Galaxy Money Market Portfolios
The Galaxy Funds
Annual Report
July 31, 1999
Galaxy Prime Reserves
Galaxy Tax-Exempt Reserves
Galaxy Government Reserves
[LOGO] Galaxy
Funds
7/31/99
<PAGE>
Galaxy Prime Reserves
Portfolio of Investments
July 31, 1999
Par Value Value
---------- -----------
COMMERCIAL PAPER (A) - 50.85%
Finance - 31.62%
$ 25,000,000 ABB Treasury Center USA
5.12%, 08/02/99 (B)................ $ 24,996,444
40,000,000 American Express Credit Corp.
5.10%, 09/07/99.................... 39,790,333
45,000,000 American Express Credit Corp.
5.08%, 09/14/99.................... 44,720,600
20,000,000 American Express Credit Corp.
5.09%, 09/15/99.................... 19,872,750
50,000,000 Associates Corp.
of North America
5.12%, 09/13/99.................... 49,694,222
50,000,000 Associates Corp.
of North America
5.08%, 09/17/99.................... 49,668,389
50,000,000 Associates Corp.
of North America
5.07%, 09/20/99.................... 49,647,917
50,000,000 BellSouth Capital Funding
5.00%, 08/05/99 (B)................ 49,972,222
40,735,000 BellSouth Capital Funding
5.08%, 09/03/99 (B)................ 40,545,311
80,000,000 Cadbury Schwepps
Money Management
5.13%, 08/03/99.................... 79,977,200
130,000,000 Cargill Global Funding Plc
5.13%, 08/02/99 (B)................ 129,981,475
50,000,000 Ford Motor Credit Co.
5.06%, 08/23/99.................... 49,845,389
40,000,000 Ford Motor Credit Co.
5.07%, 08/30/99.................... 39,836,633
60,000,000 Ford Motor Credit Co.
5.10%, 09/16/99.................... 59,609,000
10,000,000 General Electric Capital Corp.
5.10%, 08/17/99.................... 9,977,333
50,000,000 General Electric Capital Corp.
5.09%, 08/25/99.................... 49,830,333
25,000,000 General Electric Capital Corp.
5.10%, 09/13/99.................... 24,847,708
30,000,000 General Electric Capital Corp.
5.10%, 09/21/99.................... 29,783,250
35,000,000 General Electric Capital Corp.
5.13%, 10/18/99.................... 34,610,975
50,000,000 General Motors
Acceptance Corp.
5.01%, 08/02/99.................... 49,993,042
35,000,000 General Motors
Acceptance Corp.
5.18%, 08/13/99.................... 34,939,567
50,000,000 General Motors
Acceptance Corp.
5.09%, 09/09/99.................... 49,724,292
25,000,000 General Re Corp.
5.07%, 08/13/99.................... 24,957,750
90,000,000 International Lease
Finance Corp.
5.06%, 08/11/99.................... 89,873,500
35,000,000 National Rural
Utilities Cooperative
Finance Corp.
5.10%, 10/18/99.................... 34,613,250
45,000,000 National Rural
Utilities Cooperative
Finance Corp.
5.10%, 10/21/99.................... 44,483,625
11,000,000 Shell Finance UK
5.12%, 10/12/99.................... 10,887,360
58,000,000 Unilever Capital Corp.
5.05%, 09/16/99 (B)................ 57,625,739
21,000,000 USAA Capital Corp.
5.05%, 08/17/99.................... 20,952,867
25,000,000 USAA Capital Corp.
5.04%, 09/14/99.................... 24,846,000
23,850,000 USAA Capital Corp.
5.08%, 09/17/99.................... 23,691,822
---------------
1,343,796,298
---------------
Consumer Staples - 5.93%
30,000,000 DaimlerChrysler NA
Holdings Corp.
5.00%, 08/03/99.................... 29,991,667
25,000,000 DaimlerChrysler NA
Holdings Corp.
5.07%, 08/10/99.................... 24,968,312
23,400,000 Heinz (H.J.) Co.
4.97%, 08/16/99.................... 23,351,543
35,000,000 Heinz (H.J.) Co.
5.10%, 09/08/99.................... 34,811,583
See Notes to Financial Statements.
1
<PAGE>
Galaxy Prime Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
Consumer Staples (continued)
$ 40,350,000 McDonald's Corp.
5.15%, 08/02/99 (B)................ $ 40,344,228
20,000,000 Procter & Gamble Co.
4.98%, 08/09/99.................... 19,977,867
25,000,000 Procter & Gamble Co.
5.05%, 08/18/99.................... 24,940,382
53,580,000 Wal-Mart Stores, Inc.
5.08%, 08/05/99 (B)................ 53,549,757
---------------
251,935,339
---------------
Chemical and Drugs - 5.17%
27,958,000 Bayer Corp.
5.05%, 08/03/99 (B)................ 27,950,156
38,000,000 duPont (E.I.) deNemours & Co.
5.08%, 10/05/99.................... 37,651,455
18,650,000 duPont (E.I.) deNemours & Co.
5.08%, 10/08/99.................... 18,471,043
36,230,000 Pfizer, Inc.
5.05%, 08/13/99 (B)................ 36,169,013
100,000,000 Pfizer, Inc.
5.06%, 08/25/99 (B)................ 99,662,667
---------------
219,904,334
---------------
Technology - 5.07%
48,000,000 Ameritech Corp.
5.15%, 08/02/99.................... 47,993,133
50,000,000 Ameritech Corp.
5.07%, 08/09/99.................... 49,943,722
27,700,000 Hewlett-Packard Co.
