,000
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Total Repurchase Agreement .................... 31,009,000
(Cost $31,009,000) ------------
Shares
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INVESTMENT COMPANY - 0.07%
162,563 Federated U.S. Treasury Cash Reserve .......... 162,563
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Total Investment Company ...................... 162,563
(Cost $162,563) ------------
Total Investments - 99.65% ....................................... 221,662,996
(Cost $221,662,996)* ------------
Net Other Assets and Liabilities - 0.35% ......................... 779,742
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Net Assets - 100.00% ............................................. $222,442,738
============
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* 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 October 31, 1999.
MTN Medium Term Note
See Notes to Financial Statements.
2
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Institutional Government Money Market Fund
Statement of Assets and Liabilities
October 31, 1999
ASSETS:
Investments
Investments at amortized cost (Note 2) ................. $ 190,653,996
Repurchase agreement ................................... 31,009,000
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Total Investments at value ........................... 221,662,996
Cash ..................................................... 68
Receivable for shares sold ............................... 1,201,420
Interest and dividends receivable ........................ 497,945
Receivable from Investment Advisor (Note 4) .............. 57,701
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Total Assets ........................................... 223,420,130
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LIABILITIES:
Dividends payable ........................................ 928,278
Payable to Administrator (Note 3) ........................ 14,538
Trustees' fees and expenses payable (Note 3) ............. 8,923
Accrued expenses and other payables ...................... 25,653
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Total Liabilities ...................................... 977,392
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NET ASSETS .................................................. $ 222,442,738
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NET ASSETS consist of:
Par value (Note 5) ....................................... $ 222,443
Paid-in capital in excess of par value ................... 222,220,297
Undistributed net investment income ...................... 5,152
Accumulated net realized (loss) on investments sold ...... (5,154)
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TOTAL NET ASSETS ............................................ $ 222,442,738
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Shares of beneficial interest outstanding ................... 222,442,740
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NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) ........................ $ 1.00
=============
See Notes to Financial Statements.
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Institutional Government Money Market Fund
Statement of Operations
For the year ended October 31, 1999
INVESTMENT INCOME:
Interest (Note 2) .......................................... $ 11,273,594
Dividends (Note 2) ......................................... 7,098
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Total investment income .................................. 11,280,692
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EXPENSES:
Investment advisory fee (Note 3) ........................... 449,594
Administration fee (Note 3) ................................ 202,317
Custodian fee .............................................. 19,048
Fund accounting fee (Note 3) ............................... 53,413
Professional fees (Note 3) ................................. 20,274
Transfer agent fee (Note 3) ................................ 4,918
Trustees' fees and expenses (Note 3) ....................... 4,394
Reports to shareholders .................................... 10,114
Miscellaneous .............................................. 97,968
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Total expenses before reimbursement/waiver (Note 4) ...... 862,040
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Less: reimbursement/waiver (Note 4) ...................... (413,203)
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Total expenses net of reimbursement/waiver ............... 448,837
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NET INVESTMENT INCOME ........................................ 10,831,855
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 10,831,855
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See Notes to Financial Statements.
4
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Institutional Government Money Market Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years ended October 31,
------------------------------
1999 1998
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<S> <C> <C>
NET ASSETS at beginning of period ........................... $ 200,319,062 $ 175,140,909
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Increase in Net Assets resulting from operations:
Net investment income .................................... 10,831,855 7,840,721
Net realized gain on investments sold .................... -- 27,132
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Net increase in net assets resulting from operations ... 10,831,855 7,867,853
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Dividends to shareholders from:
Net investment income .................................... (10,831,855) (7,840,539)
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Share Transactions:
Net proceeds from sales of shares ........................ 545,832,680 560,841,497
Issued to shareholders in reinvestment of dividends ...... 1,271,007 367,790
Cost of shares repurchased ............................... (524,980,011) (536,058,448)
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Net increase from share transactions ................... 22,123,676 25,150,839
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Net increase in net assets ............................. 22,123,676 25,178,153
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NET ASSETS at end of period (including line A) .............. $ 222,442,738 $ 200,319,062
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(A) Undistributed net investment income ..................... $ 5,152 $ 5,152
============= =============
OTHER INFORMATION:
Share Transactions:
Sold ..................................................... 545,832,680 560,841,497
Issued to shareholders in reinvestment of dividends ...... 1,271,007 367,790
Repurchased .............................................. (524,980,011) (536,058,448)
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Net increase in shares outstanding ....................... 22,123,676 25,150,839
============= =============
</TABLE>
See Notes to Financial Statements.
5
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Institutional Government Money Market Fund
Financial Highlights
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Years ended October 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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 0.05 0.05
Net realized and unrealized gain (loss)
on investments .................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total from Investment Operations .................. 0.05 0.05 0.05 0.05 0.05
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................ (0.05) (0.05) (0.05) (0.05) (0.05)
Dividends from net realized capital gains ........... -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends ................................... (0.05) (0.05) (0.05) (0.05) (0.05)
-------- -------- -------- -------- --------
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 ........................................... 4.92% 5.32% 5.09% 5.12% 5.53%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $222,443 $200,319 $175,141 $500,927 $506,692
Ratios to average net assets:
Net investment income including
reimbursement/waiver .............................. 4.82% 5.17% 4.94% 5.00% 5.38%
Operating expenses including reimbursement/waiver ... 0.20% 0.20% 0.19% 0.19% 0.17%
Operating expenses excluding reimbursement/waiver ... 0.38% 0.36% 0.33% 0.33% 0.33%
</TABLE>
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(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the the years ended October
31, 1999, 1998, 1997, 1996 and 1995 were $0.05, $0.05, $ 0.05, $0.05 and $
0.05, respectively.
See Notes to Financial Statements.
6
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Notes to Financial Statements
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 ac counting 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. 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 under lying 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 FleetBoston Corporation 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 Fund and the other funds
offered by the Trust (whose financial state-
7
<PAGE>
Notes to Financial Statements
ments 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 May 28, 1999, 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 $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, VIP 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, 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 year ended October 31, 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 year
ended October 31, 1999, the Investment Advisor and Administrator waived fees
totaling $224,797 and $89,919, respectively, and the Investment Advisor
reimbursed expenses of $98,487 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-one classes of
shares consisting of one or more series of shares.
6. Capital Loss Carryforward
As of October 31, 1999, the Fund had capital loss carryforwards of $5,154
expiring in 2004.
7. Subsequent Event - Change in Control of Administrator and Change in
Distributor (unaudited)
On December 1, 1999, PFPC Trust Company, a wholly-owned subsidiary of PFPC
Worldwide, Inc. and an indirect wholly-owned subsidiary of PNC Bank Corp.,
acquired all of the outstanding stock of Investor Services Group (the
"Transaction"). On that same date and as part of the Transaction, PFPC Inc., an
indirect wholly-owned subsidiary of PNC Bank Corp., was merged into Investor
Services Group, which then changed its name to PFPC Inc.
In connection with the Transaction, on December 1, 1999, Provident
Distributors, Inc. became the distributor of the Trust's shares.
8
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Institutional Government Money Market Fund,
a portfolio of The Galaxy Fund, as of October 31, 1999, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1998 and the financial highlights for the four
years then ended were audited by other auditors whose report dated December 23,
1998 expressed an unqualified opinion on that statement of changes in net assets
and those financial highlights.
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 financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of October 31, 1999 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 Government Money Market Fund portfolio of The Galaxy Fund at
October 31, 1999, the results of its operations, changes in its net assets and
its financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 13, 1999
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P.O. Box 6520
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ANINSTMM (January 1, 2000)
