GALAXY MONEY MARKET PORTFOLIOS
THE GALAXY FUNDS
ANNUAL REPORT
July 31, 2000
Galaxy Prime Reserves
Galaxy Tax-Exempt Reserves
Galaxy Government Reserves
[LOGO OMITTED - GALAXY FUNDS]
7/31/00 ARRESERVE
<PAGE>
GALAXY PRIME RESERVES
PORTFOLIO OF INVESTMENTS
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
COMMERCIAL PAPER (A) - 53.03%
FINANCE - 33.77%
$100,000,000 American Express Credit Corp.
6.51%, 08/24/00............... $ 99,584,083
100,000,000 Associates Corp.
of North America
6.65%, 08/01/00............... 100,000,000
40,000,000 Associates Corp.
of North America
6.48%, 08/25/00............... 39,827,200
50,000,000 BellSouth Capital
Funding Corp.
6.47%, 08/14/00 (B)........... 49,883,181
48,110,000 BellSouth Capital
Funding Corp.
6.53%, 08/15/00 (B)........... 47,987,827
25,195,000 BMW U.S. Capital Corp.
6.53%, 08/11/00............... 25,149,299
56,700,000 BMW U.S. Capital Corp.
6.56%, 08/17/00............... 56,534,688
45,330,000 BMW U.S. Capital Corp.
6.51%, 09/08/00............... 45,018,507
92,500,000 Cargill Global Funding Plc
6.64%, 08/01/00 (B)........... 92,500,000
100,000,000 Cargill Global Funding Plc
6.50%, 08/25/00 (B)........... 99,566,667
50,000,000 CDC Commercial
Paper Corp.
6.50%, 09/07/00 (B)........... 49,665,972
50,000,000 Ford Motor Credit Corp.
6.51%, 08/07/00............... 49,945,750
50,000,000 Ford Motor Credit Corp.
6.49%, 08/18/00............... 49,846,764
50,000,000 Ford Motor Credit Corp.
6.52%, 10/05/00............... 49,411,389
50,000,000 General Electric Capital Corp.
6.54%, 08/14/00............... 49,881,917
50,000,000 General Electric Capital Corp.
6.54%, 08/15/00............... 49,872,833
PAR VALUE VALUE
----------- ----------
FINANCE (CONTINUED)
$50,000,000 General Electric Capital Corp.
6.50%, 08/28/00............... $ 49,756,250
50,000,000 General Motors
Acceptance Corp.
6.55%, 08/22/00............... 49,808,958
100,000,000 General Motors
Acceptance Corp.
6.51%, 08/30/00............... 99,475,583
50,000,000 International Lease
Finance Corp.
6.48%, 08/24/00............... 49,793,000
50,000,000 International Lease
Finance Corp.
6.51%, 09/18/00............... 49,566,000
60,000,000 International Lease
Finance Corp.
6.51%, 10/10/00............... 59,240,500
150,000,000 UBS Finance (DE) LLC
6.64%, 08/01/00............... 150,000,000
-------------
1,462,316,368
-------------
CONSUMER STAPLES - 7.73%
25,000,000 Campbell Soup Co.
6.57%, 10/27/00............... 24,603,062
100,000,000 DaimlerChrysler NA
Holdings Corp.
6.48%, 08/18/00............... 99,694,000
50,000,000 DaimlerChrysler NA
Holdings Corp.
6.54%, 08/21/00............... 49,818,333
50,000,000 Wal-Mart Stores, Inc.
6.48%, 08/01/00 (B)........... 50,000,000
50,000,000 Wal-Mart Stores, Inc.
6.48%, 08/22/00 (B)........... 49,811,000
61,000,000 Wal-Mart Stores, Inc.
6.50%, 08/29/00 (B)........... 60,691,611
-------------
334,618,006
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
1
<PAGE>
GALAXY PRIME RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
CHEMICAL AND DRUGS - 6.67%
$50,000,000 Bayer Corp.
6.52%, 09/06/00 (B)........... $ 49,674,000
40,000,000 Bayer Corp.
6.51%, 10/03/00 (B)........... 39,544,300
100,000,000 Merck & Co., Inc.
6.47%, 08/25/00............... 99,568,667
50,000,000 Pfizer, Inc.
6.54%, 08/01/00 (B)........... 50,000,000
50,000,000 Pfizer, Inc.
6.55%, 08/11/00 (B)........... 49,909,028
-------------
288,695,995
-------------
TECHNOLOGY - 3.26%
44,625,000 Lucent Technologies, Inc.
6.48%, 08/31/00............... 44,384,025
42,000,000 Motorola, Inc.
6.49%, 08/08/00............... 41,946,998
55,000,000 Motorola, Inc.
6.55%, 08/23/00............... 54,779,851
-------------
141,110,874
-------------
ENERGY - 1.14%
50,000,000 Texaco, Inc.
6.48%, 09/07/00............... 49,667,000
-------------
BASIC MATERIALS - 0.46%
20,000,000 Minnesota Mining &
Manufacturing Co.
