<PAGE>
As filed with the Securities and Exchange Commission on ^ December 29, 1995
Securities Act File No. 33-4806
Investment Company Act File No. 811-4636
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. ^ 26 [ x ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
Amendment No. ^ 28 [ x ]
The Galaxy Fund
(Exact Name of Registrant as Specified in Charter)
^ 4400 Computer Drive
^ Westboro, Massachusetts ^ 01581-5108
(Address of Principal Executive Officers)
Registrant's Telephone Number:
(800) 628-0414
W. Bruce McConnel, III
DRINKER BIDDLE & REATH
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
Copy to:
Neil Forrest
Vice President
^ First Data Investor Services Group ^, Inc.
^ 4400 Computer Drive
^ Westboro, Massachusetts ^ 01581-5108
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
The Registrant has previously filed a declaration of indefinite registration of
its shares of beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice with respect
to the Money Market, Government, Tax-Exempt, U.S. Treasury, Institutional
Treasury Money Market, Short-Term Bond, Intermediate Government Income,
Corporate Bond, High Quality Bond, Tax-Exempt Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond, Rhode Island
Municipal Bond, Equity Value, Equity Growth, Equity Income, International
Equity, Small Company Equity and Asset Allocation Funds for the fiscal year
ended October 31, ^ 1995 was filed, as amended, on December 7, 1995.
-2-
<PAGE>
^ This filing is being made only with respect to Trust Shares of the
Registrant's Short-Term Bond Fund, Intermediate Government Income Fund and High
Quality Bond Fund. As such, the Prospectuses and Statements of Additional
Information for the Registrant's other portfolios and for Retail A and/or
Retail B Shares of the Short-Term Bond Fund, Intermediate Government Income
Fund and High Quality Bond Fund are not included in this filing.
-3-
<PAGE>
THE GALAXY FUND
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A
Item No. Prospectus Heading
1. Cover Page Cover Page
2. Synopsis Highlights and Expense Summary
3. Condensed Financial
Information Financial Highlights
4. General Description of
Registrant Highlights; Investment Objectives
and Policies; Investment
Limitations; Types of Obligations
and Other Investment Information
5. Management of the Fund Management of the Fund(s);
Investment Objectives and Policies;
Investment Adviser; Authority to Act
as Investment Adviser;
Administrator; Custodian and
Transfer Agent; Expenses;
Performance and Yield; Miscellaneous
5A. Management's Discussion of
Fund Performance Not Applicable
6. Capital Stock and Other
Securities Dividends and Distributions; Taxes;
Description of Galaxy and Its
Shares; Miscellaneous
7. Purchase of Securities
Being Offered How to Purchase and Redeem Shares;
Distributor; General; Pricing of Shares
8. Redemption or
Repurchase How to Purchase and Redeem Shares;
Distributor; Redemption of Shares
9. Pending Legal
Proceedings Not Applicable
-i-
<PAGE>
THE GALAXY FUND
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part B Heading in Statement of
Item No. Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History Not Applicable
13. Investment Objectives and
Policies Investment Objectives and Policies
14. Management of the Fund Trustees and Officers; Expenses;
Miscellaneous
15. Control Persons and Principal
Holders of Securities See Prospectus-"Management of the
Fund(s)"
16. Investment Advisory and
Other Services Advisory, Sub-Advisory,
Administration, Custodian and
Transfer Agency Agreements;
Shareholder Services Plan;
Distributor; Auditors; Counsel
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and Other
Securities Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered Additional Purchase and Redemption
Information; Description of Shares
20. Tax Status Additional Information Concerning
Taxes
21. Underwriters Portfolio Transactions
22. Calculation of
Performance Data Performance and Yield Information
23. Financial Statements Auditors
-ii-
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
-iii-
<PAGE>
TRUST
THE GALAXY FUND
Short-Term Bond Fund
Intermediate ^ Government Income Fund
High Quality Bond Fund
Prospectus
March 1, ^ 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUNDS OR BY THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
___________________
TABLE OF CONTENTS
Page
____
EXPENSE SUMMARY 4
FINANCIAL HIGHLIGHTS 5
INVESTMENT OBJECTIVES AND POLICIES 10
Short-Term Bond Fund 10
Intermediate ^ Government Income Fund 11
High Quality Bond Fund 12
Special Risk Considerations 14
Other Investment Policies 15
INVESTMENT LIMITATIONS 24
PRICING OF SHARES 25
HOW TO PURCHASE AND REDEEM SHARES 26
Distributor 26
Purchase of Shares 26
Redemption of Shares 28
DIVIDENDS AND DISTRIBUTIONS 28
TAXES 29
Federal 29
State and Local 30
MANAGEMENT OF THE FUNDS 30
Investment Adviser 30
Authority to Act as Investment Adviser 32
Administrator 32
DESCRIPTION OF GALAXY AND ITS SHARES 33
Shareholder Services Plan 34
Affiliate Agreement for Sub-Account Services 35
CUSTODIAN AND TRANSFER AGENT 35
EXPENSES 36
PERFORMANCE AND YIELD INFORMATION 36
MISCELLANEOUS 38
<PAGE>
THE GALAXY FUND
For applications and
^ 4400 Computer Drive information regarding initial
^ Westboro, Massachusetts purchases and current
^ 01581-5108 performance, call (800)
628-0414. For additional purchases,
redemptions, exchanges and other shareholder
services, call (800) 628-0413.
The Galaxy Fund ("Galaxy") is an open-end management investment company.
This Prospectus describes three series of Galaxy's shares (collectively,
the "Trust Shares") which represent interests in three separate investment
portfolios (individually, a "Fund," collectively, the "Funds") offered to
investors by Galaxy, each having its own investment objective and policies:
The SHORT-TERM BOND FUND'S investment objective is to seek a high level of
current income consistent with preservation of capital. Under normal market
and
economic conditions, the Fund will invest substantially all of its assets in
investment grade debt obligations of domestic and foreign issuers rated at the
time of purchase within the three highest ratings of Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") (or which, if
unrated, are of comparable quality) and in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and other "money market"
instruments.
The INTERMEDIATE ^ GOVERNMENT INCOME FUND'S investment objective is to seek
the highest level of current income consistent with prudent risk of capital.
Subject to this objective, the Fund's investment adviser will consider the
total rate of return on portfolio securities in managing the Fund. Under
normal market and economic conditions, the Fund will invest substantially all
of its assets in debt obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, investment grade debt obligations rated at
the time of purchase within the three highest ratings of S&P or Moody's (or
which, if unrated, are of comparable quality) and ^ "money market" instruments.
The Fund was previously known as the Intermediate Bond Fund.
The HIGH QUALITY BOND FUND'S investment objective is to seek a high level
of current income consistent with prudent risk of capital. Under normal market
and economic conditions, the Fund will invest substantially all of its assets
in high quality
<PAGE>
debt obligations that are rated at the time of purchase within the two highest
ratings of S&P or Moody's (or which, if unrated, are of comparable quality) and
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and other "money market" instruments.
This Prospectus describes Trust Shares in each Fund. Trust Shares are
offered to investors maintaining qualified accounts at bank and trust
institutions, including institutions affiliated with Fleet Financial Group,
Inc.,and to participants in employer-sponsored defined contribution plans.
Galaxy is also authorized to issue an additional series of shares ^, Retail A
Shares, in the Intermediate Government Income Fund, and two additional series
of shares, Retail A shares and Retail B Shares, in each of the Short-Term Bond
Fund and High Quality Bond Fund (Retail A Shares and Retail B Shares are
referred to herein collectively as "Retail Shares"). Retail Shares are
offered under a separate prospectus primarily to individuals or
corporations purchasing either for their own accounts or for the accounts
of others and to Fleet Brokerage ^ Securities, Inc., Fleet Securities,
Inc., Fleet Financial Group, Inc., its affiliates, their correspondent
banks and other qualified banks, savings and loans associations and
broker/dealers on behalf of their customers. Trust Shares, Retail A
Shares and Retail B Shares in a Fund represent equal pro rata interests
in the Fund, except they bear different expenses which reflect the
difference in the range of services provided to them. See "Financial
Highlights," "Management of the Funds" and "Description of Galaxy
and Its Shares" herein.
Each of the Funds is distributed by 440 Financial Distributors, Inc. and
advised by Fleet Investment Advisors Inc. (the "Investment Adviser" or
"Fleet").
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO
THAT SHARES OF THE FUNDS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This Prospectus sets forth concisely the information that prospective
investors should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Funds, contained in the Statement of Additional Information bearing the
same date,
-2-
<PAGE>
has been filed with the Securities and Exchange Commission. The current
Statement of Additional Information is available upon request without charge by
contacting Galaxy at its telephone numbers or address shown above. The
Statement of Additional Information, as it may be amended from time to time, is
incorporated by reference in its entirety into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
March 1, ^ 1996
-3-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by ^ each Fund with respect to its Trust Shares, and (ii) the operating
expenses for Trust Shares of each Fund. ^ Examples based on the table are also
shown.
<TABLE>
<CAPTION>
Intermediate High
Short-Term ^ Government Quality
Bond Fund ^ Income Fund Bond Fund
Shareholder Transaction Expenses (Trust Shares) (Trust Shares) (Trust
Shares)
_______________________________ ______________ _____________
______________
<S> <C> <C> <C>
Sales Load None None None
Sales Load on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fees None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
_______________________________________
Advisory Fees (After Fee Waivers) .55% .55% .55%
^ 12b-l Fees None None None
Other Expenses (After Expense
Reimbursements) ^. 29% .24% .36%
____ ____ ____
Total Fund Operating Expenses
(After Fee Waivers and Expense
Reimbursements) ^.84% .79% .91%
_____ ____ ____
_____ ____ ____
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) a ^ 5% annual return, and (2) redemption of your investment at the end of
the following periods:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
_______ _______ _______ ________
<S> <C> <C> <C> <C>
Short-Term Bond Fund (Trust Shares) $ ^8 $26 $46 $102
Intermediate ^ Government Income Fund
(Trust Shares) $ ^8 $25 $43 $^96
High Quality Bond Fund (Trust Shares) $ ^9 $28 $49 $110
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in the Funds will bear
directly or indirectly. They are based on expenses incurred by each Fund
during the last fiscal year, restated to reflect the expenses which each Fund
expects to incur during the current fiscal year on its Trust Shares. Without
voluntary fee waivers and/or expense reimbursements by the Investment Adviser
and/or Administrator, "Advisory Fees" would be .75%, .75% and .75% and Total
Fund Operating Expenses would be ^1.04%, .99% and 1.11% for Trust Shares of
the Short-Term Bond, Intermediate ^ Government Income and High Quality Bond
Funds, respectively. For more complete descriptions of these costs and
expenses, see "Management of the Funds" and "Description of Galaxy and
Its Shares" in this Prospectus and the
-4-
<PAGE>
financial statements and notes
incorporated by reference ^ into the Statement of Additional Information.
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This Prospectus describes the Trust Shares in each Fund. Galaxy is also
authorized to issue an additional series of shares ^, Retail A Shares, in the
Intermediate Government Income Fund, and two additional series of shares,
Retail A Shares and Retail B Shares, in each of the Short-Term Bond Fund and
High Quality Bond Fund. As described below under "Description of Galaxy and
Its Shares," Trust Shares, Retail A Shares and Retail B Shares represent equal
pro rata interests in ^ a Fund, except that (i) effective October 1, 1994 ^
Retail A Shares of ^ a Fund bear the expenses incurred under Galaxy's
Shareholder Services Plan for Retail A Shares and Trust Shares at an annual
rate ^ not to exceed .15% of the average daily net asset value of ^ the Fund's
outstanding Retail A Shares (currently, these fees are not paid with respect to
a Fund's Trust Shares) ^, (ii) Retail B Shares of a Fund bear the expenses
incurred under Galaxy's Distribution and Services Plan for Retail B Shares at
an annual rate not to exceed .80% of the average daily net asset value of the
Fund's outstanding Retail B Shares, and (iii) Trust Shares, Retail A Shares and
Retail B Shares bear differing transfer agency expenses. Retail Shares are
offered under a separate prospectus.
The financial highlights presented below for the Short-Term Bond,
Intermediate ^ Government Income and High Quality Bond Funds have been audited
by Coopers & Lybrand L.L.P., Galaxy's independent accountants, whose report is
contained in Galaxy's Annual Report to Shareholders dated October 31, ^ 1995.
Such financial highlights should be read in conjunction with the financial
statements contained in the Annual Report to Shareholders and incorporated by
reference ^ into the Statement of Additional Information. Information in the
financial highlights for periods prior to the fiscal year ended October 31,
1994 reflect the investment results of both Retail A Shares and Trust Shares of
the Funds (Retail A Shares of the Intermediate ^ Government Income Fund were
first offered during the fiscal year ended October 31, 1992). More information
about the performance of each Fund is also contained in the Annual Report to
Shareholders, which may be obtained without charge by contacting
Galaxy at its telephone numbers or address provided above.
-5-
<PAGE>
Short-Term Bond Fund 1
(For a share 2 outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Year Ended Period
Ended
October 31, October 31, October
31,
1995 1994 1993 2 1992
1,2
______________________ ______
________
Trust Shares
____________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.73 $10.30 $10.09
$10.00
_____ ______ ______
______
Income from Investment
Operations:
Net Investment Income 3,4 0.57 0.44 0.47
0.42
Net realized and
unrealized gain (loss)
on investments 0.33 (0.51) 0.22
0.09
_____ ______ ______
______
Total from Investment
Operations: 0.90 (0.07) 0.69
0.51
_____ ______ ______
______
Less ^ Dividends:
Dividends from net
investment income (0.57) (0.44) (0.47)
(0.42)
^ Dividends from net
realized capital gains -- -- (0.01) -
- -
^ Dividends in excess
of net realized capital
gains -- (0.06) -- -
- -
_____ ______ ______
______
Total ^ Dividends: (0.57) (0.50) (0.48)
(0.42)
Net increase (decrease)
_____ ______ ______
______
in net asset value 0.33 (0.57) 0.21
0.09
_____ ______ ______
______
Net Asset Value,
End of Period $10.06 $9.73 $10.30
$10.09
_____ ______ ______
______
_____ ______ ______
______
Total Return 9.55% (0.66%) 6.98% 5.21%
5
Ratios/Supplemental Data:
Net Assets, End of
Period (000's) $35,088 $39,843 $85,211
$57,403
Ratios to average net assets:
Net investment income including
reimbursement/waiver 5.79% 4.45% 4.51% 5.77%
6
Operating ^ expenses including
reimbursement/waiver 0.74% 0.91% 0.86% 0.90%
6
Operating expenses excluding
reimbursement/waiver 1.02% 1.11% 1.06% 1.20%
6
Portfolio Turnover Rate 289% 233% 100% 114%
5
</TABLE>
1 The Fund commenced operations on December 30, 1991.
2 For periods prior to the year ended October 31, 1994, the per share amounts
and selected ratios reflect the financial results of both Retail and Trust
Shares.
3 Net investment income per share ^ for Trust Shares before waiver of fees by
the Investment Adviser and/or Administrator for the ^ years ended October 31,
1995 and 1994 were $0.54 and $0.42 ^, respectively.
4 Net investment income per share ^ before waiver and/or reimbursement of fees
by the ^ Investment Adviser and/or ^ Administrator for the year ended October
31, 1993 and for the period ended October 31, 1992 were $0.45 and ^ $0.40 ^,
respectively.