5.06%, 08/09/99.................... 27,668,853
50,000,000 Motorola, Inc.
5.07%, 08/03/99.................... 49,985,917
40,000,000 Motorola, Inc.
5.07%, 08/06/99.................... 39,971,833
---------------
215,563,458
---------------
Basic Materials - 1.78%
30,938,000 Statoil
5.10%, 08/10/99 (B)................ 30,898,554
45,000,000 Statoil
5.08%, 08/24/99 (B)................ 44,853,950
---------------
75,752,504
---------------
Utilities - 1.28%
40,000,000 AT&T Corp.
5.13%, 08/02/99.................... 39,994,300
14,300,000 BellSouth Telecomm, Inc.
5.20%, 08/17/99.................... 14,266,951
---------------
54,261,251
---------------
Total Commercial Paper............. 2,161,213,184
---------------
(Cost $2,161,213,184)
CORPORATE NOTES AND BONDS - 27.28%
Banking - 16.32%
35,000,000 American Express Centurion
5.14%, 02/14/00 (C)................ 35,000,000
36,405,000 Bank One Corp., MTN
5.12%, 09/15/99 (C)................ 36,407,552
50,000,000 Comerica Bank, BN
5.17%, 11/23/99 (C)................ 49,993,844
50,000,000 Fifth Third Bank, BN
5.09%, 08/26/99.................... 50,000,000
50,000,000 First National Bank
of Chicago, MTN
5.68%, 07/10/00.................... 49,980,735
50,000,000 First Union National Bank, BN
5.05%, 11/22/99 (C)................ 49,992,805
50,000,000 First Union National Bank, BN
5.06%, 11/29/99 (C)................ 50,000,000
50,000,000 Huntington National Bank, BN
5.05%, 12/01/99 (C)................ 49,985,290
50,000,000 Huntington National Bank, BN
5.07%, 12/03/99 (C)................ 50,000,000
37,500,000 Key Bank N.A., MTN
5.10%, 06/26/00 (C)................ 37,477,766
50,000,000 Mellon Bank N.A., MTN
5.10%, 03/10/00 (C)................ 49,979,275
20,000,000 Morgan Guaranty
Trust Co., BN
5.20%, 11/29/99 (C)................ 19,994,100
40,000,000 Morgan Guaranty
Trust Co., BN
5.31%, 11/29/99 (C)................ 40,009,824
50,000,000 NationsBank, BN
5.14%, 12/15/99 (C)................ 49,992,669
25,000,000 Old Kent Bank, BN
5.12%, 03/10/00 (C)................ 24,989,438
See Notes to Financial Statements.
2
<PAGE>
Galaxy Prime Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
Banking (continued)
$ 50,000,000 Toronto Dominion Bank, BN
4.86%, 08/10/99 (C)................ $ 49,999,162
---------------
693,802,460
---------------
Finance - 7.79%
91,000,000 Deere (John)
Capital Corp., MTN
5.09%, 12/08/99 (C)................ 90,987,393
85,000,000 IBM Credit Corp., MTN
5.06%, 12/07/99 (C)................ 85,000,000
55,000,000 National Rural
Utilities Cooperative
Finance Corp., MTN
5.18%, 06/26/00 (C)................ 54,995,600
75,000,000 Texaco Capital, Inc., MTN
4.85%, 05/03/00 (C)................ 74,946,836
25,000,000 Texaco Capital, Inc.
5.11%, 05/03/00.................... 24,987,180
---------------
330,917,009
---------------
Utilities - 1.76%
75,000,000 AT&T Corp.
5.27%, 07/13/00 (C)(D)............. 74,971,479
---------------
Consumer Staples - 1.41%
60,000,000 Anheuser-Busch Cos., MTN
5.08%, 07/06/00 (C)................ 59,938,974
---------------
Total Corporate Notes
and Bonds.......................... 1,159,629,922
---------------
(Cost $1,159,629,922)
CERTIFICATES OF DEPOSIT - 9.90%
50,000,000 Canadian Imperial
Bank, Yankee
5.25%, 05/10/00.................... 49,982,841
50,000,000 First National Bank
of Maryland
5.12%, 03/10/00 (C)................ 49,978,770
50,000,000 Key Bank, N.A.
5.71%, 07/12/00.................... 49,979,569
50,000,000 Morgan Guaranty Trust Co.
5.75%, 07/10/00.................... 50,000,000
15,000,000 National Bank
of Canada, Yankee
5.30%, 03/10/00 (C)................ 15,018,309
75,000,000 Royal Bank of Canada, Yankee
5.27%, 03/02/00.................... 74,976,738
31,000,000 UBS AG, Yankee
5.29%, 03/01/00.................... 30,993,910
100,000,000 UBS AG, Yankee
5.28%, 03/03/00.................... 99,977,337
---------------
Total Certificates
of Deposit......................... 420,907,474
---------------
(Cost $420,907,474)
U.S. AGENCY OBLIGATIONS - 8.09%
Federal Home Loan
Mortgage Corporation - 5.17%
30,000,000 4.73%, 08/02/99 (A)................ 29,996,058
50,000,000 4.79%, 08/13/99 (A)................ 49,920,167
50,000,000 5.00%, 08/16/99 (A)................ 49,895,833
50,000,000 4.99%, 08/24/99 (A)................ 49,840,597
40,000,000 4.76%, 08/27/99 (C)................ 39,995,893
---------------
219,648,548
---------------
Federal National
Mortgage Association (A) - 2.92%
50,000,000 5.01%, 08/06/99.................... 49,965,208
74,494,000 4.91%, 09/09/99.................... 74,097,754
---------------
124,062,962
---------------
Total U.S. Agency
Obligations........................ 343,711,510
---------------
(Cost $343,711,510)
See Notes to Financial Statements.