6.53%, 09/21/00............... 19,814,983
-------------
TOTAL COMMERCIAL PAPER 2,296,223,226
-------------
(Cost $2,296,223,226)
CORPORATE NOTES AND BONDS - 23.82%
BANKING - 17.41%
50,000,000 AllFirst Bank
6.70%, 10/26/00 (C)........... 49,992,620
50,000,000 AllFirst Bank
6.61%, 04/11/01 (C)........... 49,993,207
PAR VALUE VALUE
----------- ----------
BANKING (CONTINUED)
$50,000,000 American Express
Centurion, BN
6.64%, 03/30/01 (C)........... $ 50,000,000
50,000,000 Bank of America NA, BN
6.72%, 12/07/00............... 50,000,000
50,000,000 Bank of America NA, BN
6.73%, 12/08/00............... 50,000,000
50,000,000 Bank of New York
6.52%, 01/22/01............... 49,987,545
50,000,000 Bank One N.A., BN
6.16%, 10/16/00............... 49,996,029
25,000,000 Citigroup, Inc., MTN
6.60%, 04/04/01 (C)........... 25,000,000
12,500,000 Comerica Bank, BN
6.67%, 09/25/00 (C)........... 12,499,737
50,000,000 Comerica Bank, BN
6.61%, 11/24/00 (C)........... 49,993,824
10,000,000 Comerica Bank, BN
6.54%, 02/14/01 (C)........... 9,997,516
50,000,000 Comerica Bank, BN
6.53%, 03/14/01 (C)........... 49,984,842
12,500,000 First National Bank
7.09%, 12/04/00 (C)........... 12,509,138
50,000,000 First Union National
Bank, BN
6.63%, 05/16/01 (C)........... 50,000,000
50,000,000 Huntington National
Bank, BN
6.72%, 12/13/00 (C)........... 49,983,525
30,000,000 Huntington National
Bank, BN
6.83%, 01/12/01 (C)........... 30,018,294
45,000,000 Key Bank N.A., BN
6.50%, 01/29/01............... 44,987,276
44,000,000 M & I Bank Northeast, BN
6.36%, 10/26/00............... 44,000,000
25,000,000 Morgan Guaranty
Trust Co., BN
6.64%, 03/19/01 (C)........... 25,007,119
-------------
753,950,672
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
GALAXY PRIME RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
FINANCE - 2.77%
$100,000,000 Diageo Capital Plc
6.82%, 08/24/00 (C)........... $ 99,996,607
20,000,000 IBM Credit Corp., MTN
5.90%, 08/07/00............... 19,999,866
-------------
119,996,473
-------------
UTILITIES - 2.64%
25,000,000 AT&T Corp.
6.62%, 06/14/01 (C)(D)........ 25,000,000
89,500,000 Emerson Electric Co., MTN
6.58%, 06/06/01 (C)........... 89,500,000
-------------
114,500,000
-------------
CONSUMER STAPLES - 1.00%
43,100,000 Sara Lee Corp., MTN, Series C
6.68%, 02/14/01............... 43,086,777
-------------
TOTAL CORPORATE NOTES
AND BONDS .................... 1,031,533,922
-------------
(Cost $1,031,533,922)
CERTIFICATES OF DEPOSIT - 20.82%
40,000,000 AllFirst Bank
6.62%, 07/27/01 (C)........... 40,000,000
49,000,000 Bank of Nova Scotia
6.70%, 02/12/01............... 48,986,342
50,000,000 Barclays Bank Plc
6.53%, 08/21/00............... 50,000,000
100,000,000 Barclays Bank Plc
6.56%, 08/21/00............... 100,000,000
100,000,000 Bayerische Landesbank
New York
6.55%, 12/15/00 (C)........... 99,972,131
50,000,000 Bayerische Landesbank
New York
6.69%, 12/15/00 (C)........... 49,981,421
50,000,000 Canadian Imperial Bank
6.72%, 12/26/00............... 50,000,000
50,000,000 Fifth Third Bank
6.54%, 08/30/00............... 50,000,000
PAR VALUE VALUE
----------- ----------
CERTIFICATES OF DEPOSIT (CONTINUED)
$88,500,000 First Union National Bank, BN
6.61%, 11/24/00 (C)........... $ 88,494,505
25,000,000 M & I Bank Northeast
6.17%, 10/12/00............... 25,000,000
50,000,000 Rabobank Nederland
6.69%, 02/28/01............... 49,986,288
50,000,000 Rabobank Nederland
6.66%, 03/08/01............... 49,985,759
50,000,000 Royal Bank of Canada, Yankee
6.52%, 01/18/01............... 49,988,934
50,000,000 Royal Bank of Canada
6.52%, 03/14/01 (C)........... 49,983,325
50,000,000 SunTrust Bank
6.54%, 09/11/00............... 50,000,000
49,000,000 SunTrust Bank
6.78%, 04/18/01............... 48,993,379
-------------
TOTAL CERTIFICATES
OF DEPOSIT ................... 901,372,084
-------------
(Cost $901,372,084)
U.S. AGENCY OBLIGATION - 0.32%
FEDERAL HOME LOAN BANK - 0.32%
14,000,000 5.92%, 10/13/00............... 13,997,431
-------------
TOTAL U.S. AGENCY
OBLIGATION ................... 13,997,431
-------------
(Cost $13,997,431)
REPURCHASE AGREEMENT - 1.36%
58,716,000 Goldman Sachs
Repurchase Agreement
6.55%, 08/01/00, Dated
7/31/00, Repurchase Price
$58,726,683 (Collateralized
by U.S. Treasury Notes,
5.625-5.75%, due
11/15/00-12/31/02,
Total Par $59,802,000,
Market Value $59,350,850)..... 58,716,000
-------------
TOTAL REPURCHASE
AGREEMENT .................... 58,716,000
-------------
(Cost $58,716,000)
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
GALAXY PRIME RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
SHARES VALUE
----------- ----------
INVESTMENT COMPANIES - 0.24%
2,048,411 Dreyfus Cash
Management Fund............... $ 2,048,411
8,304,706 Federated Investors Prime
Obligation Money
Market Fund................... 8,304,706
--------------
TOTAL INVESTMENT
COMPANIES .................... 10,353,117
--------------
(Cost $10,353,117)
TOTAL INVESTMENTS - 99.59%.................... 4,312,195,780
--------------
(Cost $4,312,195,780)*
NET OTHER ASSETS AND LIABILITIES - 0.41%...... 17,872,509
--------------
NET ASSETS - 100.00%.......................... $4,330,068,289
==============
---------------------------------
* 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,
2000, these securities amounted to $689,233,586 or 15.92% of net assets.