5 Not Annualized.
6 Annualized.
-6-
<PAGE>
INTERMEDIATE ^ GOVERNMENT INCOME FUND1
(For a share 2 outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Year Ended October 31, 2
________________________
October 31,
1995 1994 1993 1992
___________________ ___________________
Trust Shares
_____________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.68 $10.72 $10.83 $10.46
_____ ______ ______ ______
Income from Investment
Operations:
Net Investment Income 3,4 0.64 0.57 0.65 0.71
Net realized and unrealized gain
(loss) on investments 0.60 (1.03) 0.10 0.40
_____ ______ ______ ______
Total from Investment
Operations 1.24 (0.46) 0.75 1.11
_____ ______ ______ ______
Less ^ Dividends:
Dividends from net
investment income (0.64) (0.56) (0.64) (0.74)
^ Dividends in excess of
net investment income -- (0.01) (0.03) --
^ Dividends from net realized
capital gains -- -- (0.19) --
^ Dividends in excess of net
realized capital gains -- (0.01) -- --
_____ ______ ______ ______
Total ^ Dividends: (0.64) (0.58) (0.86) (0.74)
_____ ______ ______ ______
Net increase (decrease) in
net asset value 0.60 (1.04) (0.11) 0.37
_____ ______ ______ ______
Net Asset Value, End of Period $10.28 $9.68 $10.72 $10.83
_____ ______ ______ ______
_____ ______ ______ ______
Total Return 13.18% (4.39%) 7.06% 10.95%
Ratios/Supplemental Data:
Net Assets, End of
Period (000's) $186,037 $212,144 $447,359 $199,135
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.39% 5.61% 6.03% 6.52%
Operating ^ expenses including
reimbursement/waiver 0.73% 0.75% 0.80% 0.80%
Operating expenses excluding
reimbursement/waiver 0.94% 0.95% 1.00% 0.94%
Portfolio Turnover Rate 145% 124% 153% 103%
<CAPTION>
Year Ended October 31, 2 Period
________________________
Ended
1991 1990 1989 October
___________________________________
31,
1988 1,2
________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.73 $10.27 $10.40 $10.00
_____ ______ ______ ______
Income from Investment
Operations:
Net Investment Income 3,4 0.73 0.76 0.82 0.11
Net realized and
unrealized gain
(loss) on investments 0.71 (0.56) 0.16 0.29
_____ ______ ______ ______
Total from Investment
Operations 1.44 0.20 0.98 0.40
_____ ______ ______ ______
Less ^ Dividends:
Dividends from net
investment income (0.71) (0.74) (0.96) --
^ Dividends in excess of
net investment income -- -- -- --
^ Dividends from net realized
capital gains -- -- (0.15) --
^ Dividends in excess of net
realized capital gains -- -- -- --
_____ ______ ______ ______
Total ^ Dividends: (0.71) (0.74) (1.11) --
_____ ______ ______ ______
Net increase (decrease) in
net asset value 0.73 (0.54) (0.13) 0.40
_____ ______ ______ ______
Net Asset Value, End of Period $10.46 $9.73 $10.27 $10.40
_____ ______ ______ ______
_____ ______ ______ ______
Total Return 15.35% 2.06% 10.22% 3.90%
5
Ratios/Supplemental Data:
Net Assets, End
of Period (000's) $99,942 $80,645 $71,400 $58,318
Ratios to average net assets:
Net investment income including
reimbursement/waiver 7.25% 7.69% 8.19% 6.41%
6
Operating ^ expenses including
reimbursement/waiver 0.96% 0.98% 0.99% 0.98%
6
Operating expenses excluding
reimbursement/waiver 0.96% 0.96% 0.99% 1.00%
6
Portfolio Turnover Rate 150% 162% 112% 41% 5
</TABLE>
1 The Fund (formerly known as the Intermediate Bond Fund) commenced operations
on September 1, 1988.
2 For periods prior to the year ended October 31, 1994, the per share amounts
and selected ratios reflect the financial results of both Retail and Trust
Shares.
3 Net investment income per share ^ for Trust Shares before waiver of fees by
the Investment Adviser and/or Administrator for the ^ years ended October 31,
1995 and 1994 were $0.62 and $0.54 ^, respectively.
4 Net investment income per share before waiver of fees by the ^ Investment
Adviser and/or ^ Administrator for the ^ years ended October 31, 1993, 1992,
1990 and 1989 were $0.63 ^, $0.70 ^ $0.76, and ^ $0.82 ^, respectively.
5 Not Annualized.
6 Annualized.
-7-
<PAGE>
High Quality Bond Fund 1
(For a share 2 outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
October 31, Year Ended Period
Ended
1995 1994 October 31, 2 October
31,
_______________
Trust Shares 1993 1992 1991
1,2
____________ _______________
________
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.54 $11.37 $10.60 $10.35
$10.00
_____ ______ ______ ______
______
Income from Investment Operations:
Net Investment Income 3,4 0.64 0.65 0.66 0.68 0.64
Net realized and unrealized gain
(loss) on investments 1.09 (1.56) 0.93 0.36 0.33
_____ ______ ______ ______
______
Total from Investment
Operations: 1.73 (0.91) 1.59 1.04 0.97
_____ ______ ______ ______
______
Less ^ Dividends:
Dividends from net investment
income (0.64) (0.65) (0.66) (0.71)
(0.62)
^ Dividends from net realized
capital gains -- -- (0.16) (0.08) --
^ Dividends in excess of net
realized capital gains -- (0.27) -- -- --
_____ ______ ______ ______
______
Total ^ Dividends: (0.64) (0.92) (0.82) (0.79)
(0.62)
_____ ______ ______ ______
______
Net increase (decrease) in net
asset value 1.09 (1.83) 0.77 0.25
0.35
_____ ______ ______ ______
______
Net Asset Value, End of Period $10.63 $9.54 $11.37 $10.60
$10.35
_____ ______ ______ ______
______
_____ ______ ______ ______
______
Total Return 18.66% (8.39%) 15.63% 10.32%
10.04%5
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $134,631 $118,776 $162,594 $108,774
$57,580
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.33% 6.28% 5.98% 6.55% 7.25%
6
Operating ^ expenses including
reimbursement/waiver 0.85% 0.78% 0.76% 0.87% 0.95%
6
Operating expenses excluding
reimbursement/waiver 1.07% 0.98% 0.96% 0.94% 0.95%
6
Portfolio Turnover Rate 110% 108% 128% 121% 145%
5
</TABLE>
1 The Fund commenced operations on December 14, 1990.
2 For periods prior to the year ended October 31, 1994, the per share amounts
and selected ratios reflect the financial results of both Retail and Trust
Shares.
3 Net investment income per share ^ for Trust Shares before waiver of fees by
the Investment Adviser and/or Administrator for the ^ years ended October 31,
1995 and 1994 were $0.62 and $0.63 ^, respectively.
4 Net investment income per share before waiver of fees by the ^ Investment
Adviser and/or Administrator for the years ended October 31, 1993, 1992 and
1991 were $0.63, ^ $0.67 and $0.64^, respectively.
5 Not Annualized.
6 Annualized.
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INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve each Fund's
investment objective, although their achievement cannot be assured. The
investment objective of a Fund may not be changed without the approval of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Except as noted below under "Investment Limitations," a
Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Funds to be a complete
investment program.
SHORT-TERM BOND FUND
The Short-Term Bond Fund's investment objective is to seek a high level of
current income consistent with preservation of capital. The Fund will invest
substantially all of its assets in corporate debt obligations of domestic and
foreign corporations such as bonds and debentures, obligations convertible into
common stock, "money market" instruments such as bank obligations and
commercial paper, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and asset-backed and mortgage-backed securities.
The Short-Term Bond Fund may also enter into interest rate futures contracts to
hedge against changes in market values. See "Other Investment Policies."
Under normal market and economic conditions, at least 65% of the Fund's total
assets will be invested in bonds and debentures, subject to the quality
standards described below. The Fund will not invest in common stock, and any
common stock received through the conversion of convertible debt obligations
will be sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest
substantially all of its assets in debt obligations rated at the time of
purchase within the three highest ratings of S&P or Moody's (or which, if
unrated, are determined by the Investment Adviser to be of comparable quality)
and in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and other "money market" instruments such as those listed
below under "Other Investment Policies." Unrated securities will be determined
to be of comparable quality to rated debt obligations if, among other things,
other outstanding obligations of the issuers of such securities are rated A or
better.When, in the opinion of the Investment Adviser, a defensive investment
posture is warranted, the Fund may invest temporarily and without limitation in
high-quality, short-term money market instruments. See Appendix A to the
Statement of Additional Information for a description of S&P's and Moody's
rating categories.
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The Fund may also invest, from time to time, in Municipal Securities. The
purchase of Municipal Securities may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of such
securities, on a pretax basis, is comparable to that of corporate or U.S. debt
obligations. In addition, the Fund may invest in obligations issued or
guaranteed by foreign governments or any of their political subdivisions or
instrumentalities. Such obligations include debt obligations issued by
Canadian Provincial Governments, which are similar to U.S. Municipal Securities
except that the income derived therefrom is fully subject to U.S. Federal
taxation. These instruments are denominated in either Canadian or U.S. dollars
and have an established over-the-counter market in the United States. Also
included are debt obligations of supranational entities. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related governmental agencies. Examples
of these include the International Bank for Reconstruction and Development
("World Bank"), the Asian Development Bank and the InterAmerican Development
Bank. Obligations of supranational entities may be supported by appropriated
but unpaid commitments of their member countries, and there is no assurance
that these commitments will be undertaken or met in the future. The Fund may
not invest more than 35% of its total assets in the securities of foreign
issuers.
Under normal conditions the Fund's portfolio securities will have an
average weighted maturity of less than three years.
The value of the Fund's portfolio securities will generally vary inversely
with changes in prevailing interest rates. See "Other Investment Policies"
below for information regarding additional investment policies of the
Short-Term Bond Fund.
INTERMEDIATE ^ GOVERNMENT INCOME FUND
The Intermediate ^ Government Income Fund's investment objective is to seek
the highest level of current income consistent with prudent risk of capital.
Subject to this objective, Fleet will consider the total rate of return on
securities in managing the Fund. The Fund will invest in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, in
corporate debt obligations, such as bonds and debentures, obligations
convertible into common stock^ and "money market" instruments, such as bank
obligations and commercial paper, ^ and in obligations of supranational banks.
See "Investment Objectives and Policies --
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<PAGE>
Short-Term Bond Fund." The Fund may also invest, from time to time, in
Municipal Securities. See "Investment Objectives and Policies -- Short-Term
Bond Fund." The Intermediate Bond Fund may also enter into interest rate
futures contracts to hedge against changes in market values. See "Other
Investment Policies." The Fund will not invest in common stock, and any common
stock received through the conversion of convertible debt obligations will be
sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest substantially
all of its assets in debt obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, debt obligations rated, at the
time of purchase, within the three highest ratings of S&P or Moody's (or which,
if unrated, are determined by the Investment Adviser to be of comparable
quality) and ^"money market" instruments such as those listed below under
"Other Investment Policies." Unrated securities will be determined to be of
comparable quality to rated debt obligations if, among other things, other
outstanding obligations of the issuers of such securities are rated A or
better. Notwithstanding the foregoing, under normal market and economic
conditions, at least 65% of the Fund's assets will be invested in ^ debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. When, in the opinion of the Investment Adviser, a defensive
investment posture is warranted, the Fund may invest temporarily and without
limitation in high quality, short-term "money market" instruments. See
Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.
In addition, the Fund may acquire obligations issued by Canadian Provincial
Governments. See "Investment Objectives and Policies -- Short-Term Bond Fund."
The Investment Adviser expects that under normal market conditions the
Fund's portfolio securities will have an average weighted maturity of three to
ten years.
The value of the Fund's portfolio securities will generally vary inversely
with changes in prevailing interest rates. See "Other Investment Policies"
below for information regarding additional investment policies of the
Intermediate ^ Government Income Fund.
HIGH QUALITY BOND FUND
The High Quality Bond Fund's investment objective is to seek a high level
of current income consistent with prudent risk of capital. The Fund will
invest substantially all of its assets in corporate debt obligations, such as
bonds, debentures, obligations convertible into common stock, "money market"
instruments such as bank obligations and commercial paper, in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and in obligations of supranational banks. See "Investment Objectives and
Policies -- Short-Term
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<PAGE>
Bond Fund." The Fund may also invest, from time to time, in Municipal
Securities. See "Investment Objectives and Policies --Short-Term Bond Fund."
The High Quality Bond Fund may also enter into interest rate futures contracts
to hedge against changes in market values of fixed-income instruments that the
Fund holds or intends to purchase. See "Other Investment Policies." At least
65% of the Fund's total assets will be invested in non-convertible bonds. Any
common stock received through the conversion of convertible debt obligations
will be sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest substantially
all of its assets in high quality debt obligations that are rated, at the time
of purchase, within the two highest ratings of S&P or Moody's (or, if unrated,
are determined by the Investment Adviser to be of comparable quality) and in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and other "money market" instruments such as those listed
below under "Other Investment Policies." Unrated securities will be determined
to be of comparable quality to high quality debt obligations if, among other
things, other outstanding obligations of the issuers of such securities are
rated AA or A-2/P-2 or better. When, in the opinion of the Investment Adviser,
a defensive investment posture is warranted, the Fund may invest temporarily
and without limitation in high quality, short-term "money market" instruments.
See Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.
The Fund may also invest up to 5% of its total assets in dollar-denominated
high quality debt obligations of U.S. companies issued outside the United
States. In addition, the Fund may acquire high quality debt obligations issued
by Canadian Provincial Governments. See "Investment Objectives and Policies
- -- Short-Term Bond Fund."
The Fund seeks to provide a current yield greater than that generally available
from a portfolio of high quality short-term obligations. The High Quality
Bond Fund's average weighted maturity will vary from time to time depending on,
among other things, current market and economic conditions and the comparative
yields on instruments with different maturities. The Fund adjusts its average
weighted maturity and its holdings of corporate and U.S. Government debt
securities in a manner consistent with the Investment Adviser's assessment of
prospective changes in interest rates. The success of this strategy depends
upon the Investment Adviser's ability to predict changes in interest rates.
The value of the Fund's portfolio securities will generally vary inversely with
changes in prevailing interest
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<PAGE>
rates. The high quality credit criteria applied to the selection of portfolio
securities are intended to reduce adverse price changes due to credit
considerations. See "Other Investment Policies" below for information
regarding additional investment policies of the High Quality Bond Fund.
SPECIAL RISK CONSIDERATIONS
Investments by the Short-Term Bond Fund in foreign securities involve higher
costs than investments in U.S. securities, including higher transaction costs
as well as the imposition of additional taxes by foreign governments. In
addition, foreign investments may include additional risks, including the
difficulty of predicting interest rate patterns and fluctuations in currency
exchange rates, less complete financial information about the issuers, less
market liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls, or the adoption of other governmental
restrictions, might adversely affect the payment of principal and interest on
foreign obligations. In addition, foreign issuers in general may be subject
to different accounting, auditing, reporting and recordkeeping standards than
those applicable to domestic companies, and securities of foreign issuers may
be less liquid and their prices more volatile than those of comparable domestic
issuers.
Although the Short-Term Bond Fund may invest in securities denominated in
foreign currencies, the Fund values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Fund's shares may fluctuate
with U.S. dollar exchange rates as well as with price changes of the Fund's
foreign securities in the various local markets and currencies. Thus, an
increase in the value of the U.S. dollar compared to the currencies in which
the Fund makes its foreign investments could reduce the effect of increases and
magnify the effect of decreases in the price of the Fund's foreign securities
in their local markets. Conversely, a decrease in the value of the U.S. dollar
will have the opposite effect of magnifying the effect of increases and
reducing the effect of decreases in the prices of the Fund's foreign securities
in their local markets. In addition to favorable and unfavorable currency
exchange rate developments, the Fund is subject to the possible imposition of
exchange control regulations or freezes on convertibility of currency.
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<PAGE>
OTHER INVESTMENT POLICIES
U.S. Government Obligations and Money Market Instruments
The Funds may, in accordance with their investment policies, invest from time
to time in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and in ^"money market" instruments, including
bank obligations and commercial paper.
Obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and time of issuance: Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one
to ten years; and Treasury Bonds generally have initial maturities of more than
10 years. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as those of the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities
if it is not obligated to do so by law. Some of these instruments
may be variable or floating rate instruments.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit, and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank which is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation, or
by a savings and loan association or savings bank which is insured by the
Federal Deposit Insurance Corporation. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations.
Investment in bank obligations is limited to the obligations of financial
institutions having more than $1 billion in total assets at the time of
purchase.
Domestic and foreign banks are subject to extensive but different
government regulation which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
to finance lending operations and the quality of underlying bank assets.
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<PAGE>
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional risks, including
future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In addition,
foreign branches of U.S. banks and U.S. branches of foreign banks may be
subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks. The Funds will invest in the obligations of
U.S. branches of foreign banks or foreign branches of U.S. banks only when the
Investment Adviser believes that the credit risk with respect to the instrument
is minimal.