3
<PAGE>
Galaxy Prime Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
ASSET-BACKED SECURITY - 0.19%
$ 7,953,251 Honda Auto Receivables
Owner Trust
Series 1999-1, Class A1
4.97%, 02/15/00.................... $ 7,953,252
---------------
Total Asset-Backed
Security........................... 7,953,252
---------------
(Cost $7,953,252)
REPURCHASE AGREEMENT - 3.42%
145,613,000 Goldman Sachs
Repurchase Agreement
5.06%, 08/02/99, Dated
07/30/99, Repurchase Price
$145,674,400 (Collateralized
by U.S. Treasury Notes
5.500% - 7.500%, Due
02/29/00 through 02/15/05
Total Par $141,638,000
Market Value $148,525,327)......... 145,613,000
---------------
Total Repurchase
Agreement.......................... 145,613,000
---------------
(Cost $145,613,000)
Shares Value
---------- -----------
INVESTMENT COMPANIES - 0.25%
1,937,319 Dreyfus Cash
Management Fund.................... $ 1,937,319
8,610,976 Federated Investors
Prime Obligation
Money Market Fund.................. 8,610,976
---------------
Total Investment
Companies.......................... 10,548,295
---------------
(Cost $10,548,295)
Total Investments - 99.98%........................... 4,249,576,637
---------------
(Cost $4,249,576,637)*
Net Other Assets and Liabilities - 0.02%............. 822,422
---------------
Net Assets - 100.00%................................. $ 4,250,399,059
===============
- ----------
* Aggregate cost for federal tax purposes.
(A) Discount yield at time of purchase.
(B) Securities exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended. These securities may only be resold, in
transactions exempt from registration, to qualified buyers. At July 31,
1999, these securities amounted to $636,549,516 or 14.98% of net assets.
(C) Variable rate securities. The rates shown reflect rates in effect at July
31, 1999.
(D) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may only be resold, in a transaction
exempt from registration, to qualified institutional buyers. At July 31,
1999, this security amounted to $74,971,479 or 1.76% of net assets.
BN Bank Note
MTN Medium Term Note
See Notes to Financial Statements.
4
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments
July 31, 1999
Par Value Value
---------- -----------
MUNICIPAL SECURITIES - 96.14%
Alabama - 2.02%
$ 3,600,000 Chatom IDB, PCR
Alabama Electric Cooperative
3.30%, 09/08/99
Guaranteed: National Rural
Utilities CFC...................... $ 3,600,000
---------------
Alaska - 1.69%
3,000,000 Valdez Marine Terminal
Revenue, Exxon Pipeline Co.
Project, Series C
3.40%, 12/01/33 (A)................ 3,000,000
---------------
Arizona - 0.67%
1,200,000 Maricopa County, PCR
Arizona Public Service Co.
Series A
3.40%, 05/01/29 (A)
LOC: Morgan Guaranty Trust......... 1,200,000
---------------
California - 2.64%
2,600,000 Los Angeles Regional
Airports Improvement Corp.
American Airlines, Series C
3.40%, 12/01/24 (A)
LOC: Wachovia Bank, N.A............ 2,600,000
900,000 Los Angeles Regional
Airports Improvement Corp.
American Airlines, Series F
3.40%, 12/01/24 (A)
LOC: Wachovia Bank, N.A............ 900,000
1,200,000 Los Angeles Regional
Airports Improvement Corp.
American Airlines, Series G
3.40%, 12/01/24 (A)
LOC: Wachovia Bank, N.A............ 1,200,000
---------------
4,700,000
---------------
Florida - 1.69%
3,000,000 University Athletic
Association, Inc., Capital
Improvement Revenue
University of Florida
Stadium Project
3.40%, 02/01/20 (A)
LOC: SunTrust Bank of
Central Florida.................... 3,000,000
---------------
Georgia - 1.70%
3,000,000 Richmond County
Board of Education, GO
4.50%, 03/01/00.................... 3,023,199
---------------
Idaho - 1.69%
3,000,000 Idaho State HFA
Pooled Financing Program
3.20%, 10/01/10 (A)
LOC: U.S. Bank of Idaho............ 3,000,000
---------------
Illinois - 3.21%
3,700,000 Chicago, GO
Tender Notes
2.85%, 01/31/00 (A)
LOC: Morgan Guaranty Trust......... 3,700,000
2,000,000 Illinois Educational Facilities
Authority, Pooled Financing
Program, Series 95
3.15%, 09/14/99
LOC: Northern Trust Co............. 2,000,000
---------------
5,700,000
---------------
See Notes to Financial Statements.
5
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
Indiana - 1.12%
$ 2,000,000 Indiana State Development
Finance Authority
Environmental Revenue
USX Corp. Project
3.00%, 12/01/22 (A)
LOC: Bank of Nova Scotia........... $ 2,000,000
---------------
Kentucky - 2.83%
5,000,000 Kentucky State
Asset/Liability Commission
TRAN, Series A
4.25%, 06/28/00 ................... 5,038,367
---------------
Louisiana - 8.86%
4,200,000 Ascension Parish, PCR
Shell Oil Co.