(C) Variable rate securities. The rates shown reflect rates in effect at July
31, 2000.
(D) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may only be resold, in transactions exempt
from registration, to qualified buyers. At July 31, 2000, this security
amounted to $25,000,000 or 0.58% 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, 2000
PAR VALUE VALUE
----------- ----------
MUNICIPAL SECURITIES - 95.43%
ALABAMA - 1.36%
$1,500,000 Chatom County IDB, PCR
4.25%, 09/06/00
Guaranty: National
Rural Utilities CFC........... $ 1,500,000
800,000 North Alabama
Environmental Improvement
Authority, PCR
Reynolds Metals Co.
4.40%, 12/01/00 (A)
LOC: Bank of Nova Scotia ..... 800,000
-------------
2,300,000
-------------
ALASKA - 0.59%
1,000,000 Valdez Marine Terminal
Revenue,
Exxon Pipeline Co. Project,
Series B
4.20%, 12/01/33 (A)........... 1,000,000
-------------
ARIZONA - 2.84%
2,000,000 Maricopa County, PCR
Arizona Public Service Co.,
Series A
4.20%, 05/01/29 (A)
LOC: Morgan Guaranty Trust ... 2,000,000
2,800,000 Maricopa County, PCR
Arizona Public Service Co.,
Series F
4.25%, 05/01/29 (A)
LOC: Bank of America.......... 2,800,000
-------------
4,800,000
-------------
COLORADO - 1.63%
2,760,000 Colorado State Health Facilities
Authority Revenue,
Boulder Community Hospital
Project, Series B
4.25%, 10/01/14 (A)
Insured: MBIA
SPA: Rabobank
Nederland N.V................. 2,760,000
-------------
PAR VALUE VALUE
----------- ----------
FLORIDA - 1.71%
$2,900,000 University Athletic
Association, Inc., Capital
Improvement Revenue
University of Florida
Stadium Project
4.35%, 02/01/20 (A)
LOC: SunTrust Bank of
Central Florida............... $ 2,900,000
-------------
GEORGIA - 4.19%
3,900,000 Municipal Electric Authority
4.15%, 01/01/20 (A)
LOC: ABN AMRO Bank N.V. ...... 3,900,000
3,195,000 Municipal Electric Authority,
Project One, Series B
4.15%, 01/01/16 (A)
LOC: ABN AMRO Bank N.V. ...... 3,195,000
-------------
7,095,000
-------------
IDAHO - 1.77%
3,000,000 Idaho State HFA
Pooled Financing Program
4.30%, 10/01/10 (A)
LOC: U.S. Bank of Idaho ...... 3,000,000
-------------
ILLINOIS - 3.40%
4,000,000 Illinois Educational Facilities
Authority,
Pooled Financing Program,
Series 95
4.25%, 09/07/00
LOC: Northern Trust........... 4,000,000
1,750,000 Illinois Educational Facilities
Authority,
Pooled Financing Program,
Series 95
4.35%, 11/01/00
LOC: Northern Trust........... 1,750,000
-------------
5,750,000
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
GALAXY TAX-EXEMPT RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
INDIANA - 4.97%
$1,500,000 Fort Wayne Hospital Authority,
Parkview Memorial Hospital,
Series B
4.25%, 01/01/20 (A)
LOC: Bank of America.......... $ 1,500,000
3,000,000 Indiana State Development
Finance Authority
Environmental Revenue
USX Corp. Project
4.05%, 12/01/22 (A)
LOC: Bank of Nova Scotia...... 3,000,000
2,900,000 Sullivan County, PCR,
Series L-1
3.95%, 09/05/00
Guaranty: National Rural
Utilities CFC................. 2,900,000
1,000,000 Sullivan County, PCR,
Series L-2
3.95%, 09/05/00
Guaranty: National Rural
Utilities CFC................. 1,000,000
-------------
8,400,000
-------------
IOWA - 0.59%
1,000,000 Iowa Finance Authority
Revenue Wheaton Franciscan
Services, Series A
4.30%, 08/15/12 (A)
Insured: MBIA
SPA: Toronto
Dominion Bank................. 1,000,000
-------------
LOUSIANA - 7.27%
4,200,000 Ascension Parish, PCR
Shell Oil Co.