Commercial paper may include variable and floating rate instruments which are
unsecured instruments that permit the indebtedness thereunder to vary. Variable
rate instruments provide for periodic adjustments in the interest rate.
Floating rate instruments provide for automatic adjustment of the interest rate
whenever some other specified interest rate changes. Some variable and
floating rate obligations are direct lending arrangements between the purchaser
and the issuer and there may be no active secondary market. However, in the
case of variable and floating rate obligations with a demand feature, a Fund
may demand payment of principal and accrued interest at a time specified in the
instrument or may resell the instrument to a third party. In the event that
an issuer of a variable or floating rate obligation defaulted on its payment
obligation, a Fund might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a
loss to the extent of the default.
The Funds may also purchase Rule 144A securities. See "Investment
Limitations."
Types of Municipal Securities
The two principal classifications of Municipal Securities which may be held by
the Funds are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Funds are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of such private activity bonds is
usually directly
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<PAGE>
related to the credit standing of the corporate user of the facility involved.
Each Fund's portfolio may also include "moral obligation" securities, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from regular Federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor the Investment Adviser will review the proceedings relating to the issuance
of Municipal Securities or the bases for such opinions.
Variable and Floating Rate Municipal Securities
Municipal Securities purchased by the Funds may include rated and unrated
variable and floating rate tax-exempt instruments. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days' notice and do not have an active trading market) that
are acquired by the Funds are subject to the 10% limit described in Investment
Limitation No. 3 under "Investment Limitations" in this Prospectus.
Repurchase and Reverse Repurchase Agreements
Each Fund may purchase portfolio securities subject to the seller's agreement
to repurchase them at a mutually specified date and price ("repurchase
agreements"). Repurchase agreements will be entered into only with financial
institutions such as banks and broker/dealers which are deemed to be
creditworthy by the Investment Adviser under guidelines approved by Galaxy's
Board of Trustees. No Fund will enter into repurchase agreements with Fleet or
any of its affiliates. Securities subject to repurchase agreements may bear
maturities exceeding one year. Unless a repurchase agreement has a remaining
maturity of seven days or less or may be terminated on demand by notice of
seven days or less, the repurchase agreement will be considered an illiquid
security and will be subject to the limit described
in Investment Limitation No. 3 under "Investment Limitations" in this
Prospectus.
The seller under a repurchase agreement will be required to maintain the
value of the securities which are
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<PAGE>
subject to the agreement and held by a Fund at not less than the agreed upon
repurchase price. If the seller defaulted on its repurchase obligation, the
Fund holding such obligation would suffer a loss to the extent that the
proceeds from a sale of the underlying securities (including accrued interest)
were less than the repurchase price (including accrued interest) under the
agreement. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action.
Each Fund may also borrow funds for temporary purposes by selling portfolio
securities to financial institutions such as banks and broker/dealers and
agreeing to repurchase them at a mutually specified date and price ("reverse
repurchase agreements"). Reverse repurchase agreements involve the risk that
the market value of the securities sold by a Fund may decline below the
repurchase price. The Funds would pay interest on amounts obtained pursuant to
a reverse repurchase agreement.
Securities Lending
Each Fund may lend its portfolio securities to financial institutions such as
banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be short-term,
will be made only to borrowers deemed by the Investment Adviser to be of good
standing and only when, in the Investment Adviser's judgment, the income to be
earned from the loan justifies the attendant risks. The Funds currently intend
to limit the lending of their portfolio securities so that, at any given time,
securities loaned by a Fund represent not more than one-third of the value of
its total assets.
Investment Company Securities
The Funds may invest in securities issued by other investment companies
which invest in high quality, short-term debt securities and which determine
their net asset value per share based on the amortized cost or penny-rounding
method. Investments in other investment companies will cause a Fund (and,
indirectly, the Fund's shareholders) to bear proportionately the costs incurred
in connection with the investment companies' operations. Securities of other
investment companies will be acquired by a Fund within the limits prescribed by
the Investment Company Act of 1940, as amended (the "1940 Act"). Each Fund
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more
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<PAGE>
than 5% of the value of its total assets will be invested in the securities of
any one investment company; (b) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of other investment
companies as a group; (c) not more than 3% of the outstanding voting stock of
any one investment company will be owned by the Fund; and (d) not more than 10%
of the outstanding voting stock of any one closed-end investment company will
be owned in the aggregate by the Funds, other investment portfolios of Galaxy,
and any other investment companies advised by the Investment Adviser. Any
change by the Funds in the future with respect to their policies concerning
investments in securities issued by other investment companies will be made
only in accordance with the requirements of the 1940 Act.
Interest Rate Futures Contracts
The Funds may enter into contracts (both purchases and sales) which provide for
the future delivery of fixed-income securities (commonly known as interest rate
futures contracts). The Funds will not engage in futures transactions for
speculation, but only to hedge against changes in the market values of
securities which the Funds hold or intend to purchase. The Funds will engage
in futures transactions only to the extent permitted by the Commodity Futures
Trading Commission ("CFTC") and the Securities and Exchange Commission. The
purchase of futures instruments in connection with securities which the Funds
intend to purchase will require an amount of cash and/or U.S. Government
obligations, equal to the market value of the outstanding futures contracts, to
be deposited in a segregated account to collateralize the position and thereby
insure that the use of such futures is unleveraged. Each Fund will limit its
hedging transactions in futures contracts so that, immediately after any such
transaction, the aggregate initial margin that is required to be posted by the
Fund under the rules of the exchange on which the futures contract is traded
does not exceed 5% of the Fund's total assets after taking into account any
unrealized profits and unrealized losses on the Fund's open contracts. In
addition, no more than one-third of each Fund's total assets may be covered by
such contracts.
Transactions in futures as a hedging device may subject the Funds to a number
of risks. Successful use of futures by the Funds is subject to the ability of
the Investment Adviser to predict correctly movements in the direction of the
market. In addition, there may be an imperfect correlation, or no correlation
at all, between movements in the price of futures contracts and movements in
the price of the instruments being hedged. There is no assurance that a liquid
market will exist for any particular futures contract at any particular time.
Consequently, the Funds may realize a loss on a futures transaction that is not
offset by a favorable movement in the
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<PAGE>
price of securities which they hold or intend to purchase or may be unable to
close a futures position in the event of adverse price movements. All income
from investments in futures contracts will be taxable. Additional information
concerning futures transactions, including special rules regarding the taxation
of such transactions, is contained in Appendix B to the Statement of Additional
Information.
When-Issued, Forward Commitment and Delayed Settlement Transactions
Each of the Funds may purchase eligible securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. Each of the
Funds may also purchase or sell eligible securities on a "delayed settlement"
basis. When-issued and forward commitment transactions, which involve a
commitment by a Fund to purchase or sell particular securities with payment and
delivery taking place at a future date (perhaps one or two months later),
permit a Fund to lock in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. Delayed settlement
describes settlement of a securities transaction in the secondary market which
will occur sometime in the future. When-issued, forward commitment and delayed
settlement transactions involve the risk, however, that the yield or price
obtained in a transaction may be less favorable than the yield or price
available in the market when the securities delivery takes place. It is
expected that forward commitments, when-issued purchases and delayed
settlements will not exceed 25% of the value of a Fund's total assets absent
unusual market conditions. In the event a Fund's forward commitments, when-
issued purchases and delayed settlements ever exceeded 25% of the value of its
total assets, the Fund's liquidity and the ability of the Investment Adviser to
manage the Fund may be adversely affected. The Funds do not intend to engage in
"when-issued" purchases, "forward commitments" and delayed settlements for
speculative purposes, but only in furtherance of their investment objectives.
Stand-By Commitments
Each Fund may acquire "stand-by commitments" with respect to Municipal
Securities held by them. Under a "stand-by commitment," a dealer agrees to
purchase, at a Fund's option, specified Municipal Securities at a specified
price. The Funds will acquire "stand-by commitments" solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. The Funds expect that "stand-by commitments" will generally
be available without the payment of any direct or indirect consideration.
However, if necessary or advisable, a Fund may pay for a "stand-by commitment"
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus
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<PAGE>
reducing the yield otherwise available for the same securities). "Stand-by
commitments" acquired by a Fund would be valued at zero in determining the
Fund's net asset value.
Asset-Backed Securities
Each Fund may purchase asset-backed securities, which represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, most often a pool of assets similar to one another. Assets
generating such payments will consist of such instruments as motor vehicle
installment purchase obligations, credit card receivables and home equity
loans. Payment of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with entities issuing the securities. The
estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of the asset-backed security, will be primarily
a function of current market rates, although other economic and demographic
factors will be involved. A Fund will not invest more than 10% of its total
assets in asset-backed securities. See "Asset-Backed Securities" in the
Statement of Additional Information.
Mortgage-Backed Securities
Each Fund may invest in mortgage-backed securities (including collateralized
mortgage obligations) that represent pools of mortgage loans assembled for sale
to investors by various governmental agencies and government-related
organizations, such as the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Mortgage-backed securities provide a monthly
payment consisting of interest and principal payments. Additional payment may
be made out of unscheduled repayments of principal resulting from the sale of
the underlying residential property, refinancing or foreclosure, net of fees or
costs that may be incurred. Prepayments of principal on mortgage-backed
securities may tend to increase due to refinancing of mortgages as interest
rates decline. To the extent that the Fund purchases mortgage-backed
securities at a premium, mortgage foreclosures and prepayments of principal by
mortgagors (which may be made at any time without penalty) may result in some
loss of the Fund's principal investment to the extent of the premium paid. The
yield of a Fund that invests in mortgage-backed securities may be affected by
reinvestment of prepayments at higher or lower rates than the original
investment.
Other mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage
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<PAGE>
loans, including savings associations, mortgage bankers, commercial banks,
investment bankers, and special purpose entities. These private mortgage-
backed securities may be supported by U.S. Government mortgage-backed
securities or some form of non-government credit enhancement. Mortgage-backed
securities have either fixed or adjustable interest rates. The rate of return
on mortgage-backed securities may be affected by prepayments of principal on
the underlying loans, which generally increase as interest rates decline; as a
result, when interest rates decline, holders of these securities normally do
not benefit from appreciation in market value to the same extent as holders of
other non-callable debt securities. In addition, like other debt securities,
the values of mortgage-related securities, including government and government-
related mortgage pools, generally will fluctuate in response to market interest
rates. To the extent that collateralized mortgage obligations are considered
to be investment companies, investments in such obligations will be subject to
the percentage limitations described under "Investment Company Securities"
above.
Stripped Obligations
To the extent consistent with their investment objective, each of the Funds may
purchase Treasury receipts and other "stripped" securities that evidence
ownership in either the future interest payments or the future principal
payments on U.S. Government and other obligations. These participations, which
may be issued by the U.S. Government or by private issuers such as banks and
other institutions are issued at their "face value," and may include stripped
mortgage-backed securities ("SMBS"), which are derivative multi-class mortgage
securities. Stripped securities, particularly SMBS, may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors.
SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying obligations
experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities. The market value
of the class consisting entirely of principal payments generally is extremely
volatile in response to changes in interest rates. The yields on a class of
SMBS that receives all or most of the interest are generally higher than
prevailing market yields on other mortgage-backed obligations because their
cash flow patterns are more volatile and there is a greater risk
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that the initial investment will not be fully recouped. SMBS which are
not issued by the U.S. Government (or a U.S. Government agency or
instrumentality) are considered illiquid. Obligations issued by the U.S.
Government may be considered liquid under guidelines established by the Trust's
Board of Trustees if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of net
asset value per share.
Guaranteed Investment Contracts
Each Fund may invest in guaranteed investment contracts ("GICs") issued by
United
States and Canadian insurance companies. Pursuant to GICs, a Fund makes cash
contributions to a deposit fund of the insurance company's general account.
The insurance company then credits to the Fund payments at negotiated, floating
or fixed interest rates. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a
GIC becomes part of the general assets of the insurance company, and the
contract is paid from the company's general assets. The Funds will only
purchase GICs that are issued or guaranteed by insurance companies that at the
time of purchase are rated at least AA by S&P or receive a similar high quality
rating from a nationally recognized service which provides ratings of insurance
companies. GICs are considered illiquid securities and will be subject to the
Funds' limitation on such investments, unless there is an active and
substantial secondary market for the particular instrument and market
quotations are readily available.
Bank Investment Contracts
Each Fund may invest in bank investment contracts ("BICs") issued by banks
that meet the quality and asset size requirements for banks described above
under ^"U.S. Government Obligations and Money Market Instruments." Pursuant to
BICs, cash contributions are made to a deposit account at the bank in exchange
for payments at negotiated, floating or fixed interest rates. A BIC is a
general obligation of the issuing bank. BICs are considered illiquid
securities and will be subject to the Funds' limitation on such investments,
unless there is an active and substantial secondary market for the particular
instrument and market quotations are readily available.
Portfolio Turnover
Each Fund may sell a portfolio investment soon after its acquisition if the
Investment Adviser believes that such a disposition is consistent with the
Fund's investment objective. Portfolio investments may be sold for a variety of
reasons, such as a more favorable investment opportunity or other circumstances
bearing on the desirability of continuing to hold such
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investments. The rate of portfolio turnover will not be a limiting factor in
making portfolio decisions. A high rate of portfolio turnover may result in
the realization of substantial capital gains and involves correspondingly
greater transaction costs. To the extent that net capital gains are realized,
distributions derived from such gains are treated as ordinary income for
Federal income tax purposes. See "Financial Highlights" and "Taxes --
Federal."
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy and may
not be changed with respect to any Fund without the affirmative vote of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."
No Fund may:
1. Make loans, except that (i) each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, and may
enter into repurchase agreements with respect to portfolio securities, and (ii)
each Fund may lend portfolio securities against collateral consisting of cash
or securities which are consistent with the Fund's permitted investments, where
the value of the collateral is equal at all times to at least 100% of the value
of the securities loaned.
2. Borrow money or issue senior securities, except from domestic banks for
temporary purposes and then in amounts not in excess of 10% of the value of its
total assets at the time of such borrowing (provided that each Fund may borrow
pursuant to reverse repurchase agreements in accordance with its investment
policies and in amounts not in excess of 10% of the value of its total assets
at the time of such borrowing); or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or 10% of the value of a Fund's total
assets at the time of such borrowing. No Fund will purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
3. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days, time deposits with maturities in excess of seven days,
restricted securities, non-negotiable time deposits and other securities which
are not readily marketable.
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4. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer, except that up to 25% of the value of its
total assets may be invested without regard to this limitation.
In addition, the Funds may not purchase any securities which would cause 25% or
more of the value of a Fund's total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their principal
business activities in the same industry; provided, however that (a) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (b) wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents,
and (c) utilities will be classified according to their services. (For
example, gas, gas transmission, electric and gas, electric and telephone each
will be considered a separate industry.)
The Securities and Exchange Commission has adopted Rule 144A which allows for a
broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act of 1933 for
resales of certain securities to qualified institutional buyers. A Fund's
investment in Rule 144A securities could have the effect of increasing the
level of illiquidity of the Fund during any period that qualified institutional
buyers were no longer interested in purchasing these securities. For purposes
of the limitation on purchases of illiquid instruments described under
Investment Limitation No. 3 above, Rule 144A securities will not be considered
illiquid if the Investment Adviser has determined, in accordance with
guidelines established by the Board of Trustees, that an adequate trading
market exists for such securities.
If a percentage limitation is satisfied at the time of investment, a later
increase in such percentage resulting from a change in the value of a Fund's
portfolio securities will not constitute a violation of the limitation.
PRICING OF SHARES
Net asset value per share of the Funds is determined as of the close of regular
trading hours on the New York Stock Exchange (the "Exchange"), currently 4:00
p.m. (Eastern Time). The net asset value per share is determined on each day
on which the Exchange is open for trading. Currently, the holidays which
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Galaxy observes are New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Net asset
value per share for purposes of pricing sales and redemptions is calculated
separately for each series of shares by dividing the value of all securities
and other assets attributable to a particular series of shares of a Fund, less
the liabilities attributable to shares of that series of the Fund, by the
number of outstanding shares of that series of the Fund.