3.05%, 05/01/26 (A)................ 4,200,000
1,500,000 Lake Charles Harbor &
Terminal District
Revenue Updates
Reynolds Metals Co. Project
3.00%, 05/01/06 (A)
LOC: Canadian Imperial
Bank of Commerce................... 1,500,000
3,950,000 Louisiana State Offshore
Terminal Authority
Deepwater Port Revenue
Loop, Inc., 1st Stage
3.40%, 09/01/06 (A)
LOC: UBS AG........................ 3,950,000
2,100,000 St. Charles Parish, PCR
3.45%, 10/01/25 (A)
Guaranteed: Shell Oil Co........... 2,100,000
4,000,000 St. James Parish, PCR
3.50%, 01/19/00
Guaranteed: Texaco Co.............. 4,000,000
---------------
15,750,000
---------------
Massachusetts - 6.92%
3,000,000 Massachusetts State, GO
Series B
3.00%, 09/01/16 (A)
SPA: Toronto
Dominion Bank...................... 3,000,000
2,900,000 Massachusetts State
Housing Finance Agency
Multi-Family, Series A
3.05%, 12/01/25 (A)
Insured: GNMA
SPA: Republic National
Bank of New York................... 2,900,000
1,400,000 Massachusetts State Water
Resource Authority
Subordinated General
Purpose, Series A
3.00%, 04/01/28 (A)
Insured: AMBAC
SPA: Bank of Nova Scotia........... 1,400,000
2,000,000 Natick, BAN Lot A, GO
3.25%, 08/06/99 ................... 2,000,089
3,000,000 Stoneham, BAN, GO
3.25%, 11/16/99.................... 3,002,990
---------------
12,303,079
---------------
Michigan - 2.25%
4,000,000 Michigan State University
Revenue, Series A-2
3.05%, 08/15/22 (A)................ 4,000,000
---------------
Minnesota - 1.97%
3,500,000 New ULM, Hospital
Facility Revenue
Health Central System
3.30%, 08/01/14 (A)
LOC: Norwest Bank
Minnesota NA....................... 3,500,000
---------------
See Notes to Financial Statements.
6
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
Mississippi - 6.48%
$ 3,925,000 Claiborne County, PCR
National Rural
Utilities Cooperative
3.10%, 08/04/99.................... $ 3,925,000
2,575,000 Claiborne County, PCR
National Rural
Utilities Cooperative
3.20%, 09/15/99.................... 2,575,000
3,500,000 Mississippi State Highway
Revenue, Four Lane
Highway Program, Series 39
4.50%, 06/01/00.................... 3,531,170
1,500,000 Perry County, PCR
Leaf River Forest Project
3.40%, 03/01/02 (A)
LOC: Wachovia Bank NA.............. 1,500,000
---------------
11,531,170
---------------
Missouri - 5.59%
4,100,000 Jackson County
Water System Revenue
2.90%, 11/01/24 (A)
Guaranteed: Chevron Corp........... 4,100,000
3,000,000 Missouri State Development
Finance Board, Union
Station, Class B
3.50%, 12/01/03 (A)
LOC: Canadian Imperial
Bank of Commerce................... 3,000,000
2,850,000 Missouri State Higher
Education Loan Authority
Student Loan Revenue
Series CC
2.95%, 08/15/99.................... 2,850,000
---------------
9,950,000
---------------
Nevada - 1.86%
3,300,000 Reno Hospital Revenue
St. Mary's Regional Medical
Center, Series B
3.40%, 05/15/23 (A)
Insured: MBIA
SPA: Rabobank
Nederland NV....................... 3,300,000
---------------
New Mexico - 2.26%
4,000,000 New Mexico State, TRAN
4.00%, 06/30/00.................... 4,027,196
---------------
New York - 1.55%
500,000 Long Island Power Authority
New York Electric System
Revenue, Series 5
3.40%, 05/01/33 (A)
LOC: ABN-AMRO,
Morgan Guaranty Trust.............. 500,000
1,250,000 New York State Energy
Research and Development
Authority, PCR, New York
State Electric & Gas
Series B
3.20%, 10/15/15 (A)
LOC: UBS AG........................ 1,250,000
1,000,000 New York State Energy
Research and Development
Authority, PCR, New York
State Electric & Gas
Series C
3.30%, 06/01/29 (A)
LOC: Morgan Guaranty Trust......... 1,000,000
---------------
2,750,000
---------------
See Notes to Financial Statements.
7
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
North Carolina - 2.98%
$ 2,000,000 Wake County Industrial
Facilities & Pollution Control
Financing Authority
Carolina Power & Light Co.
3.40%, 06/15/14 (A)
LOC: First National
Bank of Chicago.................... $ 2,000,000
3,300,000 Wake County Industrial
Facilities & Pollution Control
Financing Authority
Carolina Power & Light Co.
3.45%, 03/01/17 (A)(B)
LOC: First Union
National Bank...................... 3,300,000
---------------
5,300,000
---------------
Oregon - 2.19%
3,900,000 Port Portland, PCR
Reynolds Metals Co.
3.40%, 12/01/09 (A)
LOC: Bank of Nova Scotia........... 3,900,000
---------------
Pennsylvania - 5.74%
1,100,000 Beaver County IDA, PCR
Duquesne-Beaver Valley
Series A
3.05%, 08/01/20 (A)
LOC: Barclays Bank Plc............. 1,100,000
1,300,000 Beaver County IDA, PCR
Duquesne-Mansfield
Series B
3.05%, 08/01/09 (A)
LOC: Barclays Bank Plc............. 1,300,000
3,500,000 Delaware County IDA, PCR
Philadelphia Electric Co.