4.10%, 05/01/26 (A)........... 4,200,000
500,000 Louisiana Offshore
Terminal Authority
Deepwater
Port Revenue,
Loop, Inc., 1st Stage
4.20%, 09/01/06 (A)
LOC: SunTrust Bank............ 500,000
PAR VALUE VALUE
----------- ----------
LOUSIANA (CONTINUED)
$2,100,000 St. Charles Parish, PCR
Shell Oil Co. Project
4.30%, 10/01/25 (A)........... $ 2,100,000
5,500,000 St. James Parish, PCR,
Texaco Project
4.25%, 10/17/00............... 5,500,000
-------------
12,300,000
-------------
MAINE - 2.13%
3,600,000 Maine Finance Authority,
Jackson Laboratory Issue
4.40%, 12/01/30 (A)
LOC: Keybank N.A.............. 3,600,000
-------------
MARYLAND - 2.67%
1,500,000 Maryland State Health &
Higher Educational Facilities
Authority Pooled Loan Project,
Series A
4.15%, 04/01/35 (A)
LOC: First National Bank
of Chicago.................... 1,500,000
3,000,000 Maryland State, GO,
First Series
5.00%, 03/01/01............... 3,014,778
-------------
4,514,778
-------------
MINNESOTA - 3.79%
3,000,000 Minnesota State, GO,
Multi-Purpose
4.75%, 06/01/01............... 3,008,370
3,400,000 New ULM, Hospital
Facility Revenue
Health Central System
4.35%, 08/01/14 (A)
LOC: Norwest Bank
Minnesota NA.................. 3,400,000
-------------
6,408,370
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
GALAXY TAX-EXEMPT RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
MISSISSIPPI - 5.38%
$2,600,000 Harrison County, PCR,
duPont (E.I.) de Nemours
4.25%, 09/01/10 (A)........... $ 2,600,000
4,100,000 Jackson County
Water System,
Chevron Corp. Project
3.90%, 11/01/24 (A)........... 4,100,000
2,400,000 Perry County, PCR,
Leaf River Forest Project
4.20%, 03/01/02 (A)
LOC: Wachovia Bank N.A. ...... 2,400,000
-------------
9,100,000
-------------
NEVADA - 1.60%
2,700,000 Reno Hospital Revenue
St. Mary's Regional Medical
Center, Series B
4.40%, 05/15/23 (A)
Insured: MBIA
SPA: ABN AMRO Bank............ 2,700,000
-------------
NEW HAMPSHIRE - 2.16%
3,650,000 New Hampshire Health &
Higher Education Facilities
Authority VHA of New England
Capital Asset Financing
Program, Series D
4.35%, 12/01/25 (A)
Insured:AMBAC
SPA: Mellon Bank N.A. ........ 3,650,000
-------------
NEW MEXICO - 2.61%
2,500,000 Farmington, PCR,
Arizona Public Service Co.,
Series A
4.20%, 05/01/24 (A)
LOC: Bank of America
NT & SA....................... 2,500,000
PAR VALUE VALUE
----------- ----------
NEW MEXICO (CONTINUED)
$1,920,000 Farmington, PCR,
Arizona Public Service Co.,
Series B
4.20%, 09/01/24 (A)
LOC: Barclays Bank Plc........ $ 1,920,000
-------------
4,420,000
-------------
NEW YORK - 0.92%
300,000 New York City Municipal
Water Finance Authority,
Water & Sewer System
Revenue, Series G
4.15%, 06/15/24 (A)
LOC: FGIC
SPA: FGIC-SPI................. 300,000
1,250,000 New York State Energy
Research and Development
Authority, PCR, New York
State Electric & Gas,
Series B
3.70%, 10/15/15 (A)
LOC: UBS AG................... 1,250,000
-------------
1,550,000
-------------
OREGON - 1.71%
2,900,000 Port Portland, PCR,
Reynolds Metals Co.