The Funds' assets are valued for purposes of pricing sales and redemptions by
an independent pricing service ("Service") approved by Galaxy's Board of
Trustees. When, in the judgment of the Service, quoted bid prices for portfolio
securities are readily available and are representative of the bid side of the
market, these investments are valued at the mean between quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices (as
calculated by the Service based upon its evaluation of the market for such
securities). Other investments are carried at fair value as determined by the
Service, based on methods which include consideration of yields or prices of
bonds of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. The Service may also
employ electronic data processing techniques and matrix systems to determine
value. Short-term securities are valued at amortized cost, which approximates
market value. The amortized cost method involves valuing a security at its
cost on the date of purchase and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at maturity and
cost.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are sold on a continuous basis by Galaxy's distributor, 440
Financial Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of
^
First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc. d/b/a 440 Financial). The Distributor is a registered
broker/dealer with principal offices located at ^ 290 Donald Lynch Boulevard,
Marlboro, Massachusetts ^ 01752.
PURCHASE OF SHARES
The Trust Shares described in this Prospectus are sold to investors maintaining
qualified accounts at bank and trust institutions, including subsidiaries of
Fleet
Financial Group, Inc., and to participants in employer-sponsored defined
contribution plans ("Institutions"). Trust Shares sold to such investors
("Customers") will be held of record by Institutions.
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The Institution is responsible for transmitting to the Distributor orders for
purchases of Trust Shares and for wiring required funds in payment to Galaxy's
custodian on a timely basis. The Distributor is responsible for transmitting
such orders to Galaxy's transfer agent for execution. Beneficial ownership of
Trust Shares will be recorded by the Institution and reflected in the account
statements it provides to its Customers. Confirmations of purchases and
redemptions of Trust Shares will be sent to the appropriate Institution.
Purchases of Trust Shares will be effected only on days on which the
Distributor, Galaxy's custodian and the purchasing Institution are open for
business ("Business Days").
A purchase order for Trust Shares received by the Distributor on a Business Day
prior to the close of regular trading hours on the Exchange (currently, 4:00
p.m. Eastern Time) will be priced at the net asset value determined on that
day, provided that Galaxy's custodian receives the purchase price in Federal
funds or other immediately available funds prior to 4:00 p.m. on the following
Business Day, at which time the order will be executed. If funds are not
received by such date and time, the order will not be accepted and notice
thereof will be given promptly to the Institution which submitted the order.
Payments for orders which are not received or accepted will be returned after
prompt inquiry to the sending Institution. If an Institution accepts a
purchase order from its Customer on a non-Business Day, the order will not be
executed until it is received and accepted by the Distributor on a Business Day
in accordance with the foregoing procedures.
Galaxy reserves the right to reject any purchase order, in whole or in part.
The issuance of Trust Shares is recorded on the books of the Funds and share
certificates will not be issued.
Customers may purchase Trust Shares through procedures established by
Institutions in connection with the requirements of their Customer accounts.
Such accounts may include discretionary investment management accounts,
custodial accounts, agency accounts and different types of tax-advantaged
accounts. Investors should contact their Institution (or in the case of
employee plans, their employer) for further information concerning the types of
eligible Customer accounts and the related purchase and redemption procedures.
Although Galaxy does not impose any minimum initial or subsequent investment
requirement with respect to Trust Shares, Institutions may impose such
requirements on the accounts maintained by their Customers, and may also
require that Customers maintain minimum account balances with respect to Trust
Shares.
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Trust Shares of the Funds may also be available for purchase through different
types of retirement plans offered by the Institutions to their Customers.
Information pertaining to such plans is available directly from the
Institution.
REDEMPTION OF SHARES
Customers may redeem all or part of their Trust Shares in accordance with
procedures governing their accounts at their Institution. It is the
responsibility of the Institution to transmit redemption orders to the
Distributor and to credit its Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments is imposed by
Galaxy, although the Institution may charge its Customers' accounts for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institution.
Redemption orders are effected at the net asset value per share next determined
after receipt and acceptance of the order by the Distributor. Payment for
redemption orders received by the Distributor on a Business Day will normally
be wired the following Business Day to the Institution. Payment for redemption
orders which are received on a non-Business Day will normally be wired to the
Institution on the next Business Day. However, in both cases Galaxy reserves
the right to wire redemption proceeds within seven days after receiving the
redemption order if, in its judgment, an earlier payment could adversely affect
a Fund.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
Each Fund reserves the right to redeem shares in any account at their net
asset value involuntarily, upon 60 days' written notice, if the value of the
account is less than $250 as a result of redemptions.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Funds are declared daily and
paid monthly. Net realized capital gains are distributed at least annually.
Dividends and distributions will be paid in cash. Customers may elect to have
their dividends reinvested in additional Trust Shares of a Fund at the net
asset value of such shares on the payment date. Such election, or any
revocation
thereof, must be communicated in writing by an Institution on
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behalf of Customers to Galaxy's transfer agent and will become effective
with respect to dividends paid after its receipt. The crediting and payment of
dividends to Customers will be in accordance with the procedures governing such
Customers' accounts at their Institution.
TAXES
FEDERAL
In General
Each Fund qualified during its last taxable year and intends to continue to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). Such qualification generally relieves a Fund of
liability for Federal income taxes to the extent the Fund's earnings are
distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that a Fund distribute to its shareholders
an amount equal to at least 90% of its investment company taxable income and
90% of its tax-exempt interest income (if any) net of certain deductions for
such year. In general, a Fund's investment company taxable income will be its
taxable income, including dividends, interest and short-term capital gains (the
excess of net short-term capital gain over net long-term capital loss), subject
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for
such year. The policy of each Fund is to distribute as dividends substantially
all of its investment company taxable income and any net tax-exempt interest
income each year. Such dividends will be taxable as ordinary income to each
Fund's shareholders who are not currently exempt from Federal income taxes,
whether such dividends are received in cash or reinvested in additional
shares. (Federal income taxes for distributions to an IRA or a qualified
retirement plan are deferred under the Code.) It is anticipated that no part
of any distribution will qualify for the dividends received deduction for
corporations.
Distribution by a Fund of the excess of its net long-term capital gain over its
respective net short-term capital loss is taxable to shareholders as long-term
capital gain, regardless of how long the shareholder has held shares and
whether such gains are received in cash or reinvested in additional shares.
Such distributions are not eligible for the dividends received deduction.
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Dividends declared in October, November or December of any year which are
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year if such dividends are actually paid during January of the
following year.
If you are considering buying shares of a Fund on or just before the record
date of a capital gain distribution, you should be aware that the amount of the
forthcoming distribution payment, although in effect a return of capital,
generally will be taxable to you.
A taxable gain or loss may be realized by a shareholder upon redemption,
transfer or exchange of Fund shares depending upon the tax basis of such shares
and their price at the time of redemption, transfer or exchange.
The foregoing summarizes some of the important Federal tax considerations
generally affecting the Funds and their shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Funds should consult their tax advisers with specific reference to their own
tax situation. Shareholders will be advised annually as to the Federal income
tax consequences of distributions made each year.
STATE AND LOCAL
Investors are advised to consult their tax advisers concerning the application
of state and local taxes, which may have different consequences than
those of the Federal income tax law described above.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of
Galaxy's Board of Trustees. The Funds' Statement of Additional Information
contains the names of and general background information concerning the
Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at ^ 50 Kennedy Plaza, 2nd Floor, Providence,
Rhode Island 02903, serves as the Investment Adviser to the Funds. Fleet,
which commenced operations in 1984, also provides investment management and
advisory services to Fleet Trust Company and other individual and institutional
clients, and manages the other investment portfolios of Galaxy: the Money
Market, Government, Tax-Exempt, U.S. Treasury, Connecticut Municipal Money
Market, Massachusetts Municipal Money Market, Institutional Treasury Money
Market,
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Equity Value, Equity Growth, Equity Income, International Equity, Small Company
Equity, Asset Allocation, Growth and Income, Small Cap Value, Corporate Bond,
Tax-Exempt Bond, New York Municipal Bond, Connecticut Municipal Bond,
Massachusetts Municipal Bond and Rhode Island Municipal Bond Funds. Fleet is
an indirect wholly-owned subsidiary of Fleet Financial Group, Inc., a
registered bank holding company with total assets of approximately ^ $____
billion at ^___________, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and in
accordance with each Fund's investment policies, Fleet manages each Fund, makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities and maintains related records.
The portfolio manager of the Short-Term Bond Fund and the High Quality Bond
Fund, Kenneth W. Thomae, is primarily responsible for the day-to-day management
of their investment portfolios. Mr. Thomae, a Vice President, has been with
Fleet and its predecessors since 1985 and has been the Funds' portfolio manager
since their inception.
The Intermediate ^ Government Income Fund's portfolio manager, Bruce R.
Barton, is primarily responsible for the day-to-day management of that Fund's
investment portfolio. Mr. Barton, a Senior Vice President, has been with Fleet
and its predecessors since 1984 and has been the Fund's portfolio manager since
its inception.
For the services provided and expenses assumed with respect to the Funds, the
Investment Adviser is entitled to receive advisory fees, computed daily and
paid monthly, at an annual rate of .75% of the average daily net assets of each
Fund. The fee for the Funds is higher than fees paid by most other mutual
funds, although the Board of Trustees of Galaxy believes that it is not higher
than average advisory fees paid by funds with similar investment objectives and
policies.
Fleet may from time to time, in its discretion, waive advisory fees payable by
the Funds in order to help maintain a competitive expense ratio and may from
time to time allocate a portion of its advisory fees to Fleet Trust Company or
other subsidiaries of Fleet Financial Group, Inc. in consideration for
administrative and other services which they provide to beneficial
shareholders. Fleet is currently waiving a portion of the advisory fees
payable to it by the Short-Term Bond, Intermediate ^ Government Income and High
Quality Bond Funds such that it is entitled to receive an advisory fee at the
annual rate of .55% of each such Fund's average daily net assets, but Fleet
may, in its discretion, revise or discontinue this waiver at any time. For the
fiscal year ended October 31, ^ 1995, Fleet
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received advisory fees (after fee waivers) at the effective annual rates of
.45%, .53% and .53% of the Short-Term Bond FundOs, Intermediate Government
Income FundOs and High Quality Bond Fund's average daily net assets,
respectively.
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Funds, but do not prohibit such a bank holding company or its
affiliates or banks generally from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of customers. The Investment
Adviser, custodian and Institutions which have agreed to provide shareholder
support services that are banks or bank affiliates are subject to such banking
laws and regulations. Should legislative, judicial, or administrative action
prohibit or restrict the activities of such companies in connection with their
services to the Funds, Galaxy might be required to alter materially or
discontinue its arrangements with such companies and change
its method of operation. It is anticipated, however, that any resulting change
in the Funds' method of operation would not affect a Fund's net asset value per
share or result in financial loss to any shareholder. State securities laws on
this issue may differ from federal law and banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATOR
^ First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc. d/b/a 440 Financial) ("First Data"), located at 4400
Computer Drive, Westboro, Massachusetts 01581-5108, serves as the Funds'
administrator. ^ First Data is a wholly-owned subsidiary of ^ First Data
Corporation.
^ First Data generally assists the Funds in their administration and operation.
^
First Data also serves as administrator to the other portfolios of Galaxy. For
the services provided to the Funds, ^ First Data is entitled to receive
administration fees, computed daily and paid monthly, at the annual rate of
.09% of the first $2.5 billion of the combined average daily net assets of the
Funds and the other portfolios offered by Galaxy (collectively, the
"Portfolios"), .085% of the next $2.5 billion of combined average daily net
assets and .08% of combined average daily net assets over $5 billion. In
addition, ^ First Data also receives a separate annual fee from
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each Portfolio for certain fund accounting services. From time to time, ^
First Data may waive all or a portion of the administration fee payable to it
by the Funds, either voluntarily or pursuant to applicable statutory expense
limitations. ^ For the fiscal year ended October 31, ^ 1995, the Short-Term
Bond Fund, Intermediate ^ Government Income Fund and High Quality Bond Fund
paid administration fees at the effective rate of ^.088% of each Fund's average
daily net assets.
DESCRIPTION OF GALAXY AND ITS SHARES
Galaxy was organized as a Massachusetts business trust on March 31, 1986.
Galaxy's Declaration of Trust authorizes the Board of Trustees to classify or
reclassify any unissued shares into one or more classes or series of shares.
Pursuant to such authority, the Board of Trustees has authorized the issuance
of an unlimited number of shares in each ^ series ^ of the Funds as follows:
Class D shares (Trust Shares) and Class D-Special Series 1 shares (Retail A
Shares), both series representing interests in the Intermediate ^ Government
Income Fund; Class J-Series 1 shares (Trust Shares) ^, Class J-Series 2 shares
(Retail ^ A Shares) and Class J-Series 3 shares (Retail B shares), each series
representing interests in the High Quality Bond Fund; and Class L-Series 1
shares (Trust Shares) ^, Class L-Series 2 shares (Retail ^ A Shares) and Class
L-Series 3 shares (Retail B shares), each series representing interests in the
Short-Term Bond Fund. Each Fund is classified as a diversified company under
the 1940 Act. The Board of Trustees has also authorized the issuance of
additional classes and series of shares representing interests in other
portfolios of Galaxy. For information regarding the Funds' Retail Shares and
these other portfolios, which are offered through separate prospectuses,
contact the Distributor at (800) 628-0414.
Shares of each series in a Fund bear their pro rata portion of all operating
expenses paid by that Fund except as follows. Holders of a Fund's Retail A
Shares bear the fees that are paid to Institutions under Galaxy's Shareholder
Services Plan described below. Holders of Retail B Shares of the Short-Term
Bond Fund and High Quality Bond Fund bear the fees described in the prospectus
for such shares that are paid under Galaxy's Distribution and Services Plan at
an annual rate not to exceed .80% of the average daily net asset value of a
Fund's outstanding Retail B Shares. Currently, these payments are not made
with respect to a Fund's Trust Shares ^. In addition, shares of each series in
a Fund bear differing transfer agency expenses. The differences in the
expenses paid by the respective series will affect their performance.
Standardized yield and total return quotations are computed separately for each
series of shares.
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^ Retail A Shares of the Funds are sold with a maximum front-end sales charge
of 3.75%. Retail B Shares of the Short-Term Bond Fund^ and High Quality Bond
Fund^ are sold with a maximum contingent deferred sales charge of 5.0%. Retail
A and Retail B Shares have certain exchange and other privileges which are not
available with respect to Trust Shares.
Each share of Galaxy (irrespective of series designation) has a par value of
$.001 per share, represents an equal proportionate interest in the related Fund
with other shares of the same class (irrespective of series designation), and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to such Fund as are declared in the discretion of Galaxy'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.
Galaxy is not required under Massachusetts law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. Shareholders
have the right to remove Trustees.
SHAREHOLDER SERVICES PLAN
Galaxy intends to enter into service agreements with Institutions (including
Fleet Bank and its affiliates) pursuant to which Institutions will render
certain administrative and support services to Customers who are the beneficial
owners of Retail A Shares. Such services will be provided to Customers who are
the beneficial owners of Retail A Shares and are intended to supplement the
services provided by Galaxy's administrator and transfer agent to the
shareholders of record of the Retail A Shares. In consideration for payment of
up to .15% (on an annualized basis) of the average daily net asset value of
Retail A Shares owned beneficially by their Customers, Institutions may
provide one or more of the following services to such Customers: aggregating
and processing purchase and redemption requests and placing net purchase and
redemption orders with the Distributor; processing dividend payments from a
Fund; providing sub-accounting with respect to Retail A Shares or the
information necessary for sub-accounting; and providing periodic mailings to
Customers. In consideration for payment of up to a separate .15% (on an
annualized basis) of the average daily net asset value of Retail A Shares owned
beneficially by their Customers, Institutions may provide
one or more of these additional services to such Customers; providing Customers
with information as to their positions in Retail A Shares; responding to
Customer
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inquiries; and providing a service to invest the assets of Customers in Retail
A Shares. These services are described more fully in Galaxy's Statement of
Additional Information under "Shareholder Services Plan."