Series A
3.10%, 08/09/99
Insured: FGIC...................... 3,500,000
3,500,000 Delaware County IDA
United Parcel Service Project
3.35%, 12/01/15 (A)................ 3,500,000
800,000 Lehigh County
General Purpose Authority
Revenue, Lehigh Valley
Hospital, Series B
3.40%, 07/01/29 (A)
Insured: MBIA
SPA: First Union
National Bank...................... $ 800,000
---------------
10,200,000
---------------
South Carolina - 2.77%
4,925,000 South Carolina State
Jobs Economic Development
Authority, St. Francis Hospital
3.40%, 07/01/22 (A)
LOC: Chase Manhattan
Bank, N.A.......................... 4,925,000
---------------
Tennessee - 2.42%
1,800,000 Sullivan County IDB, PCR
Mead Corp.
3.35%, 10/01/16 (A)
LOC: UBS AG........................ 1,800,000
2,500,000 Tennessee State, BAN
Series C
3.00%, 07/02/01 (A)................ 2,500,000
---------------
4,300,000
---------------
Texas - 17.78%
1,100,000 Dallas, GO
5.90%, 02/15/00.................... 1,116,889
2,600,000 Grapevine IDC
American Airlines, Series A3
3.40%, 12/01/24 (A)
LOC: Morgan Guaranty Trust......... 2,600,000
900,000 Grapevine IDC
American Airlines, Series B1
3.40%, 12/01/24 (A)
LOC: Morgan Guaranty Trust......... 900,000
See Notes to Financial Statements.
8
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments (continued)
July 31, 1999
Par Value Value
---------- -----------
Texas (continued)
$ 800,000 Grapevine IDC
American Airlines, Series B2
3.40%, 12/01/24 (A)
LOC: Morgan Guaranty Trust........ $ 800,000
1,000,000 Gulf Coast Waste
Disposal Authority, PCR
Amoco Oil Co.
3.40%, 10/01/17 (A)................ 1,000,000
5,300,000 Gulf Coast Waste
Disposal Authority, PCR
Exxon Project
3.10%, 10/01/24 (A)................ 5,300,000
1,200,000 Harris County IDC
Baytank Houston, Inc. Project
3.10%, 02/01/20 (A)
LOC: Rabobank
Nederland, N.V..................... 1,200,000
5,000,000 Hockley County IDC, PCR
Amoco Project
3.15%, 11/01/19 (A)................ 5,002,342
3,700,000 Lone Star Airport
Improvement Authority
American Airlines, Series A3
3.40%, 12/01/14 (A)
LOC: Royal Bank of Canada.......... 3,700,000
1,000,000 Lone Star Airport
Improvement Authority
American Airlines, Series B2
3.40%, 12/01/14 (A)
LOC: Royal Bank of Canada.......... 1,000,000
1,000,000 North Central HFDC
Hospital Revenue
Presbyterian Medical Center
Series C
3.40%, 12/01/15 (A)
Insured: MBIA
SPA: NationsBank NA................ 1,000,000
3,500,000 North Central HFDC
Hospital Revenue
Presbyterian Medical Center
Series D
3.40%, 12/01/15 (A)
Insured: MBIA
SPA: NationsBank NA................ 3,500,000
4,500,000 Texas State, TRAN, GO
4.50%, 08/31/99.................... 4,504,497
---------------
31,623,728
---------------
Washington - 2.79%
4,955,000 Washington State, GO
Series R-92C
5.30%, 09/01/99.................... 4,965,101
---------------
Wyoming - 2.47%
700,000 Platte County, PCR
Tri-State Generation
Series B
3.50%, 07/01/14 (A)
LOC: National Rural Utilities...... 700,000
1,000,000 Uinta County, PCR
Amoco Oil Project
3.40%, 07/01/26 (A)................ 1,000,000
2,700,000 Uinta County, PCR
Chevron USA, Inc. Project
3.40%, 12/01/22 (A)................ 2,700,000
---------------
4,400,000
---------------
Total Municipal
Securities......................... 170,986,840
---------------
(Cost $170,986,840)
See Notes to Financial Statements.
9
<PAGE>
Galaxy Tax-Exempt Reserves
Portfolio of Investments (continued)
July 31, 1999
Shares Value
---------- -----------
INVESTMENT COMPANIES - 3.35%
260,401 Dreyfus Tax Exempt Cash
Management ........................ $ 260,401
5,692,319 Federated Investors Tax-Free
Obligations Fund................... 5,692,319
---------------
Total Investment
Companies.......................... 5,952,720
---------------
(Cost $5,952,720)
Total Investments - 99.49%........................... 176,939,560
---------------
(Cost $176,939,560)*
Net Other Assets and Liabilities - 0.51%............. 900,307
---------------
Net Assets - 100.00%................................. $ 177,839,867
===============
- ----------
* Aggregate cost for federal tax purposes is $176,941,046.
(A) Variable rate demand notes are payable upon not more than one, seven or
thirty business days notice. Put bonds and notes have demand features
which mature within one year. The interest rate shown reflects the rate
in effect at July 31, 1999.
(B) Subject to Alternative Minimum Tax.
AMBAC American Municipal Bond Assurance Corp.
BAN Bond Anticipation Notes
FGIC Federal Guaranty Insurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
HFA Health Facilities Authority
HFDC Health Facilities Development Corp.
IDA Industrial Development Authority
IDB Industrial Development Board
IDC Industrial Development Corp.
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
SPA Stand-by Purchase Agreement
TRAN Tax and Revenue Anticipation Notes
See Notes to Financial Statements.