4.40%, 12/01/09 (A)
LOC: Bank of Nova Scotia ..... 2,900,000
-------------
PENNSYLVANIA - 7.72%
3,500,000 Delaware County IDA, PCR,
Philadelphia Electric Co.,
Series A
4.20%, 08/07/00
LOC: First Union Bank......... 3,500,000
4,000,000 Delaware Valley Finance
Authority Local
Government Revenue
4.25%, 08/01/16 (A)
LOC: Credit Suisse
First Boston.................. 4,000,000
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
GALAXY TAX-EXEMPT RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
PENNSYLVANIA (CONTINUED)
$2,000,000 Delaware Valley Finance
Authority Local Government
Revenue, Series D
4.25%, 12/01/20 (A)
LOC: Credit Suisse
First Boston.................. $ 2,000,000
3,550,000 Schuylkill County IDA,
Resource Recovery Revenue,
Gilberton Power Project
4.25%, 12/01/02 (A)
LOC: Mellon Bank N.A.......... 3,550,000
-------------
13,050,000
-------------
RHODE ISLAND - 1.51%
2,545,000 Rhode Island State, GO
Consolidated Capital
Development Loan, Series A
5.00%, 09/01/00............... 2,547,718
-------------
SOUTH CAROLINA - 4.38%
4,400,000 Spartanburg County
Health Services District, Inc.,
Hospital Revenue
4.20%, 04/15/23 (A)
LOC: MBIA
SPA: NationsBank N.A.......... 4,400,000
3,000,000 Spartanburg County School
District No. 7, GO, BAN
4.75%, 02/15/01............... 3,009,738
-------------
7,409,738
-------------
TENNESSEE - 2.07%
1,500,000 Chattanooga-Hamilton
County Hospital Authority
4.30%, 10/01/17 (A)
LOC: Morgan Guaranty Trust.... 1,500,000
2,000,000 Tennessee State, GO,
Series A
4.15%, 08/03/00............... 2,000,000
-------------
3,500,000
-------------
PAR VALUE VALUE
----------- ----------
TEXAS - 14.72%
$1,700,000 Gulf Coast Waste
Disposal Authority, PCR
Amoco Oil Co. Project
4.20%, 10/01/17 (A)........... $ 1,700,000
5,300,000 Gulf Coast Waste
Disposal Authority, PCR
Exxon Project
4.20%, 10/01/24 (A)........... 5,300,000
1,200,000 Harris County IDC
Baytank Houston, Inc. Project
4.20%, 02/01/20 (A)
LOC: Rabobank
Nederland, N.V................ 1,200,000
5,000,000 Hockley County IDC, PCR
Amoco Project
4.30%, 11/01/19 (A)........... 5,002,277
2,000,000 Houston, GO, Series B
4.22%, 09/11/00............... 2,000,000
1,000,000 Lone Star Airport
Improvement Authority,
American Airlines, Inc.,
Series A-1
4.40%, 12/01/14 (A)
LOC: Royal Bank of Canada..... 1,000,000
3,000,000 Lower Neches Valley Authority
Chevron, Inc. Project
3.95%, 02/15/17 (A)........... 3,000,000
600,000 North Central HFDC
Hospital Revenue
Presbyterian Medical Center,
Series C
4.40%, 12/01/15 (A)
Insured: MBIA
SPA: NationsBank N.A.......... 600,000
600,000 North Central Texas Health
Facilities Development Corp.,
Presbyterian Medical Center,
Series C
4.40%, 12/01/15 (A)
LOC: MBIA
SPA: NationsBank of Texas..... 600,000
4,500,000 Texas State, TRAN, Series A
4.50%, 08/31/00............... 4,502,852
-------------
24,905,129
-------------
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
GALAXY TAX-EXEMPT RESERVES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
UTAH - 3.55%
$6,000,000 Utah State, GO, Series C
4.20%, 07/01/16 (A)
SPA: Toronto
Dominion Bank................. $ 6,000,000
-------------
WASHINGTON - 2.51%
4,250,000 Seattle Municipal
Light & Power Revenue
4.65%, 08/07/00
LIQ: Morgan Guaranty Trust.... 4,250,000
-------------
WYOMING - 5.68%
700,000 Lincoln County, PCR,
Exxon Project, Series A
4.30%, 11/01/14 (A)........... 700,000
5,000,000 Sweetwater County, PCR,
Series A
4.05%, 08/08/00
LOC: UBS AG................... 5,000,000
3,900,000 Uinta County, PCR,
Chevron USA, Inc. Project
4.15%, 08/15/20 (A)........... 3,900,000
-------------
9,600,000
-------------
TOTAL MUNICIPAL
SECURITIES ................... 161,410,733
-------------
(Cost $161,410,733)
SHARES VALUE
----------- ----------
INVESTMENT COMPANIES - 2.20%
38,286 Dreyfus Tax Exempt Cash
Management.................... $ 38,286
3,677,150 Federated Investors Tax-Free
Obligations Fund.............. 3,677,150
-------------
TOTAL INVESTMENT
COMPANIES .................... 3,715,436
-------------
(Cost $3,715,436)
TOTAL INVESTMENTS - 97.63%.................... 165,126,169
-------------
(Cost $165,126,169)*
NET OTHER ASSETS AND LIABILITIES - 2.37%...... 4,006,921
-------------
NET ASSETS - 100.00%.......................... $ 169,133,090
=============
----------------------------------------
* Aggregate cost for federal tax purposes.
(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, 2000.
AMBAC American Municipal Bond Assurance Corp
BAN Bond Anticipation Notes
FGIC Federal Guaranty Insurance Corp.
GO General Obligation
HFA Health Facilities Authority
HFDC Health Facilities Development Corp.
IDA Industrial Development Authority
IDB Industrial Development Board
IDC Industrial Development Corp.
LIQ Liquidity
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.