Although the Shareholder Services Plan has been approved with respect to both
Retail A Shares and Trust Shares of the Funds, as of the date of this
Prospectus, Galaxy intends to enter into servicing agreements under the
Shareholder Services Plan only with respect to Retail A Shares of each Fund,
and to limit the payment under these servicing agreements for each Fund to no
more than .15% (on an annualized basis) of the average daily net asset value of
the Retail A Shares of the Fund beneficially owned by Customers of
Institutions. Galaxy understands that Institutions may charge fees to their
Customers who are owners of Retail A Shares in connection with their accounts
with such Institutions. Any such fees would be in addition to any amounts
which may be received by an Institution under the Shareholder Services Plan.
Under the terms of each servicing agreement entered into with Galaxy,
Institutions are required to provide their Customers with a schedule of any
fees that they may charge in connection with Customer investments
in Retail A Shares.
AFFILIATE AGREEMENT FOR SUB-ACCOUNT SERVICES
^ First Data has entered into an agreement with Fleet Trust Company, an
affiliate of the Investment Adviser, pursuant to which Fleet Trust Company
performs certain sub-account and administrative functions ("Sub-Account
Services") on a per account basis with respect to Trust Shares of each Fund
held by defined contribution plans, including: maintaining records reflecting
separately with respect to each plan participant's sub-account all purchases
and redemptions of Trust Shares and the dollar value of Trust Shares in each
sub-account; crediting to each participant's sub-account all dividends and
distributions with respect to that sub-account; and transmitting to each
participant a periodic statement regarding the sub-account as well as any proxy
materials, reports and other material Fund communications. Fleet Trust Company
is compensated by ^ First Data for the Sub-Account Services and in connection
therewith the transfer agency fees payable by Trust Shares of the Funds to ^
First Data have been increased by an amount equal to these fees. In substance,
therefore, the holders of Trust Shares of these Funds indirectly bear these
fees.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A., located at 1 Chase Manhattan Plaza, New York,
New York 10081, a wholly-owned subsidiary of The Chase Manhattan Corporation,
serves as the
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custodian of the Funds' assets. Chase Manhattan may employ sub-
custodians for the Short-Term Bond Fund upon approval of the Trustees in
accordance with the regulations of the SEC, for the purpose of providing
custodial services for the Fund's foreign assets held outside the United
States. ^ First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), a wholly-
owned subsidiary of ^ First Data Corporation, serves as the Funds' transfer and
dividend disbursing agent. Services performed by both entities for the Funds
are described in the Statement of Additional Information. Communications to ^
First Data should be directed to ^ First Data at P.O. Box 15108, 4400 Computer
Drive, Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and ^ First Data bear all expenses in connection
with the performance of their services for the Funds. Galaxy bears the
expenses incurred in the Funds' operations. Such expenses include taxes;
interest; fees (including fees paid to its trustees and officers who are not
affiliated with ^ First Data); SEC fees; state securities qualification fees;
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders; advisory, administration, shareholder
servicing, fund accounting and custody fees; charges of the transfer agent and
dividend disbursing agent; certain insurance premiums; outside auditing and
legal expenses; costs of independent pricing services; costs of shareholders'
reports and shareholder meetings; and any extraordinary expenses. The Funds
also pay for brokerage fees and commissions in connection with the purchase of
portfolio securities.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the
performance and yields of the Funds may be quoted and compared to those of
other mutual funds with similar investment objectives and to stock or other
relevant bond indexes or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the performance of the Funds may be compared to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL
STREET JOURNAL and THE NEW YORK TIMES, or publications of a local or regional
nature, may
-35-
<PAGE>
also be used in comparing the performance and yields of the Funds. The
performance and yield data ^ will be calculated separately for Trust Shares,
Retail A Shares and Retail B Shares of the Funds.
The standard yield is computed by dividing a Fund's average daily net
investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net asset value per share on the last
day of the period, and annualizing the result on a semi-annual basis. The
Funds may also advertise their "effective yield" which is calculated similarly
but, when annualized, the income earned by an investment in a Fund is assumed
to be reinvested.
The Funds may also advertise their performance using "average annual total
return" over various periods of time. Such total return figures reflect the
average percentage change in the value of an investment in a Fund from the
beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five- and
ten-year periods (if applicable), and may be given for other periods as well,
such as from the commencement of a Fund's operations, or on a year-by-year
basis. Each Fund may also use "aggregate total return" figures for various
periods, representing the cumulative change in the value of an investment in a
Fund for the specified period. Both methods of calculating total return assume
that dividend and capital gain distributions made by a Fund during the period
are reinvested in Fund shares.
Performance and yields of the Funds will fluctuate and any quotation of
performance or yield should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Fund's shares with bank deposits, savings accounts
and similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses, and
market conditions.
Any additional fees charged by Institutions with respect to accounts of
Customers that have invested in Trust Shares of a Fund will not be included in
calculations of yield and performance.
-36-
<PAGE>
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the Funds'
investment operations and annual financial statements audited by independent
certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of either Galaxy or a particular Fund means, with respect
to the approval of an investment advisory agreement or a change in an
investment objective or fundamental investment policy, the affirmative vote of
the holders of the lesser of (a) more than 50% of the outstanding shares of
Galaxy or such Fund (irrespective of series designation), or (b) 67% or more of
the shares of Galaxy or such Fund (irrespective of series designation) present
at a meeting if more than 50% of the outstanding shares of Galaxy or such Fund
(irrespective of series designation) are represented at the meeting in person
or by proxy.
The portfolio managers of the Funds and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders and
prospective investors. The topics may include but are not limited to the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products; and tax, retirement and investment planning.
Inquiries regarding the Funds may be directed to Galaxy at (800) 628-0414
(applications and information concerning initial purchases and current
performance) or (800) 628-0413 (additional purchases, redemptions, exchanges
and other shareholder services).
-37-
<PAGE>
TRUST
THE GALAXY FUND
Short-Term Bond Fund
Prospectus
March 1, ^ 1996
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Statement of
Additional Information incorporated herein by reference, in connection with
the offering made by this Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Fund or its Distributor. This Prospectus does not constitute an offering by
the Fund or by its Distributor in any jurisdiction in which such offering may
not lawfully be made.
_________________________
TABLE OF CONTENTS
Page
____
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVE AND POLICIES 6
In General 6
Other Investment Policies 7
INVESTMENT LIMITATIONS 17
PRICING OF SHARES 18
HOW TO PURCHASE AND REDEEM SHARES 19
Distributor 19
Purchase of Shares 19
Redemption of Shares 21
DIVIDENDS AND DISTRIBUTIONS 21
TAXES 22
Federal 22
State and Local 23
MANAGEMENT OF THE FUNDS 23
Investment Adviser 23
Authority to Act as Investment Adviser 24
Administrator 25
DESCRIPTION OF GALAXY AND ITS SHARES 25
CUSTODIAN AND TRANSFER AGENT 28
EXPENSES 28
PERFORMANCE AND YIELD INFORMATION 29
MISCELLANEOUS 30
<PAGE>
THE GALAXY FUND
For applications and
^ 4400 Computer Drive information regarding initial
^ Westboro, Massachusetts purchases and current
^ 01581-5108 performance, call (800)
628-0414. For additional purchases,
redemptions, exchanges and other shareholder
services, call (800) 628-0413.
The Galaxy Fund ("Galaxy") is an open-end management investment company.
This Prospectus describes a series of Galaxy's shares ("Trust Shares") which
represent interests in the Short-Term Bond Fund (the "Fund") offered by
Galaxy.
The Fund's investment objective is to seek a high level of current income
consistent with preservation of capital. Under normal market and economic
conditions, the Fund will invest substantially all of its assets in investment
grade debt obligations of domestic and foreign issuers rated at the time of
purchase within the three highest ratings of Standard & Poor's ^ Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") (or which, if
unrated, are of comparable quality) and in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and other "money
market" instruments.
This prospectus describes Trust Shares in the Fund. Trust Shares are
offered to investors maintaining qualified accounts at bank and trust
institutions, including institutions affiliated with Fleet Financial Group,
Inc., and to participants in employer-sponsored defined contribution plans.
Galaxy is also authorized to issue ^ two additional series of shares in the
Fund ^, Retail A Shares and Retail B Shares (Retail A Shares and Retail B
Shares are referred to herein collectively as "Retail Shares"). Retail Shares
are offered under a separate prospectus primarily to individuals or
corporations purchasing either for their own accounts or for the accounts of
others and to Fleet Brokerage ^ Securities, Inc., Fleet Securities, Inc.,
Fleet Financial Group, Inc., its affiliates, their correspondent banks and
other qualified banks, savings and loans associations and broker/dealers on
behalf of their customers. Trust Shares, Retail A Shares and Retail B Shares
represent equal pro rata interests in the Fund, except they bear different
expenses which reflect the ^ difference in the range of services provided to
them. See "Financial Highlights," "Management of the Fund" and "Description
of Galaxy and Its Shares" herein.
<PAGE>
The Fund is distributed by 440 Financial Distributors, Inc. and advised
by Fleet Investment Advisors Inc. (the "Investment Adviser" or "Fleet").
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This Prospectus sets forth concisely the information that prospective
investors should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in the Statement of Additional Information bearing the
same date, has been filed with the Securities and Exchange Commission. The
current Statement of Additional Information is available upon request without
charge by contacting Galaxy at its telephone numbers or address shown above.
The Statement of Additional Information, as it may be amended from time to
time, is incorporated by reference in its entirety into this Prospectus.
_____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
March 1, ^ 1996
-2-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to its Trust Shares, and (ii) the ^ operating
expenses for Trust Shares of the Fund. ^ Examples based on the table are also
shown.
<TABLE>
<CAPTION>
SHORT-TERM
BOND FUND
SHAREHOLDER TRANSACTION EXPENSES (TRUST SHARES)
________________________________ ______________
<S> <C>
Sales Load None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
_______________________________________
Advisory Fees
After Fee Waivers .55%
^ 12b-l Fees None
Other Expenses (After
Expense Reimbursements) ^.29%
_____
Total Fund Operating Expenses
(After Fee Waivers and
Expense Reimbursements) ^.84%
_____
_____
</TABLE>
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) a ^ 5% annual return, and (2) redemption of your investment at
the end of the following periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
______ _______ _______ ________
Short-Term Bond Fund
(Trust Shares) ^ $8 $26 $46 $102
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in Trust Shares of the
Fund will bear directly or indirectly. They are based on expenses incurred by
the Fund during the last fiscal year, restated to reflect expenses which the
Fund expects to incur during the current fiscal year on its Trust Shares.
Without voluntary fee waivers and expense reimbursements by the Investment
Adviser, Advisory Fees would be .75% and Total Fund Operating Expenses would
be ^1.04% for Trust Shares of the Fund. For more complete descriptions of
these costs and expenses, see "Management of the Fund" and "Description of
Galaxy and Its Shares" in this Prospectus and the financial statements and
notes incorporated by reference ^ into the Statement of Additional
Information.
-3-
<PAGE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This Prospectus describes the Trust Shares in the Fund. Galaxy is also
authorized to issue ^ two additional series of shares in the Fund, Retail ^ A
Shares and Retail B Shares. As described below under "Description of Galaxy
and Its Shares," Trust Shares, Retail A Shares and Retail B Shares represent
equal pro rata interests in the Fund, except that (i) effective October 1,
1994^, Retail A Shares of the Fund bear the expenses incurred under Galaxy's
Shareholder Services Plan for Retail A Shares and Trust Shares at an annual
rate ^ not to exceed .15% of the average daily net asset value of the Fund's
outstanding Retail A Shares (currently, these fees are not paid with respect
to the Fund's Trust Shares) ^, (ii) Retail B Shares of the Fund bear the
expenses incurred under Galaxy's Distribution and Services Plan for Retail B
shares at an annual rate not to exceed .80% of the average daily net asset
value of the Fund's outstanding Retail B Shares, and (iii) Trust Shares,
Retail A Shares and Retail B Shares bear differing transfer agency expenses.
Retail Shares are offered under a separate prospectus.
The financial highlights presented below have been audited by Cooper's &
Lybrand L.L.P., Galaxy's independent accountants, whose report is contained in
Galaxy's Annual Report to Shareholders dated October 31, ^ 1995. Such
financial highlights should be read in conjunction with the financial
statements contained in the Annual Report to Shareholders and incorporated by
reference ^ into the Statement of Additional Information. Information in the
financial highlights for periods prior to the fiscal year ended October 31,
1994 reflect the investment results of both Trust Shares and Retail A Shares
of the Fund. More information about the performance of the Fund is also
contained in the Annual Report to Shareholders, which may be obtained without
charge by contacting Galaxy at its telephone numbers or address provided
above.
-4-
<PAGE>
SHORT-TERM BOND FUND 1
(FOR A SHARE 2 OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Year Ended ^ Period
Ended
Year Ended October 31, October 31, October
31,
1995 1994 1993 1992 1,
2
_____________________ __________
____________
Trust Shares
____________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ ^ 9.73 $10.30 $10.09
$10.00
________ ______ ______
______
Income from Investment
Operations
Net Investment
Income 3,4 0.57 0.44 0.47
0.42
Net realized and
unrealized
gain (loss) on
investments 0.33 (0.51) 0.22
0.09
________ ______ ______
______
Total from Investment
Operations: 0.90 (0.07) 0.69
0.51
________ ______ ______
______
Less ^ Dividends:
Dividends from net
investment income (0.57) (0.44) (0.47)
(0.42)
^ Dividends from net
realized capital gains -- -- (0.01) -
- -
^ Dividends in excess of
net realized capital gains -- (0.06) -- -
- -
________ ______ ______
______
Total ^ Dividends: (0.57) (0.50) (0.48)
(0.42)
________ ______ ______
______
Net increase (decrease) in net
asset value 0.33 (0.57) 0.21
0.09
________ ______ ______
______
Net Asset Value, End
of Period $10.06 $ 9.73 ^ $10.30 ^
$10.09
________ ______ ______
______
________ ______ ______
______
Total Return 9.55% (0.66%) 6.98%
5.21% 5
Ratios/Supplemental Data:
Net Assets, End of
Period (000's) $35,088 $39,843 $85,211
$57,403
Ratios to average net
assets:
Net investment income
including
reimbursement
/waiver 5.79% 4.45% 4.51% 5.77%
6
Operating ^ expenses
including
reimbursement/waiver 0.74% 0.91% 0.86% 0.90%
6
Operating expenses
excluding
reimbursement/waiver 1.02% 1.11% 1.06% 1.20%
6
Portfolio Turnover Rate 289% 2.33% 100% 114%
5
</TABLE>
_______________
1 The Fund commenced operations on December 30, 1991.
2 For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail and
Trust Shares.
3 Net investment income per share for Trust Shares before waiver and/or of
fees by the Investment Adviser and/or Administrator for the ^ years ended
October 31, 1995 and 1994 were $0.54 and $0.42 ^, respectively.
4 Net investment income per share before waiver and/or reimbursement of fees
by the Investment Adviser and/or Administrator for the ^ years ended October
31, 1993 and for the period ended October 31, 1992 were $0.45 and ^ $0.40 ^,
respectively.
5 Not Annualized.
6 Annualized.
-5-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek a high level of current income
consistent with preservation of capital. The Fund will invest substantially
all of its assets in corporate debt obligations of domestic and foreign
corporations, such as bonds and debentures, obligations convertible into
common stock, "money market" instruments such as bank obligations and
commercial paper, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and asset-backed and mortgage-backed securities.
The Fund may also enter into interest rate futures contracts to hedge against
changes in market values. See "Other Investment Policies." Under normal
market and economic conditions, at least 65% of the Fund's total assets will
be invested in bonds and debentures, subject to the quality standards
described below. The Fund will not invest in common stock, and any common
stock received through the conversion of convertible debt obligations will be
sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest
substantially all of its assets in debt obligations rated at the time of
purchase within the three highest ratings of S&P or Moody's (or which, if
unrated, are determined by the Investment Adviser to be of comparable quality)
and in obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and other "money market" instruments such as those listed
below under "Other Investment Policies." Unrated securities will be
determined to be of comparable quality to rated debt obligations if, among
other things, other outstanding obligations of the issuers of such securities
are rated A or better. When, in the opinion of the Investment Adviser, a
defensive investment posture is warranted, the Fund may invest temporarily and
without limitation in high-quality, short-term money market instruments. See
Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.
The Fund may also invest, from time to time, in municipal securities.