10
<PAGE>
Galaxy Government Reserves
Portfolio of Investments
July 31, 1999
Par Value Value
---------- -----------
U.S. AGENCY OBLIGATIONS - 85.51%
Federal National
Mortgage Association - 32.35%
$ 5,000,000 5.03%, 08/02/99 (A)................ $ 4,999,301
10,000,000 5.00%, 08/06/99 (A)................ 9,993,062
5,000,000 4.79%, 08/13/99 (A)................ 4,992,017
8,925,000 4.93%, 09/07/99 (A)................ 8,879,743
5,000,000 5.06%, 10/04/99 (A)................ 4,955,022
5,000,000 5.06%, 10/15/99 (A)................ 4,947,291
4,000,000 4.86%, 02/10/00,
MTN, Series B...................... 3,984,679
3,000,000 4.98%, 07/26/00,
MTN, Series B (B).................. 2,998,156
5,000,000 5.18%, 08/04/00, MTN (B)........... 4,997,000
---------------
50,746,271
---------------
Federal Home Loan Bank - 25.16%
10,000,000 4.93%, 08/13/99 (A)................ 9,983,566
5,000,000 4.91%, 08/18/99 (A)................ 4,988,407
5,000,000 5.00%, 09/08/99 (B)................ 4,999,691
8,000,000 5.16%, 03/08/00.................... 7,995,836
1,500,000 5.20%, 05/26/00.................... 1,499,547
5,000,000 5.48%, 07/13/00.................... 4,994,359
5,000,000 5.00%, 07/28/00 (B)................ 4,997,033
---------------
39,458,439
---------------
Federal Home Loan
Mortgage Corporation - 24.81%
5,000,000 5.01%, 08/05/99 (A)................ 4,997,216
5,000,000 5.54%, 08/13/99 (B)................ 5,000,068
10,000,000 4.76%, 08/27/99 (B)................ 9,998,973
5,000,000 4.97%, 09/02/99 (A)................ 4,977,911
5,000,000 5.02%, 09/13/99 (A)................ 4,970,019
2,950,000 5.00%, 09/14/99 (A)................ 2,931,972
6,000,000 6.54%, 05/19/00.................... 6,047,709
---------------
38,923,868
---------------
Federal Farm Credit Bank - 3.19%
5,000,000 4.77%, 08/02/99.................... 4,999,964
---------------
Total U.S. Agency
Obligations........................ 134,128,542
---------------
(Cost $134,128,542)
REPURCHASE AGREEMENT - 13.71%
21,496,000 Goldman Sachs
Repurchase Agreement
5.06%, 08/02/99, Dated
07/30/99, Repurchase Price
$21,505,064 (Collateralized
by U.S. Treasury Bond,
8.88%, due 02/15/19;
Total Par $16,619,000
Market Value $21,925,984).......... 21,496,000
---------------
Total Repurchase
Agreement.......................... 21,496,000
---------------
(Cost $21,496,000)
Shares
---------
INVESTMENT COMPANIES - 3.82%
2,728,206 Dreyfus Cash
Management Fund.................... 2,728,206
3,266,316 Federated Investors
Government Obligation
Money Market Fund.................. 3,266,316
---------------
Total Investment
Companies.......................... 5,994,522
---------------
(Cost $5,994,522)
Total Investments - 103.04%.......................... 161,619,064
---------------
(Cost $161,619,064)*
Net Other Assets and Liabilities - (3.04)%........... (4,766,073)
---------------
Net Assets - 100.00%................................. $ 156,852,991
===============
- ----------
* Aggregate cost for federal tax purposes.
(A) Discount yield at time of purchase.
(B) Interest is reset at various time intervals. The interest rate shown
reflects the rate in effect at July 31, 1999.
See Notes to Financial Statements.
11
<PAGE>
Galaxy Money Market Portfolios
Statements of Assets and Liabilities
July 31, 1999
<TABLE>
<CAPTION>
Prime Tax-Exempt Government
Reserves Reserves Reserves
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at amortized cost ................. $4,103,963,637 $ 176,939,560 $ 140,123,064
Repurchase agreements ......................... 145,613,000 -- 21,496,000
-------------- -------------- --------------
Total investments at value .................. 4,249,576,637 176,939,560 161,619,064
Cash ............................................ 34,471 26,174 41,375
Receivable for shares sold ...................... 76,210,365 2,735,571 2,245,869
Interest and dividend receivables ............... 13,560,244 1,098,474 690,543
-------------- -------------- --------------
Total Assets .................................. 4,339,381,717 180,799,779 164,596,851
-------------- -------------- --------------
LIABILITIES:
Dividends payable ............................... 7,860,793 164,277 284,832
Payable for investments purchased ............... 153,704 -- 4,997,000
Payable for shares repurchased .................. 76,232,532 2,599,089 2,273,519
Advisory fee payable (Note 3) ................... 1,284,150 59,135 55,413
Distribution and service fee payable (Note 3) ... 1,610,101 59,135 55,413
Payable to Administrator (Note 3) ............... 286,788 13,760 15,432
Trustees' fees and expenses payable (Note 3) .... 35,994 2,539 3,234
Accrued expenses and other payables ............. 1,518,596 61,977 59,017
-------------- -------------- --------------
Total Liabilities ............................. 88,982,658 2,959,912 7,743,860
-------------- -------------- --------------
NET ASSETS ......................................... $4,250,399,059 $ 177,839,867 $ 156,852,991
============== ============== ==============
NET ASSETS consist of:
Par value (Note 4) .............................. $ 4,250,399 $ 177,841 $ 156,853
Paid-in capital in excess of par value .......... 4,246,148,660 177,663,472 156,696,129
Undistributed net investment income ............. -- 40 9
Accumulated net realized loss on investments sold -- (1,486) --