9
<PAGE>
GALAXY GOVERNMENT RESERVES
PORTFOLIO OF INVESTMENTS
JULY 31, 2000
PAR VALUE VALUE
----------- ----------
U.S. AGENCY OBLIGATIONS - 80.60%
FEDERAL HOME LOAN BANK - 29.28%
$10,000,000 6.40%, 08/11/00 (A)........... $ 9,982,222
5,000,000 6.43%, 08/23/00 (A)........... 4,980,353
5,000,000 6.61%, 10/04/00 (B)........... 4,999,399
4,000,000 5.92%, 10/13/00............... 3,999,266
4,500,000 5.88%, 11/20/00............... 4,491,497
5,000,000 4.88%, 01/26/01............... 4,954,332
5,000,000 6.45%, 03/16/01............... 4,996,673
10,000,000 6.44%, 07/20/01 (B)........... 9,994,197
-------------
48,397,939
-------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 29.00%
10,000,000 6.49%, 08/03/00 (A)........... 9,996,395
5,000,000 6.39%, 08/04/00, MTN(B)....... 4,999,975
10,000,000 6.50%, 08/10/00 (A)........... 9,983,750
5,000,000 6.43%, 09/14/00 (A)........... 4,960,736
3,000,000 6.47%, 11/22/00, MTN(B)....... 2,999,728
10,000,000 6.43%, 12/08/00, MTN(B)....... 9,996,546
5,000,000 6.47%, 02/16/01, MTN.......... 4,999,213
-------------
47,936,343
-------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 16.29%
7,000,000 6.42%, 08/01/00 (A)........... 7,000,000
5,000,000 6.43%, 08/15/00 (A)........... 4,987,497
5,000,000 6.41%, 10/05/00 (A)........... 4,942,132
10,000,000 6.53%, 12/20/00 (B)........... 9,995,184
-------------
26,924,813
-------------
FEDERAL FARM CREDIT BANK - 6.03%
5,000,000 6.49%, 09/01/00, MTN(B)....... 4,999,873
5,000,000 5.13%, 04/02/01............... 4,956,608
-------------
9,956,481
-------------
TOTAL U.S. AGENCY
OBLIGATIONS .................. 133,215,576
-------------
(Cost $133,215,576)
PAR VALUE VALUE
----------- ----------
REPURCHASE AGREEMENT - 16.36%
$27,033,000 Lehman Brothers
Repurchase Agreement
6.56%, 08/01/00, Dated
07/31/00, Repurchase Price
$27,037,926 (Collateralized
by U.S. Treasury Bond
12.00%, Due 08/15/13
Total Par $19,630,000
Market Value $27,575,142)..... $ 27,033,000
-------------
TOTAL REPURCHASE
AGREEMENT .................... 27,033,000
-------------
(Cost $27,033,000)
SHARES
----------
INVESTMENT COMPANIES - 3.62%
2,919,631 Dreyfus Cash
Management Fund............... 2,919,631
3,066,815 Federated Investors
Government Obligation
Money Market Fund............. 3,066,815
-------------
TOTAL INVESTMENT
COMPANIES .................... 5,986,446
-------------
(Cost $5,986,446)
TOTAL INVESTMENTS - 100.58%................... 166,235,022
-------------
(Cost $166,235,022)*
LIABILITIES IN EXCESS OF ASSETS - (0.58%)..... (956,764)
-------------
NET ASSETS - 100.00%.......................... $ 165,278,258
=============
---------------------------------
* 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, 2000.
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
This page intentionally left blank.
<PAGE>
GALAXY MONEY MARKET PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2000
<TABLE>
PRIME TAX-EXEMPT GOVERNMENT
RESERVES RESERVES RESERVES
---------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at amortized cost ................. $ 4,253,479,780 $ 165,126,169 $ 139,202,022
Repurchase agreements ......................... 58,716,000 - 27,033,000
---------------- --------------- ---------------
Total investments at value .................. 4,312,195,780 165,126,169 166,235,022
Cash ............................................ 2,605 638 808
Receivable for shares sold ...................... 93,095,487 5,026,042 1,520,497
Interest and dividend receivables ............... 24,815,149 1,214,696 794,247
---------------- --------------- ---------------
Total Assets .................................. 4,430,109,021 171,367,545 168,550,574
---------------- --------------- ---------------
LIABILITIES:
Payable for shares repurchased .................. 96,081,996 2,060,585 3,107,280
Advisory fee payable (Note 3) ................... 1,308,659 57,509 57,374
Distribution and service fee payable (Note 3) ... 1,641,724 57,509 57,374
Payable to Administrator (Note 3) ............... 267,224 16,981 15,803
Trustees' fees and expenses payable (Note 3) .... 81,425 3,302 3,521
Accrued expenses and other payables ............. 659,704 38,569 30,964
---------------- --------------- ---------------
Total Liabilities ............................. 100,040,732 2,234,455 3,272,316
---------------- --------------- ---------------
NET ASSETS ......................................... $ 4,330,068,289 $ 169,133,090 $ 165,278,258
================ =============== ===============
NET ASSETS consist of:
Par value (Note 4) .............................. $ 4,330,068 $ 169,133 $ 165,278
Paid-in capital in excess of par value .......... 4,325,738,221 168,963,957 165,112,980
---------------- --------------- ---------------
TOTAL NET ASSETS ................................... $ 4,330,068,289 $ 169,133,090 $ 165,278,258
================ =============== ===============
SHARES OF BENEFICIAL INTEREST OUTSTANDING .......... 4,330,068,289 169,133,090 165,278,258
NET ASSET VALUE:
offering and redemption price per share
(Net Assets (DIVIDE) 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 YEAR ENDED JULY 31, 2000
<TABLE>
PRIME TAX-EXEMPT GOVERNMENT
RESERVES RESERVES RESERVES
---------------- --------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) ............................... $ 258,162,502 $ 6,571,978 $ 9,968,659
Dividends (Note 2) .............................. 253,631 92,566 143,119
---------------- --------------- ---------------
Total investment income ....................... 258,416,133 6,664,544 10,111,778
---------------- --------------- ---------------
EXPENSES:
Investment advisory fee (Note 3) ................ 15,722,584 726,319 699,562
Administration fee (Note 3) ..................... 3,201,005 132,655 127,688
Custody fee ..................................... 56,534 23,412 17,898
Fund accounting fee (Note 3) .................... 109,675 42,204 32,495
Professional fees ............................... 171,984 30,390 25,773
Trustees' fee (Note 3) .......................... 106,789 4,130 3,629
Transfer agent fee (Note 3) ..................... 5,186 5,510 5,014
Distribution and service fee (Note 3) ........... 19,732,056 726,319 699,562
Reports to shareholders ......................... 1,001,900 16,854 17,180
Registration fees ............................... 30,557 26,552 15,922
Miscellaneous ................................... 71,515 3,157 11,738
---------------- --------------- ---------------
Total expenses ................................ 40,209,785 1,737,502 1,656,461
---------------- --------------- ---------------
NET INVESTMENT INCOME .............................. 218,206,348 4,927,042 8,455,317
---------------- --------------- ---------------
NET REALIZED GAIN ON INVESTMENTS ................... - 1,486 -