The purchase of municipal securities may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of
such securities, on a pretax basis, is comparable to that of corporate or U.S.
debt obligations. In addition, the Fund may invest in obligations issued or
guaranteed by foreign governments or any of their political subdivisions or
instrumentalities. Such obligations include debt obligations issued by
Canadian Provincial Governments, which are similar to U.S. municipal
securities except that the income derived therefrom is fully subject to U.S.
-6-
<PAGE>
Federal taxation. These instruments are denominated in either Canadian or
U.S. dollars and have an established over-the-counter market in the United
States. Also included are debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related governmental
agencies. Examples of those include the International Bank for Reconstruction
and Development ("World Bank"), the Asian Development Bank and the
InterAmerican Development Bank. Obligations of supranational entities may be
supported by appropriated but unpaid commitments of their member countries and
there is no assurance that those commitments will be undertaken or met in the
future. The Fund may not invest more than 35% of its total assets in the
securities of foreign issuers.
Under normal conditions the Fund's portfolio securities will have an
average weighted maturity of less than three years.
The value of the Fund's portfolio securities will generally vary
inversely with changes in prevailing interest rates. See "Other Investment
Policies" below for information regarding additional investment policies of
the Short-Term Bond Fund.
The Investment Adviser will use its best efforts to achieve the Fund's
investment objective, although its achievement cannot be assured. The
investment objective of the Fund may not be changed without the approval of
the holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Except as noted below under "Investment Limitations," the
Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Fund to be a complete
investment program.
OTHER INVESTMENT POLICIES
U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS
The Fund may, in accordance with its investment policies, invest from
time to time in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and in ^ "money market" instruments, including
bank obligations and commercial paper.
Obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities include U.S. Treasury securities, which differ only in
their interest rates, maturities and time of issuance: Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial
-7-
<PAGE>
maturities of one to ten years; and Treasury Bonds generally
have initial maturities of more than 10 years. Obligations of
certain agencies and instrumentalities of the U.S. Government,
such as those of the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others,
such as those of the Federal Home Loan Banks, are supported by the
right of the issuer to borrow from the Treasury; others, such as those of the
Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the instrumentality. No assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law. Some of these
instruments may be variable or floating rate instruments.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit, and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank which is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation, or
by a savings and loan association or savings bank which is insured by the
Federal Deposit Insurance Corporation. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations.
Investment in bank obligations is limited to the obligations of financial
institutions having more than $1 billion in total assets at the time of
purchase.
Domestic and foreign banks are subject to extensive but different
government regulation which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
to finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional risks, including
future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks
may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting, and recordkeeping standards than those
applicable to domestic branches
-8-
<PAGE>
of U.S. banks. The Fund will invest in the obligations of
U.S. branches of foreign banks or foreign branches of U.S.
banks only when the Investment Adviser believes that the credit risk with
respect to the instrument is minimal.
Commercial paper may include variable and floating rate instruments which
are unsecured instruments that permit the indebtedness thereunder to vary.
Variable rate instruments provide for periodic adjustments in the interest
rate. Floating rate instruments provide for automatic adjustment of the
interest rate whenever some other specified interest rate changes. Some
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, the Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell the instrument to a third
party. In the event that an issuer of a variable or floating rate obligation
defaulted on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and could, for this or
other reasons, suffer a loss to the extent of the default. The Fund may also
purchase Rule 144A securities. See "Investment Limitations."
Types of Municipal Securities
The two principal classifications of municipal securities which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Private activity bonds held by the Fund
are in most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of such private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" securities,
which are normally issued by special purpose public authorities. If the
issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
Variable and Floating Rate Municipal Securities
Municipal securities purchased by the Fund may include rated and unrated
variable and floating rate tax-exempt instruments.
-9-
<PAGE>
There may be no active secondary market with respect to a particular variable
or floating rate instrument. Nevertheless, the periodic readjustments of their
interest rates tend to assure that their value to the Fund will approximate
their par value. Illiquid variable and floating rate instruments (instruments
which are not payable upon seven days' notice and do not have an active trading
market) that are acquired by the Fund are subject to the 10% limit described in
Investment Limitation No. 3 under "Investment Limitations" in this Prospectus.
Repurchase and Reverse Repurchase Agreements
The Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price
("repurchase agreements"). Repurchase agreements will be entered into only
with financial institutions such as banks and broker/dealers which are deemed
to be creditworthy by the Investment Adviser under guidelines approved by
Galaxy's Board of Trustees. The Fund will not enter into repurchase
agreements with Fleet or any of its affiliates. Securities subject to
repurchase agreements may bear maturities exceeding one year. Unless a
repurchase agreement has a remaining maturity of seven days or less or may be
terminated on demand by notice of seven days or less, the repurchase agreement
will be considered an illiquid security and will be subject to the 10% limit
described in Investment Limitation No. 3 under "Investment Limitations" in
this Prospectus.
The seller under a repurchase agreement will be required to maintain the
value of the securities which are subject to the agreement and held by the
Fund at not less than the agreed upon repurchase price. If the seller
defaulted on its repurchase obligation, the Fund would suffer a loss to the
extent that the proceeds from a sale of the underlying securities (including
accrued interest) were less than the repurchase price (including accrued
interest) under the agreement. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities by
the Fund might be delayed pending court action.
The Fund may also borrow funds for temporary purposes by selling
portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date
and price ("reverse repurchase agreements"). Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Fund may
decline below the repurchase price. The Fund would pay interest on amounts
obtained pursuant to a reverse repurchase agreement.
-10-
<PAGE>
Securities Lending
The Fund may lend its portfolio securities to financial institutions such
as banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be short-term,
will be made only to borrowers deemed by the Investment Adviser to be of good
standing and only when, in the Investment Adviser's judgment, the income to be
earned from the loan justifies the attendant risks. The Fund currently
intends to limit the lending of its portfolio securities so that, at any given
time, securities loaned by the Fund represent not more than one-third of the
value of its total assets.
Investment Company Securities
The Fund may invest in securities issued by other investment companies
which invest in high quality, short-term debt securities and which determine
their net asset value per share based on the amortized cost or penny-rounding
method. Investments in other investment companies will cause the Fund (and,
indirectly, the Fund's shareholders) to bear proportionately the costs
incurred in connection with the investment companies' operations. Securities
of other investment companies will be acquired by the Fund within the limits
prescribed by the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund currently intends to limit its investments so that, as determined
immediately after a securities purchase is made: (a) not more than 5% of the
value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of other investment companies
as a group; (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund; and (d) not more than 10% of the
outstanding voting stock of any one closed-end investment company will be
owned in the aggregate by the Fund, other investment portfolios of Galaxy, and
any other investment companies advised by the Investment Adviser. Any change
by the Fund in the future with respect to its policies concerning investments
in securities issued by other investment companies will be made only in
accordance with the requirements of the 1940 Act.
Interest Rate Futures Contracts
The Fund may enter into contracts (both purchases and sales) which
provide for the future delivery of fixed-income securities
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(commonly known as interest rate futures contracts). The Fund will not
engage in futures transactions for speculation, but only to hedge
against changes in the market values of securities which the Fund
holds or intend to purchase. The Fund will engage in futures
transactions only to the extent permitted by the Commodity
Futures Trading Commission ("CFTC") and the Securities and Exchange
Commission ("SEC"). The purchase of futures instruments in connection with
securities which the Fund intends to purchase will require an amount of cash
and/or U.S. Government obligations, equal to the market value of the
outstanding futures contracts, to be deposited in a segregated account to
collateralize the position and thereby insure that the use of such futures is
unleveraged. The Fund will limit its hedging transactions in futures
contracts so that, immediately after any such transaction, the aggregate
initial margin that is required to be posted by the Fund under the rules of
the exchange on which the futures contract is traded does not exceed 5% of the
Fund's total assets after taking into account any unrealized profits and
unrealized losses on the Fund's open contracts. In addition, no more than
one-third of the Fund's total assets may be covered by such contracts.
Transactions in futures as a hedging device may subject the Fund to a
number of risks. Successful use of futures by the Fund is subject to the
ability of the Investment Adviser to predict correctly movements in the
direction of the market. In addition, there may be an imperfect correlation,
or no correlation at all, between movements in the price of futures contracts
and movements in the price of the instruments being hedged. There is no
assurance that a liquid market will exist for any particular futures contract
at any particular time. Consequently, the Fund may realize a loss on a
futures transaction that is not offset by a favorable movement in the price of
securities which the Fund holds or intends to purchase or may be unable to
close a futures position in the event of adverse price movements. Additional
information concerning futures transactions is contained in Appendix B to the
Statement of Additional Information.
When-Issued, Forward Commitment and Delayed Settlement Transactions
The Fund may purchase eligible securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. The Fund may
also purchase or sell eligible securities on a "delayed settlement" basis.
When-issued and forward commitment transactions, which involve a commitment by
the Fund to purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later), permit the
Fund to lock in a price or yield on a security it owns or intends to purchase,
regardless of future changes in interest rates. Delayed settlement describes
settlement of a securities transaction in the secondary market
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which will occur sometime in the future. When-issued,
forward commitment and delayed settlement transactions
involve the risk, however, that the yield or price
obtained in a transaction may be less favorable than the yield or price
available in the market when the securities delivery takes place. It is
expected that forward commitments, when-issued purchases and delayed
settlements will not exceed 25% of the value of the Fund's total assets absent
unusual market conditions. In the event the Fund's forward commitments, when-
issued purchases and delayed settlements ever exceeded 25% of the value of its
total assets, the Fund's liquidity and the ability of the Investment Adviser
to manage the Fund may be adversely affected. The Fund does not intend to
engage in when-issued purchases, forward commitments and delayed settlements
for speculative purposes, but only in furtherance of their investment
objectives.
Asset-Backed Securities
The Fund may purchase asset-backed securities, which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another. Assets generating such payments will consist of such instruments as
motor vehicle installment purchase obligations, credit card receivables and
home equity loans. Payment of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with entities issuing the securities.
The estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of the asset-backed security, will be
primarily a function of current market rates, although other economic and
demographic factors will be involved. The Fund will not invest more than 10%
of its total assets in asset-backed securities. See "Asset-Backed Securities"
in the Statement of Additional Information.
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities (including
collateralized mortgage obligations) that represent pools of mortgage loans
assembled for sale to investors by various governmental agencies and
government-related organizations, such as the Government National Mortgage
Association ("GMNMA"), the Federal National Mortgage Association ("FNMA"), and
the Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed
securities provide a monthly payment consisting of interest and principal
payments. Additional payment may be made out of unscheduled repayments of
principal resulting from the sale of the underlying residential property,
refinancing or foreclosure, net of fees or costs that may be incurred.
Prepayments of principal on mortgage-backed securities may tend to increase
due
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to refinancing of mortgages as interest rates decline. To the extent that
the Fund purchases mortgage-backed securities at a premium, mortgage
foreclosures and prepayments of principal by mortgagors (which may be made at
any time without penalty) may result in some loss of the Fund's principal
investment to the extent of the premium paid. The yield of the Fund from
investing in mortgaged-backed securities may be affected by reinvestment of
prepayments at higher or lower rates than the original investment.
Other Mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities. These private mortgage-backed securities may be
supported by U.S. Government mortgage-backed securities or some form of non-
government credit enhancement. Mortgage-backed securities have either fixed
or adjustable interest rates. The rate of return on mortgage-backed
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline; as a result, when
interest rates decline, holders of these securities normally do not benefit
from appreciation in market value to the same extent as holders of other non-
callable debt securities. In addition, like other debt securities, the values
of mortgage-related securities, including government and government-related
mortgage obligations are considered to be investment companies, investments in
such obligations will be subject to the percentage limitations described under
"Investment Company Securities" above.
Stripped Obligations
To the extent consistent with its investment objective, the Fund may
purchase Treasury receipts and other "stripped" securities that evidence
ownership in either the future interest payments or the future principal
payments on U.S. Government and other obligations. These participations,
which may be issued by the U.S. Government or by private issuers, such as
banks and other institutions, are issued at their "face value," and may
include stripped mortgage-backed securities ("SMBS"), which are derivative
multi-class mortgage securities. Stripped securities, particularly SMBS, may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
SMBS are usually structured with two or more classes that receive
different proportions of the interest and principal distributions from a pool
of mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other
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<PAGE>
class will receive most of the interest and the remainder
of the principal. If the underlying obligations
experience greater than anticipated prepayments of principal, the
Fund may fail to fully recoup its initial investment in these securities. The
market value of the class consisting entirely of principal payments generally
is extremely volatile in response to changes in interest rates. The yields on
a class of SMBS that receives all or most of the interest are generally higher
than prevailing market yields on other mortgage-backed obligations because
their cash flow patterns are more volatile and there is a greater risk that
the initial investment will not be fully recouped. SMBS which are not issued
by the U.S. Government (or a U.S. Government agency or instrumentality) are
considered illiquid. Obligations issued by the U.S. Government may be
considered liquid under guidelines established by the Trust's Board of
Trustees if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of net
asset value per share.
Guaranteed Investment Contracts
The Fund may invest in guaranteed investment contracts ("GICs") issued by
United States and Canadian insurance companies. Pursuant to GICs, the Fund
makes cash contributions to a deposit fund of the insurance company's general
account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation
of the issuing insurance company and not a separate account. The purchase
price paid for a GIC becomes part of the general assets of the insurance
company, and the contract is paid from the company's general assets. The Fund
will only purchase GICs that are issued or guaranteed by insurance companies
that at the time of purchase are rated at least AA by S&P or receive a similar
high quality rating from a nationally recognized service which provides
ratings of insurance companies. GICs are considered illiquid securities and
will be subject to the Fund's 10% limitation on such investments, unless there
is an active and substantial secondary market for the particular instrument
and market quotations are readily available.
Bank Investment Contracts
The Fund may invest in bank investment contracts ("BICs") issued by banks
that meet the quality and asset size requirements for banks described above
under ^"U.S. Government Obligations and Money Market Instruments." Pursuant
to BICs, cash contributions are made to a deposit account at the bank in
exchange for payments at negotiated, floating or fixed interest rates. A BIC
is a general obligation of the issuing bank. BICs are considered illiquid
securities and will be subject to the Fund's 10% limitation on such
investments, unless there is an active and
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<PAGE>
substantial secondary market for the particular instrument and market
quotations are readily available.
Foreign Securities
Investments by the Fund in foreign securities involve higher costs than
investments in U.S. securities, including higher transaction costs as well as
the imposition of additional taxes by foreign governments. In addition,
foreign investments may include additional risks associated with currency
exchange rates, less complete financial information about the issuers, less
market liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls, or the adoption of other governmental
restrictions, might adversely affect the payment of principal and interest on
foreign obligations.
Although the Fund may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S. dollars.
As a result, the net asset value of the Fund's shares may fluctuate with U.S.
dollar exchange rates as well as with price changes of the Fund's foreign
securities in the various local markets and currencies. Thus, an increase in
the value of the U.S. dollar compared to the currencies in which the Fund
makes its foreign investments could reduce the effect of increases and magnify
the effect of decreases in the price of the Fund's foreign securities in their
local markets. Conversely, a decrease in the value of the U.S. dollar will
have the opposite effect of magnifying the effect of increases and reducing
the effect of decreases in the prices of the Fund's foreign securities in
their local markets. In addition to favorable and unfavorable currency
exchange-rate developments, the Fund is subject to the possible imposition of
exchange control regulations or freezes on convertibility of currency.
Portfolio Turnover
The Fund may sell a portfolio investment soon after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
Fund's investment objective. Portfolio investments may be sold for a variety
of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. The rate of portfolio turnover will not be a limiting factor in
making portfolio decisions. A high rate of portfolio turnover may result in
the realization of substantial capital gains and involves correspondingly
greater transaction costs. To the extent that net capital gains are realized,
distributions derived from such gains are treated as ordinary
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<PAGE>
income for Federal income tax purposes. See "Financial Highlights" and
"Taxes -- Federal."
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy
and may not be changed with respect to the Fund without the affirmative vote
of the holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."
The Fund may not:
1. Make loans, except that (i) the Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, and may
enter into repurchase agreements with respect to portfolio securities, and
(ii) the Fund may lend portfolio securities against collateral consisting of
cash or securities which are consistent with the Fund's permitted investments,
where the value of the collateral is equal at all times to at least 100% of
the value of the securities loaned.