-------------- -------------- --------------
TOTAL NET ASSETS ................................... $4,250,399,059 $ 177,839,867 $ 156,852,991
============== ============== ==============
Shares of beneficial interest outstanding .......... 4,250,399,059 177,841,313 156,852,982
NET ASSET VALUE:
offering and redemption price per share
(Net Assets / Shares Outstanding) ............... $ 1.00 $ 1.00 $ 1.00
============== ============== ==============
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Galaxy Money Market Portfolios
Statements of Operations
For the period ended July 31, 1999
<TABLE>
<CAPTION>
Prime Tax-Exempt Government
Reserves(1) Reserves(1) Reserves(1)
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2).......................... $ 165,778,694 $ 3,786,575 $ 6,608,120
Dividends (Note 2)......................... 526,547 93,005 205,999
---------------- --------------- ---------------
Total investment income.................. 166,305,241 3,879,580 6,814,119
---------------- --------------- ---------------
EXPENSES:
Investment advisory fee (Note 3)........... 11,806,913 503,030 546,391
Administration fee (Note 3)................ 2,485,044 95,182 103,321
Custody fee ............................... 50,080 12,436 12,236
Fund accounting fee (Note 3)............... 96,677 26,025 28,752
Professional fees.......................... 153,145 25,038 25,117
Trustees' fee (Note 3)..................... 63,545 3,640 4,413
Transfer agent fee (Note 3)................ 4,288 4,288 4,288
Distribution and service fee (Note 3)...... 14,766,863 503,030 546,390
Reports to shareholders.................... 772,118 11,116 12,398
Registration fees.......................... 1,199,073 59,228 57,509
Miscellaneous.............................. 31,599 1,495 7,239
---------------- --------------- ---------------
Total expenses........................... 31,429,345 1,244,508 1,348,054
---------------- --------------- ---------------
NET INVESTMENT INCOME......................... 134,875,896 2,635,072 5,466,065
---------------- --------------- ---------------
NET REALIZED LOSS ON INVESTMENTS.............. -- (1,486) --
---------------- --------------- ---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..................... $ 134,875,896 $ 2,633,586 $ 5,466,065
================ ================ ================
</TABLE>
- ----------
(1) The Funds commenced operations on September 22, 1998.
See Notes to Financial Statements.
13
<PAGE>
Galaxy Money Market Portfolios
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Prime Tax-Exempt Government
Reserves(1) Reserves(1) Reserves(1)
---------------- ---------------- ----------------
Period ended Period ended Period ended
July 31, 1999 July 31, 1999 July 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
NET ASSETS at beginning of period(2) ............... $ 10 $ 10 $ 10
---------------- ---------------- ----------------
Increase in Net Assets resulting from operations:
Net investment income ........................... 134,875,896 2,635,072 5,466,065
Net realized loss on investments sold ........... -- (1,486) --
---------------- ---------------- ----------------
Net increase in net assets
resulting from operations ................... 134,875,896 2,633,586 5,466,065
---------------- ---------------- ----------------
Dividends to shareholders from:
Net investment income ........................... (134,875,896) (2,635,032) (5,466,056)
---------------- ---------------- ----------------
Total Dividends ............................... (134,875,896) (2,635,032) (5,466,056)
---------------- ---------------- ----------------
Share Transactions:
Net proceeds from sale of shares ................ 21,244,865,186 629,913,123 594,673,838
Issued to shareholders in
reinvestment of dividends ..................... 127,220,074 2,472,799 5,186,232
Cost of shares repurchased ...................... (17,121,686,211) (454,544,619) (443,007,098)
---------------- ---------------- ----------------
Net increase from share transactions .......... 4,250,399,049 177,841,303 156,852,972
---------------- ---------------- ----------------
Net increase in net assets .................... 4,250,399,049 177,839,857 156,852,981
---------------- ---------------- ----------------
NET ASSETS at end of period (including line A) ..... $ 4,250,399,059 $ 177,839,867 $ 156,852,991
================ ================ ================
(A) Undistributed net investment income ............ $ -- $ 40 $ 9
================ ================ ================
OTHER INFORMATION:
Share Transactions:
Sold ............................................ 21,244,865,186 629,913,123 594,673,838
Issued to shareholders in
reinvestment of dividends ..................... 127,220,074 2,472,799 5,186,232
Repurchased ..................................... (17,121,686,211) (454,544,619) (443,007,098)
---------------- ---------------- ----------------
Net increase in shares outstanding ............ 4,250,399,049 177,841,303 156,852,972
================ ================ ================
</TABLE>
- ----------
(1) The Funds commenced operations on September 22, 1998.
(2) Amounts represent initial investment.
See Notes to Financial Statements.
14
<PAGE>
Galaxy Money Market Portfolios
Financial Highlights
For a Share outstanding throughout the period.