---------------- --------------- ---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 218,206,348 $ 4,928,528 $ 8,455,317
================ =============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
GALAXY MONEY MARKET PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
PRIME RESERVES
-----------------------------------
YEAR PERIOD
ENDED ENDED
JULY 31, 2000 JULY 31, 1999(1)
--------------- ---------------
<S> <C> <C>
NET ASSETS at beginning of period .................................. $ 4,250,399,059 $ 10(2)
--------------- ---------------
Increase in Net Assets resulting from operations:
Net investment income ........................................... 218,206,348 134,875,896
Net realized gain (loss) on investments sold .................... - -
--------------- ---------------
Net increase in net assets
resulting from operations ................................... 218,206,348 134,875,896
--------------- ---------------
Dividends to shareholders from:
Net investment income ........................................... (218,206,348) (134,875,896)
--------------- ---------------
Total Dividends ............................................... (218,206,348) (134,875,896)
--------------- ---------------
Share Transactions:
Net proceeds from sale of shares ................................ 24,906,196,879 21,244,865,186
Issued to shareholders in
reinvestment of dividends ..................................... 226,112,157 127,220,074
Cost of shares repurchased ...................................... (25,052,639,806) (17,121,686,211)
--------------- ---------------
Net increase (decrease) from share transactions ............... 79,669,230 4,250,399,049
--------------- ---------------
Net increase (decrease) in net assets ......................... 79,669,230 4,250,399,049
--------------- ---------------
NET ASSETS at end of period (including line A) ..................... $ 4,330,068,289 $ 4,250,399,059
=============== ===============
(A) Undistributed net investment income ............................ $ - $ -
=============== ===============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold ............................................................ 24,906,196,879 21,244,865,186
Issued to shareholders in
reinvestment of dividends ..................................... 226,112,157 127,220,074
Repurchased ..................................................... (25,052,639,806) (17,121,686,211)
--------------- ---------------
Net increase (decrease) in shares outstanding ................. 79,669,230 4,250,399,049
=============== ===============
</TABLE>
-------------------------------------------------
(1) The Funds commenced operations on September 22, 1998.
(2) Amounts represent initial investment.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
<TABLE>
TAX-EXEMPT RESERVES GOVERNMENT RESERVES
----------------------------------- ----------------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
JULY 31, 2000 JULY 31, 1999(1) JULY 31, 2000 JULY 31, 1999(1)
--------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ................... $ 177,839,867 $ 10(2) $ 156,852,991 $ 10(2)
--------------- ---------------- ------------- ----------------
Increase in Net Assets resulting from operations:
Net investment income ............................ 4,927,042 2,635,072 8,455,317 5,466,065
Net realized gain (loss) on investments sold ..... 1,486 (1,486) - -
--------------- ---------------- ------------- ----------------
Net increase in net assets
resulting from operations .................... 4,928,528 2,633,586 8,455,317 5,466,065
--------------- ---------------- ------------- ----------------
Dividends to shareholders from:
Net investment income ............................ (4,927,082) (2,635,032) (8,455,326) (5,466,056)
--------------- ---------------- ------------- ----------------
Total Dividends ................................ (4,927,082) (2,635,032) (8,455,326) (5,466,056)
--------------- ---------------- ------------- ----------------
Share Transactions:
Net proceeds from sale of shares ................. 803,601,489 629,913,123 604,124,676 594,673,838
Issued to shareholders in
reinvestment of dividends ...................... 5,091,551 2,472,799 8,742,456 5,186,232
Cost of shares repurchased ....................... (817,401,263) (454,544,619) (604,441,856) (443,007,098)
--------------- ---------------- ------------- ----------------
Net increase (decrease) from share transactions (8,708,223) 177,841,303 8,425,276 156,852,972
--------------- ---------------- ------------- ----------------
Net increase (decrease) in net assets .......... (8,706,777) 177,839,857 8,425,267 156,852,981
--------------- ---------------- ------------- ----------------
NET ASSETS at end of period (including line A) ...... $ 169,133,090 $ 177,839,867 $ 165,278,258 $ 156,852,991
=============== ================ ============= ================
(A) Undistributed net investment income ............. $ - $ 40 $ - $ 9
=============== ================ ============= ================
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold ............................................. 803,601,489 629,913,123 604,124,676 594,673,838
Issued to shareholders in
reinvestment of dividends ...................... 5,091,551 2,472,799 8,742,456 5,186,232
Repurchased ...................................... (817,401,263) (454,544,619) (604,441,856) (443,007,098)
--------------- ---------------- ------------- ----------------
Net increase (decrease) in shares outstanding .. (8,708,223) 177,841,303 8,425,276 156,852,972
=============== ================ ============= ================
</TABLE>
15
<PAGE>
GALAXY PRIME RESERVES
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31,
2000 1999(1)
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period ............................. $ 1.00 $ 1.00
----------------- -----------------
Income from Investment Operations:
Net investment income ......................................... 0.05 0.04
----------------- -----------------
Less Dividends:
Dividends from net investment income .......................... (0.05) (0.04)
----------------- -----------------
Net increase (decrease) in net asset value ....................... - -
----------------- -----------------
Net Asset Value, End of Period ................................... $ 1.00 $ 1.00
================= =================
Total Return ..................................................... 5.09% 3.59%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................................ $ 4,330,068 $ 4,250,399
Ratios to average net assets:
Net investment income ......................................... 4.98% 4.10%*