2. Borrow money or issue senior securities, except from domestic banks
for temporary purposes and then in amounts not in excess of 10% of the value
of its total assets at the time of such borrowing (provided that the Fund may
borrow pursuant to reverse repurchase agreements in accordance with its
investment policies and in amounts not in excess of 10% of the value of its
total assets at the time of such borrowing); or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of
the value of the Fund's total assets at the time of such borrowing. The Fund
will not purchase securities while ^ borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
3. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities in
excess of seven days, time deposits with maturities in excess of seven days,
restricted securities, non-negotiable time deposits and other securities which
are not readily marketable.
4. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would
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<PAGE>
be invested in such issuer, except that up to 25% of the value of its
total assets may be invested without regard to this limitation.
In addition, the Fund may not purchase any securities which would cause
25% or more of the value of the Fund's total assets at the time of purchase to
be invested in the securities of one or more issuers conducting their
principal business activities in the same industry; provided, however that (a)
there is no limitation with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, (b) wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents,
and (c) utilities will be classified according to their services. (For
example, gas, gas transmission, electric and gas, electric and telephone each
will be considered a separate industry.)
The Securities and Exchange Commission has adopted Rule 144A which allows
for a broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act of 1933 for
resales of certain securities to qualified institutional buyers. The Fund's
investment in Rule 144A securities could have the effect of increasing the
level of illiquidity of the Fund during any period that qualified
institutional buyers were no longer interested in purchasing these securities.
For purposes of the 10% limitation on purchases of illiquid instruments
described under Investment Limitation No. 3 above, Rule 144A securities will
not be considered illiquid if the Investment Adviser has determined, in
accordance with guidelines established by the Board of Trustees, that an
adequate trading market exists for such securities.
If a percentage limitation is satisfied at the time of investment, a
later increase in such percentage resulting from a change in the value of the
Fund's portfolio securities will not constitute a violation of the limitation.
PRICING OF SHARES
Net asset value per share of the Fund is determined as of the close of
regular trading hours on the New York Stock Exchange (the "Exchange"),
currently 4:00 p.m. (Eastern Time). Net asset value per share is determined
on each day on which the Exchange is open for trading. Currently, the
holidays which Galaxy observes are New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Net asset value per share of the Fund for purposes of pricing
sales and redemptions is calculated
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separately for each series of shares by
dividing the value of all securities and other assets attributable to a
particular series of shares of the Fund, less the liabilities attributable to
the shares of that series of the Fund, by the number of outstanding shares of
that series of the Fund.
The Fund's assets are valued for purposes of pricing sales and
redemptions by an independent pricing service ("Service") approved by Galaxy's
Board of Trustees. When, in the judgment of the Service, quoted bid prices
for portfolio securities are readily available and are representative of the
bid side of the market, these investments are valued at the mean between
quoted bid prices (as obtained by the Service from dealers in such securities)
and asked prices (as calculated by the Service based upon its evaluation of
the market for such securities). Other investments are carried at fair value
as determined by the Service, based on methods which include consideration of
yields or prices of bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. The
Service may also employ electronic data processing techniques and matrix
systems to determine value. Short-term securities are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming
a constant amortization to maturity of the difference between the principal
amount due at maturity and cost.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by Galaxy's
distributor, 440 Financial Distributors, Inc. (the "Distributor"), a wholly-
owned subsidiary of ^ First Data Investor Services Group, Inc. (formerly known
as The Shareholder Services Group, Inc. d/b/a 440 Financial). The Distributor
is a registered broker/dealer with principal offices located at ^ 290 Donald
Lynch Boulevard, Marlboro, Massachusetts ^ 01752.
PURCHASE OF SHARES
The Trust Shares described in this Prospectus are sold to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of Fleet Financial Group, Inc. and to participants in employer-
sponsored defined contribution plans ("Institutions"). Trust Shares sold to
such investors ("Customers") will be held of record by Institutions. The
Institution is responsible for transmitting to the Distributor orders for
purchases of Trust Shares and for wiring required funds in payment to Galaxy's
custodian on a timely
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basis. The Distributor is responsible for transmitting such
orders to Galaxy's transfer agent for execution. Beneficial ownership of
Trust Shares will be recorded by the Institution and reflected in the account
statements it provides to its Customers. Confirmations of purchases and
redemptions of Trust Shares will be sent to the appropriate Institution.
Purchases of Trust Shares will be effected only on days on which the
Distributor, Galaxy's custodian and the purchasing Institution are open for
business ("Business Days").
A purchase order for Trust Shares received by the Distributor on a
Business Day prior to the close of regular trading hours on the Exchange
(currently, 4:00 p.m. Eastern Time) will be priced at the net asset value
determined on that day, provided that Galaxy's custodian receives the purchase
price in Federal funds or other immediately available funds prior to 4:00 p.m.
on the following Business Day, at which time the order will be executed. If
funds are not received by such date and time, the order will not be accepted
and notice thereof will be given promptly to the Institution which submitted
the order. Payments for orders which are not received or accepted will be
returned after prompt inquiry to the sending Institution. If an Institution
accepts a purchase order from its Customer on a non-Business Day, the order
will not be executed until it is received and accepted by the Distributor on a
Business Day in accordance with the foregoing procedures.
Galaxy reserves the right to reject any purchase order, in whole or in
part.
The issuance of Trust Shares is recorded on the books of the Fund and
share certificates will not be issued.
Customers may purchase Trust Shares through procedures established by
Institutions in connection with the requirements of their Customer accounts.
Such accounts may include discretionary investment management accounts,
custodial accounts, agency accounts and different types of tax-advantaged
accounts (including defined contribution plans). Investors should contact
their Institution (or, in the case of employee plans, their employer) for
further information concerning the types of eligible Customer accounts and the
related purchase and redemption procedures.
Although Galaxy does not impose any minimum initial or subsequent
investment requirement with respect to Trust Shares, Institutions may impose
such requirements on the accounts maintained by its Customers, and may also
require that Customers maintain minimum account balances with respect to Trust
Shares.
Trust Shares of the Fund may also be available for purchase through
different types of retirement plans offered by the
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Institutions to its Customers. Information pertaining to such plans is
available directly from the Institution.
REDEMPTION OF SHARES
Customers may redeem all or part of their Trust Shares in accordance with
procedures governing their accounts at their Institution. It is the
responsibility of the Institution to transmit redemption orders to the
Distributor and to credit its Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments is imposed by
Galaxy, although the Institution may charge its Customers' accounts for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institution.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by the Distributor.
Payment for redemption orders received by the Distributor on a Business Day
will normally be wired the following Business Day to the Institution. Payment
for redemption orders which are received on a non-Business Day will normally
be wired to the Institution on the next Business Day. However, in both cases
Galaxy reserves the right to wire redemption proceeds within seven days after
receiving the redemption order if, in its judgment, an earlier payment could
adversely affect the Fund.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
The Fund reserves the right to redeem shares in any account at their net
asset value involuntarily, upon 60 days' written notice, if the value of the
account is less than $250 as a result of redemptions.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Fund are declared daily and
paid monthly. Net realized capital gains are distributed at least annually.
Dividends and distributions will be paid in cash. Customers may elect to
have their dividends reinvested in additional Trust Shares of the Fund at the
net asset value of such shares on the ex-dividend date. Such election, or any
revocation thereof, must be communicated in writing by an Institution on
behalf of Customers to Galaxy's transfer agent and will become effective with
respect to dividends paid after its receipt. The crediting and payment of
dividends to Customers will be in accordance with
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the procedures governing such Customers' accounts at their Institution.
TAXES
FEDERAL
IN GENERAL
The Fund qualified during its last taxable year and intends to continue
to qualify as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). Such qualification generally relieves the
Fund of liability for Federal income taxes to the extent the Fund's earnings
are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its tax-exempt interest income (if any) net of certain
deductions for such year. In general, the Fund's investment company taxable
income will be its taxable income, including dividends, interest and short-
term capital gains (the excess of net short-term capital gain over net long-
term capital loss), subject to certain adjustments and excluding the excess of
any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. The policy of the Fund is to distribute
as dividends substantially all of its investment company taxable income and
any net tax-exempt interest income each year. Such dividends will be taxable
as ordinary income to the Fund's shareholders who are not currently exempt
from Federal income taxes, whether such dividends are received in cash or
reinvested in additional shares. (Federal income taxes for distributions to
an IRA or a qualified retirement plan are deferred under the Code.) It is
anticipated that no part of any distribution will qualify for the dividends
received deduction for corporations.
Distribution by the Fund of the excess of its respective net long-term
capital gain over its net short-term capital loss is taxable to shareholders
as long-term capital gain, regardless of how long the shareholder has held
shares and whether such gains are received in cash or reinvested in additional
shares. Such distributions are not eligible for the dividends received
deduction.
Dividends declared in October, November or December of any year which are
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by the Fund on December
31 of such year if
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such dividends are actually paid during January of the following year.
If you are considering buying Shares of the Fund on or just before the
record date of a dividend, you should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital,
generally will be taxable to you.
A taxable gain or loss may be realized by a shareholder upon redemption,
transfer or exchange of Fund shares depending upon the tax basis of such
shares and their price at the time of redemption, transfer or exchange.
The foregoing summarizes some of the important Federal tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisers with specific reference to their own
tax situation. Shareholders will be advised annually as to the Federal income
tax consequences of distributions made each year.
STATE AND LOCAL
Investors are advised to consult their tax advisers concerning the
application of state and local taxes, which may have different consequences
than those of the Federal income tax law described above.
MANAGEMENT OF THE FUNDS
The business and affairs of the Fund are managed under the direction of
Galaxy's Board of Trustees. The Fund's Statement of Additional Information
contains the names of and general background information concerning the
Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at ^ 50 Kennedy Plaza, 2nd Floor,
Providence, Rhode Island 02903, serves as the Investment Adviser to the Fund.
Fleet, which commenced operations in 1984, also provides investment
management and advisory services to Fleet Trust Company and other individual
and institutional clients, and manages the other investment portfolios of
Galaxy: the Money Market, Government, Tax-Exempt, U.S. Treasury,
Institutional Treasury Money Market, Connecticut Municipal Money Market,
Massachusetts Municipal Money Market, Equity Value, Equity Growth, Equity
Income, International Equity, Small Company Equity, Asset Allocation, Growth
and Income, Small Cap Value, Intermediate ^ Government Income, Corporate Bond,
High Quality Bond, Tax-Exempt Bond, New York Municipal Bond, Connecticut
Municipal Bond, Massachusetts Municipal Bond and Rhode Island
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Municipal Bond Funds. Fleet is an indirect wholly-owned
subsidiary of Fleet Financial Group, Inc., a registered bank holding
company with total assets of approximately ^ $____ billion
at ^____________, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and in
accordance with the Fund's investment policies, Fleet manages the Fund, makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities and maintains related records.
The Fund's portfolio manager, Kenneth W. Thomae, is primarily responsible
for the day-to-day management of the Fund's investment portfolio. Mr. Thomae,
a Vice President, has been with Fleet and its predecessors since 1985 and has
been the Fund's portfolio manager since its inception.
For the services provided and expenses assumed with respect to the Fund,
the Investment Adviser is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rate of .75% of the average daily net assets
of the Fund. The fee for the Fund is higher than fees paid by most other
mutual funds, although the Board of Trustees of Galaxy believes that it is not
higher than average advisory fees paid by funds with similar investment
objectives and policies.
Fleet may from time to time, in its discretion, waive advisory fees
payable by the Fund in order to help maintain a competitive expense ratio and
may from time to time allocate a portion of its advisory fees to Fleet Trust
Company or other subsidiaries of Fleet Financial Group, Inc. in consideration
for administrative and other services which they provide to beneficial
shareholders. Fleet is currently waiving a portion of the advisory fees
payable to it by the Fund so that it is entitled to receive an advisory fee at
the annual rate of .55% of the Fund's average daily net assets, but Fleet may
in its discretion revise or discontinue this waiver at any time. For the
fiscal year ended October 31, ^ 1995, Fleet received advisory fees (after fee
waivers) at the effective rate of .45% of the Fund's average daily net assets.
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as Trust Shares of the Fund, but do not prohibit such a bank holding company
or its affiliates or banks generally from acting
-24-
<PAGE>
as investment adviser, transfer agent, or custodian
to such an investment company or from purchasing shares
of such a company as agent for and upon the order of customers. The
Investment Adviser, custodian and Institutions which have agreed to provide
shareholder support services that are banks or bank affiliates are subject to
such banking laws and regulations. Should legislative, judicial, or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Fund, Galaxy might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operation. It is anticipated, however, that any resulting change in
the Fund's method of operation would not affect the Fund's net asset value per
share or result in financial loss to any shareholder. State securities laws
on this issue may differ from federal law and banks and financial institutions
may be required to register as dealers pursuant to state law.
ADMINISTRATOR
^ First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial ("First Data"), located
at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as the
Fund's
administrator. ^ First Data is a wholly-owned subsidiary of ^ First Data
Corporation.
^ First Data generally assists the Fund in its administration and
operation. ^ First Data also serves as administrator to the other portfolios
of Galaxy. For the services provided to the Fund, ^ First Data is entitled to
receive administration fees, computed daily and paid monthly, at the annual
rate of .09% of the first $2.5 billion of the combined average daily net
assets of the Fund and the other portfolios offered by Galaxy (collectively,
the "Portfolios"), .085% of the next $2.5 billion of combined average daily
net assets and .08% of combined average daily net assets over $5 billion. In
addition, ^ First Data also receives a separate annual fee from each Portfolio
for certain fund accounting services. From time to time, ^ First Data may
waive all or a portion of the administration fee payable to it by the Fund,
either voluntarily or pursuant to applicable statutory expense limitations. ^
For the fiscal year ended October 31, ^ 1995, the Fund paid administration
fees at the effective annual rate of ^.088% of the Fund's average daily net
assets.
DESCRIPTION OF GALAXY AND ITS SHARES
Galaxy was organized as a Massachusetts business trust on March 31, 1986.
Galaxy's Declaration of Trust authorizes the Board of Trustees to classify or
reclassify any unissued shares into one or more classes or series of shares.
Pursuant to such
-25-
<PAGE>
authority, the Board of Trustees has authorized the issuance
of an unlimited number of shares in each of ^ three series in the Fund as
follows: Class L - Series 1 shares (Trust Shares) ^, Class L -Series 2 shares
(Retail ^ A Shares) and Class L - Series 3 shares (Retail B Shares), each
series representing interests in the Fund. The Fund is classified as a
diversified company under the 1940 Act. The Board of Trustees has also
authorized the issuance of additional classes and series of shares
representing interests in other portfolios of Galaxy. For information
regarding the Fund's ^ Retail Shares and these other portfolios, which are
offered through separate prospectuses, contact the Distributor at (800) 628-
0414.
Shares of each series in the Fund bear their pro rata portion of all
operating expenses paid by the Fund except as follows. Holders of the Fund's
Retail A and Retail B Shares bear the fees that are paid to Institutions under
Galaxy's Shareholder Services Plan described below. Holders of the Fund's
Retail B Shares bear the fees described in the prospectus for such shares that
are paid under Galaxy's Distribution and Services Plan at an annual rate not
to exceed .80% of the average daily net asset value of the Fund's outstanding
Retail B shares. Currently, these payments are not made with respect to the
Fund's Trust Shares ^. In addition, shares of each series in the Fund bear
differing transfer agency expenses. Standardized yield and total return
quotations are computed separately for each series of shares. ^ The
difference in the expenses paid by the respective series will affect their
performance.
^ Retail A Shares of the Fund are sold ^ with a maximum front-end sales
charge of 3.75%. Retail B Shares are sold with a maximum contingent deferred
sales charge of 5.0%. Retail A and Retail B Shares have certain exchange and
other privileges which are not available with respect to Trust Shares.
Each share of Galaxy (irrespective of series designation) has a par value
of $.001 per share, represents an equal proportionate interest in the related
Fund with other shares of the same class (irrespective of series designation),
and is entitled to such dividends and distributions out of the income earned
on the assets belonging to such Fund as are declared in the discretion of
Galaxy'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.
-26-
<PAGE>
Galaxy is not required under Massachusetts law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. Shareholders
have the right to remove Trustees.