<TABLE>
<CAPTION>
Prime Tax-Exempt Government
Reserves(1) Reserves(1) Reserves(1)
---------------- ---------------- ----------------
Period ended Period ended Period ended
July 31, 1999 July 31, 1999 July 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 1.00 $ 1.00 $ 1.00
-------------- -------------- --------------
Income from Investment Operations:
Net investment income ..................... 0.04 0.02 0.03
-------------- -------------- --------------
Less Dividends:
Dividends from net investment income ...... (0.04) (0.02) (0.03)
-------------- -------------- --------------
Net increase (decrease) in net asset value ... -- -- --
-------------- -------------- --------------
Net Asset Value, End of Period ............... $ 1.00 $ 1.00 $ 1.00
============== ============== ==============
Total Return ................................. 3.59%** 1.82%** 3.49%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............ $ 4,250,399 $ 177,840 $ 156,853
Ratios to average net assets:
Net investment income ..................... 4.10%* 2.09%* 4.00%*
Operating expenses ........................ 0.96%* 0.99%* 0.99%*
</TABLE>
- ----------
* Annualized
** Not annualized
(1) The Funds commenced operations on September 22, 1998.
See Notes to Financial Statements.
15
<PAGE>
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 Prime Reserves, Tax-Exempt
Reserves and Government Reserves Funds (individually, a "Fund", collectively,
the "Funds") 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 Funds in the preparation of their
financial statements.
Portfolio Valuation: Securities in the Funds 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 and dividend
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 distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
Federal Income Taxes: The Trust treats each Fund as a separate entity for
Federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
By so qualifying, each 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 July 31. In addition, by distributing in
each calendar year substantially all of its net investment income, capital
gains, and certain other amounts, if any, each Fund will not be subject to a
Federal excise tax. Therefore, no Federal income or excise tax provision is
recorded.
Repurchase Agreements: Each 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. Each Fund requires that the securities collateralizing a repurchase
agreement transaction be transferred to the Trust's custodian in a manner that
is intended to enable the Fund to obtain those securities in the event of a
counterparty default. The value of the collateral securities is monitored daily
to ensure that the value of the collateral, including accrued interest, equals
or exceeds the repurchase price.
Repurchase agreement transactions involve certain risks in the event of default
or insolvency of the counterparty, including possible delays or restrictions
upon
16
<PAGE>
Notes to Financial Statements
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.
Expenses: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a 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.
3. Investment Advisory, Administration, Distribution, Shareholder Services and
Other Fees
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor"or
"Fleet"), an indirect wholly-owned subsidiary of Fleet Financial Group, Inc.,
are parties to an investment advisory agreement under which the Investment
Advisor provides services for a fee, computed daily and paid monthly, at the
annual rate of 0.40% of the first $750,000,000 of each Fund's average daily net
assets, plus 0.35% of each Fund's average daily net assets in excess of
$750,000,000.
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 combined average daily
net assets of the Funds 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.
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, serves as the distributor of the Trust's shares.
The Trust has adopted a distribution and services plan (the "Plan") with respect
to the Funds. Under the Plan, the Trust may pay (i) the Distributor or another
person for distribution services provided and expenses assumed and (ii)
broker-dealers or other financial institutions ("Service Organizations") for
shareholder administrative support services provided to shareholders of the
Funds. Payments by the Trust for distribution expenses may not exceed an annual
rate of 0.75% of the average daily net assets of a Fund and payments for
shareholder administrative support services may not exceed 0.25% of the average
daily net assets of a Fund's outstanding shares which are owned of record or
beneficially by a Service Organization's customers for whom the Service
Organization is the owner of record or shareholder of record or with whom it has
a servicing relationship. The Trust is currently limiting payments under the
Plan to an aggregate fee of not more than 0.45% of the average daily net assets
of the Prime Reserves and not more than 0.40% of the average daily net assets of
the Tax-Exempt Reserves and Government Reserves.
17
<PAGE>
Notes to Financial Statements
For the period ended July 31, 1999, the Funds paid fees under the Plan as
follows:
Shareholder
Fund Services Distribution
---- -------- ------------
Prime Reserves ......... $ 8,203,813 $ 6,563,050
Tax-Exempt Reserves .... 314,394 188,636
Government Reserves .... 341,494 204,896
Certain officers of the Trust are 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 plus certain other fees for
attending or participating in meetings as well as reimbursements 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.
Each Trustee is eligible to participate in The Galaxy Fund/The Galaxy VIP
Fund/Galaxy Fund II Deferred Compensation Plan (the "Compensation Plan"), an
unfunded, non-qualified deferred compensation plan. The Compensation 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 period ended July 31, 1999 include legal fees paid to Drinker
Biddle & Reath LLP. A partner of that firm is Secretary of the Trust.
4. 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 Funds, each with a par value of
$0.001. The Trust's shares are classified into thirty classes of shares, each
consisting of one or more series including: Class BB Shares - Prime Reserves;
Class DD Shares - Tax-Exempt Reserves; and Class CC Shares - Government
Reserves.
Each share represents an equal proportionate interest in the respective Fund,
bears the same fees and expenses and is entitled to such dividends and
distributions of income earned as are declared at the discretion of the Trust's
Board of Trustees.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held, and will vote in
the aggregate and not by class or series, except as otherwise expressly required
by law or when the Board of Trustees determines that the matter to be voted on
affects only the interests of shareholders of a particular class or series.
18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Prime Reserves, Tax-Exempt Reserves, and
Government Reserves (three of the portfolios constituting The Galaxy Fund) as of
July 31, 1999, and the related statements of operations, the statements of
changes in net assets, and the financial highlights for the period from
September 22, 1998 (commencement of investment operations) to July 31, 1999.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits 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 and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1999 by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. 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 audits provide 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
Prime Reserves, Tax-Exempt Reserves, and Government Reserves portfolios of The
Galaxy Fund at July 31, 1999, and the results of their operations, changes in
their net assets and their financial highlights for the period from September
22, 1998 to July 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
September 10, 1999