Operating expenses ............................................ 0.92% 0.96%*
</TABLE>
----------------------------------------------------
* Annualized
** Not annualized
(1) The Fund commenced operations on September 22, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
GALAXY TAX-EXEMPT RESERVES
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31,
2000 1999(1)
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period ............................. $ 1.00 $ 1.00
----------------- -----------------
Income from Investment Operations:
Net investment income ......................................... 0.03 0.02
----------------- -----------------
Less Dividends:
Dividends from net investment income .......................... (0.03) (0.02)
----------------- -----------------
Net increase (decrease) in net asset value ....................... - -
----------------- -----------------
Net Asset Value, End of Period ................................... $ 1.00 $ 1.00
================= =================
Total Return ..................................................... 2.77% 1.82%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................................ $ 169,133 $ 177,840
Ratios to average net assets:
Net investment income ......................................... 2.72% 2.09%*
Operating expenses ............................................ 0.96% 0.99%*
</TABLE>
-------------------------------------
* Annualized
** Not annualized
(1) The Fund commenced operations on September 22, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
GALAXY GOVERNMENT RESERVES
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31,
2000 1999(1)
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period ............................. $ 1.00 $ 1.00
----------------- -----------------
Income from Investment Operations:
Net investment income ......................................... 0.05 0.03
----------------- -----------------
Less Dividends:
Dividends from net investment income .......................... (0.05) (0.03)
----------------- -----------------
Net increase (decrease) in net asset value ....................... - -
----------------- -----------------
Net Asset Value, End of Period ................................... $ 1.00 $ 1.00
================= =================
Total Return ..................................................... 4.94% 3.49%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ................................ $ 165,278 $ 156,853
Ratios to average net assets:
Net investment income ......................................... 4.84% 4.00%*
Operating expenses ............................................ 0.95% 0.99%*
</TABLE>
-----------------------------------------
* Annualized
** Not annualized
(1) The Fund commenced operations on September 22, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<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 thirty-six managed investment portfolios. The accompanying financial
statements and financial highlights are those of the Prime Reserves, Tax-Exempt
Reserves and Government Reserves (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 and
paid daily. 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. 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 a Fund's ability to dispose of the underlying securities,
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 FleetBoston Financial Corpor-
ation, 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 PFPC Inc. (formerly known as First Data Investor Services Group,
Inc.), a member of the PNCFinancial Services Group (formerly known as PNC Bank
Corp.), are parties to an administration agreement under which PFPC Inc. (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, 0.0575% of the next $3 billion of combined average daily net assets
and 0.0525% of combined average daily net assets in excess of $21 billion.
In addition, the Administrator also provides certain fund accounting, custody
administration and transfer agency services pursuant to certain fee
arrangements. In accordance with such fee arrangements, the Administrator
compensates the Trust's custodian bank, The Chase Manhattan Bank, for its
services.
Prior to December 1, 1999, the services described above were provided by First
Data Investor Services Group, Inc., a wholly-owned subsidiary of First Data
Corp. On that date, PFPC Trust Co., 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 First Data Investor Services Group, Inc. As part of the
transaction, PFPC Inc., also an indirect wholly-owned subsidiary of PNC Bank
Corp., was merged into First Data Investor Services Group, Inc., which then
changed its name to PFPC Inc.
Provident Distributors, Inc. (the "Distributor"), serves as the distributor of
the Trust's shares. Prior to December 1, 1999, First Data Distributors, Inc., a
wholly-owned subsidiary of First Data Investor Services Group, Inc., served as
the exclusive 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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
For the year ended July 31, 2000, the Funds paid fees under the Plan as follows:
Shareholder
Fund Services Distribution
---- -------- ------------
Prime Reserves ......... $10,962,253 $8,769,803
Tax-Exempt Reserves .... 453,949 272,370
Government Reserves .... 437,226 262,336
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. 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. 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 year ended July 31, 2000 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 forty classes of shares, each
consisting of one or more series.
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.
21
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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 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, 2000, and the related statements of operations for the year then ended
and the statements of changes in net assets and the financial highlights for the
year then ended and for the period from September 22, 1998 (commencement of
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 auditing standards generally accepted
in the United States. 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 July 31, 2000 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 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, 2000, and the results of their operations for the year
then ended and the changes in their net assets and financial highlights for the
year then ended and for the period from September 22, 1998 to July 31, 1999, in
conformity with accounting principles generally accepted in the United States.
Ernst + Young LLP
Boston, Massachusetts
September 8, 2000
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