SHAREHOLDER SERVICES PLAN
Galaxy intends to enter into servicing agreements with Institutions
(including Fleet Bank and its affiliates) pursuant to which Institutions will
render certain administrative and support services to Customers who are the
beneficial owners of Retail A Shares. Such services will be provided to
Customers who are the beneficial owners of Retail A Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail A Shares. In consideration for
payment of up to .15% (on an annualized basis) of the average daily net asset
value of Retail A Shares owned beneficially by their Customers, Institutions
may provide one or more of the following services to such Customers:
aggregating and processing purchase and redemption requests and placing net
purchase and redemption orders with the Distributor; processing dividend
payments from the Fund; providing periodic mailings to Customers. In
consideration for payment of up to a separate .15% (on an annualized basis) of
the average daily net asset value of Retail A Shares owned beneficially by
their Customers, Institutions may provide one or more of these additional
services to such Customers; providing Customers with information as to their
positions in Retail A Shares; responding to Customers inquiries; and providing
a service to invest the assets of Customers in Retail A Shares. These
services are described more fully in Galaxy's Statement of Additional
Information under "Shareholder Services Plan."
Although the Shareholder Services Plan has been approved with respect to
both Retail A Shares and Trust Shares of the Fund, as of the date of this
Prospectus, Galaxy intends to enter into servicing agreements under the
Shareholder Services Plan only with respect to Retail A Shares of the Fund,
and to limit the payment under these service agreements for the Fund to no
more than .15% (on an annualized basis) of the average daily net asset value
of the Retail A Shares of the Fund beneficially owned by Customers of
Institutions. Galaxy understands that Institutions may charge fees to their
customers who are owners of Retail A Shares in connection with their accounts
with such Institutions. Any such fees would be in addition to any amounts
which may be received by an Institution under the Shareholder Services Plan.
Under the terms of each servicing agreement entered into with Galaxy,
Institutions are required to provide their Customers with a schedule of any
fees that they may charge in connection with Customer investments in Retail A
Shares.
-27-
<PAGE>
AFFILIATE AGREEMENT FOR SUB-ACCOUNT SERVICES
^ First Data has entered into an agreement with Fleet Trust Company, an
affiliate of the Investment Adviser, pursuant to which Fleet Trust Company
performs certain sub-account and administrative functions ("Sub-Account
Services") on a per account basis with respect to Trust Shares of the Fund
held by defined contribution plans, including: maintaining records reflecting
separately with respect to each plan participant's sub-account all purchases
and redemption of Trust Shares and the dollar value of Trust Shares in each
sub-account; crediting to each participant's sub-account all dividends and
distributions with respect to that sub-account; and transmitting to each
participant a periodic statement regarding the sub-account as well as any
proxy materials, reports and other material Fund communications. Fleet Trust
Company is compensated by ^ First Data for the Sub-Account Services and in
connection therewith the transfer agency fees payable by Trust Shares of the
Fund to ^ First Data have been increased by an amount equal to these fees.
In substance therefore, the holders of Trust Shares of the Fund indirectly
bear these fees.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A., located at 1 Chase Manhattan Plaza, New
York, New York 10081, a wholly-owned subsidiary of The Chase Manhattan
Corporation, serves as the custodian of the Fund's assets. Chase Manhattan
may employ sub-custodians for the Fund upon approval of the Trustees in
accordance with the regulations of the SEC, for the purpose of providing
custodial services for the Fund's foreign assets held outside the United
States. ^ First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), a
wholly-owned subsidiary of ^ First Data Corporation serves as the Funds'
transfer and dividend disbursing agent. Services performed by both entities
for the Fund are described in the Statement of Additional Information.
Communications to ^ First Data should be directed to ^ First Data at P.O. Box
15108, 4400 Computer Drive, Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and ^ First Data bear all expenses in
connection with the performance of their services for the Fund. Galaxy bears
the expenses incurred in the Fund's operations. Such expenses include taxes;
interest; fees (including fees paid to its trustees and officers who are not
affiliated with ^ First Data); SEC fees; state securities qualification fees;
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders; advisory, administration, shareholder
servicing
-28-
<PAGE>
fund accounting and custody fees; charges of the transfer agent and
dividend disbursing agent; certain insurance premiums; outside auditing and
legal expenses; costs of independent pricing services; costs of shareholders'
reports and shareholder meetings; and any extraordinary expenses. The Fund
also pays for brokerage fees and commissions in connection with the purchase
of portfolio securities.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the
performance and yields of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives and to stock or other
relevant bond indexes or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the performance of the Fund may be compared to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL
STREET JOURNAL and THE NEW YORK TIMES, or publications of a local or regional
nature, may also be used in comparing the performance and yields of the Fund.
The performance and yield data ^ will be calculated separately for Trust
Shares, Retail A Shares and Retail B Shares of the Fund.
The standard yield is computed by dividing the Fund's average daily net
investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net asset value per share on the last
day of the period, and annualizing the result on a semi-annual basis. The
Fund may also advertise its "effective yield" which is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested.
The Fund may also advertise its performance using "average annual total
return" over various periods of time. Such total return figures reflect the
average percentage change in the value of an investment in the Fund from the
beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five- and
ten-year periods (if applicable), and may be given for other periods as well,
such as from the commencement of the Fund's operations, or on a year-by-year
basis. The Fund may also use "aggregate total return" figures for various
periods, representing the cumulative change in the value of an investment in
the Fund for the specified period. Both methods of calculating total return
assume that dividend and capital gain
-29-
<PAGE>
distributions made by the Fund during the period are reinvested in Fund shares.
Performance and yields of the Fund will fluctuate and any quotation of
performance or yield should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance and yield are generally functions of kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses, and market conditions.
Any additional fees charged by Institutions with respect to accounts of
Customers that have invested in Trust Shares of the Fund will not be included
in calculations of yield and performance.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of ^ either Galaxy or a particular Fund means, with
respect to the approval of an investment advisory agreement or a change in an
investment objective or fundamental investment policy, the affirmative vote of
the holders of the lesser of (a) more than 50% of the outstanding shares of
the Fund or Galaxy, or (b) 67% or more of the shares of the Fund or Galaxy
present at a meeting if more than 50% of the outstanding shares of the Fund or
Galaxy are represented at the meeting in person or by proxy.
The portfolio manager of the Fund and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders
and prospective investors. The topics may include but are not limited to the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products; and tax, retirement and investment planning.
-30-
<PAGE>
TRUST
THE GALAXY FUND
Intermediate ^ Government Income Fund
Prospectus
March 1, ^ 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
_______________________
TABLE OF CONTENTS
Page
_____
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVE AND POLICIES ^ 7
In General ^ 7
Other Investment Policies ^ 8
INVESTMENT LIMITATIONS ^ 17
PRICING OF SHARES ^ 19
HOW TO PURCHASE AND REDEEM SHARES ^ 19
Distributor ^ 19
Purchase of Shares ^ 20
Redemption of Shares ^ 21
DIVIDENDS AND DISTRIBUTIONS ^ 22
TAXES ^ 22
Federal ^ 22
State and Local ^ 23
MANAGEMENT OF THE FUND ^ 23
Investment Adviser ^ 23
Authority to Act as Investment Adviser ^ 25
Administrator ^ 25
DESCRIPTION OF GALAXY AND ITS SHARES ^ 26
Shareholder Services Plan ^ 27
Affiliate Agreement for Sub-Account Services ^ 28
CUSTODIAN AND TRANSFER AGENT ^ 28
EXPENSES ^ 28
PERFORMANCE AND YIELD INFORMATION ^ 29
MISCELLANEOUS ^ 30
<PAGE>
THE GALAXY FUND
For applications and
^ 4400 Computer Drive information regarding initial
^ Westboro, Massachusetts purchases and current
^ 01581-5108 performance, call (800)
628-0414. For additional purchases,
redemptions, exchanges and other
shareholder services, call (800) 628-0413.
The Galaxy Fund ("Galaxy") is an open-end management investment
company. This Prospectus describes a series of Galaxy's shares ("Trust
Shares") which represent interests in the Intermediate ^ Government Income
Fund (the "Fund") offered by Galaxy.
The Fund's investment objective is to seek the highest level of
current income consistent with prudent risk of capital. Subject to this
objective, the Fund's investment adviser will consider the total rate of
return on portfolio securities in managing the Fund. Under normal market and
economic conditions, the Fund will invest substantially all of its assets in
debt obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, investment grade debt obligations rated at the time of
purchase within the three highest ratings of Standard & Poor's Ratings Group
("S&P's") or Moody's Investor's Service, Inc. ("Moody's") (or which, if
unrated, are of comparable quality) and ^"money market" instruments. The Fund
was previously known as the Intermediate Bond Fund.
This prospectus describes Trust Shares in the Fund. Trust Shares
are offered to investors maintaining qualified accounts at bank and trust
institutions, including institutions affiliated with Fleet Financial Group,
Inc. and to participants in employer-sponsored defined contribution plans.
Galaxy is also authorized to issue an additional series of shares in the Fund
("Retail A Shares"), which are offered under a separate prospectus primarily
to individuals or corporations purchasing either for their own accounts or for
the accounts of others and to Fleet Brokerage ^ Securities, Inc., Fleet
Securities Inc., Fleet Financial Group, Inc., its affiliates, their
correspondent banks and other qualified banks, savings and loan associations
and broker/dealers on behalf of their customers. Trust Shares and Retail A
Shares represent equal pro rata interests in the Fund, except they bear
different expenses which reflect the difference in the range of services
provided to them. See "Financial Highlights," "Management of the Fund" and
"Description of Galaxy and Its Shares" herein.
<PAGE>
The Fund is distributed by 440 Financial Distributors, Inc. and
advised by Fleet Investment Advisors Inc. (the "Investment Adviser" or
"Fleet").
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FLEET FINANCIAL GROUP, INC., OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This Prospectus sets forth concisely the information that
prospective investors should consider before investing. Investors should read
this Prospectus and retain it for future reference. Additional information
about the Fund, contained in the Statement of Additional Information bearing
the same date, has been filed with the Securities and Exchange Commission.
The current Statement of Additional Information is available upon request
without charge by contacting Galaxy at its telephone numbers or address shown
above. The Statement of Additional Information, as it may be amended from
time to time, is incorporated by reference in its entirety into this
Prospectus.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
March 1, ^ 1996
-2-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction
expenses imposed by the Fund with respect to its Trust Shares, and (ii) the
operating expenses for Trust Shares of the Fund. ^ Examples based on the
table are also shown.
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT
INCOME ^ FUND
SHAREHOLDER TRANSACTION EXPENSES (TRUST SHARES)
________________________________ ______________
<S> <C>
Sales Load None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
_______________________________________
Advisory Fees
After Fee Waivers .55%
^ 12b-1 Fees None
Other Expenses (After
Expense Reimbursements) ^.24%
____
Total Fund Operating Expenses
(After Fee Waivers and
Expense Reimbursements) ^.79%
____
____
</TABLE>
EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT,
ASSUMING (1) A ^ 5% ANNUAL RETURN, AND (2) REDEMPTION OF YOUR INVESTMENT AT
THE END OF THE FOLLOWING PERIODS:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
______ ______ ______ ________
<S> <C> <C> <C> <C>
Intermediate ^ Government
Income Fund
(Trust Shares) ^ $8 $25 $43 $96
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in Trust Shares of the
Fund will bear directly or indirectly. They are based on expenses incurred by
the Fund during the last fiscal year, restated to reflect the expenses which
the Fund expects to incur during the current fiscal year on its Trust Shares.
Without voluntary fee waivers and expense reimbursements by the Investment
Adviser, Advisory Fees would be .75% and Total Fund Operating Expenses for the
Fund would be ^.99% for Trust Shares of the Fund. For more complete
descriptions of these costs and expenses, see "Management of the Fund" and
"Description of Galaxy and Its Shares" in this Prospectus and the financial
-3-
<PAGE>
statements and notes incorporated by reference ^ into the Statement of
Additional Information.
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This Prospectus describes the Trust Shares in the Fund. Galaxy is
also authorized to issue an additional series of shares in the Fund^. As
described below under "Description of Galaxy and Its Shares," Trust Shares and
Retail Shares represent equal pro rata interests in the Fund except that ^(i)
Retail A Shares of the Fund bear the expenses incurred under Galaxy's
Shareholder Services Plan at an annual rate ^ not to exceed .15% of the
average daily net asset value of the Fund's outstanding Retail Shares
(currently, these fees are not paid with respect to the Fund's Trust Shares)
and (ii) Trust Shares and Retail A Shares bear differing transfer agency
expenses. Retail A Shares are offered under a separate prospectus.
The financial highlights presented below have been audited by
Coopers & Lybrand, L.L.P., Galaxy's independent accountants, whose report is
contained in Galaxy's Annual Report to Shareholders dated October 31, ^ 1995.
Such financial highlights should be read in conjunction with the financial
statements contained in the Annual Report to Shareholders and incorporated by
reference ^ into the Statement of Additional Information. Information in the
financial highlights for periods prior to the fiscal year ended October 31,
1994 reflect the investment results of both Trust Shares and Retail A Shares
of the Fund (Retail A Shares of the Fund were first offered during the fiscal
year ended October 31, 1992). More information about the performance of the
Fund is also contained in the Annual Report to Shareholders, which may be
obtained without charge by contacting Galaxy at its telephone numbers or
address provided above.
-4-
<PAGE>
INTERMEDIATE GOVERNMENT INCOME^ FUND 1
(FOR A SHARE 2 OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
Year Ended
October 31,
1995 1994 Year Ended October 31, 2
___________________ ________________________
Trust Shares 1993 1992
___________________
________________________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.68 $10.72 $10.83 $10.46
_____ ______ ______ ______
Income From Investment
Operations:
Net Investment Income 3,4 0.64 0.57 0.65 0.71
Net realized and ^
unrealized gain
^(loss) on investments 0.60 (1.03) 0.10 0.40
_____ ______ ______ ______
Total from Investment
Operations: 1.24 (0.46) 0.75 1.11
_____ ______ ______ ______
Less ^ Dividends:
Dividends from net
investment income (0.64) (0.56) (0.64) (0.74)
^ Dividends in excess
of net investment
income -- (0.01) (0.03) --
^ Dividends from net
realized capital
gains -- -- (0.19) --
^ Dividends in excess
of net realized
capital gains -- (0.01) -- --
_____ ______ ______ ______
Total ^ Dividends: (0.64) (0.58) (0.86) (0.74)
_____ ______ ______ ______
Net increase (decrease)
in net asset value 0.60 (1.04) (0.11) 0.37
_____ ______ ______ ______
Net Asset Value, End
of Period $10.28 $9.68 $10.72 $10.83
_____ ______ ______ ______
_____ ______ ______ ______
Total Return 13.18% (4.39%) 7.06% 10.95%
Ratios/Supplemental Data:
Net Assets, End of
Period (000's) ^ $186,037 $212,144 $447,359 $199,135
Ratios to average net
assets:
Net investment income
including
reimbursement/waiver 6.39% 5.61% 6.03% 6.52%
Operating ^ expenses
including
reimbursement/waiver 0.73% 0.75% 0.80% 0.80%
Operating expenses
excluding
reimbursement/waiver 0.94% 0.95% 1.00% 0.94%
Portfolio Turnover Rate 145% 124% 153% 103%
<CAPTION>
Period Ended
Year Ended October 31, 2 October 31,
1991 1990 1989 1988 1,2
__________________________________ ____________
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.73 $10.27 $10.40 $10.00
_____ ______ ______ ______
Income From Investment
Operations:
Net Investment Income 3,4 0.73 0.76 0.82 0.11
Net realized and ^
unrealized gain
^(loss) on investments 0.71 (0.56) 0.16 0.29
_____ ______ ______ ______
Total from Investment
Operations: 1.44 0.20 0.98 0.40
_____ ______ ______ ______
Less ^ Dividends:
Dividends from net
investment income (0.71) (0.74) (0.96) --
^ Dividends in excess
of net investment
income -- -- -- --
^ Dividends from net
realized capital
gains -- -- (0.15) --
^ Dividends in excess
of net realized
capital gains -- -- -- --
_____ ______ ______ ______
Total ^ Dividends: (0.71) (0.74) (1.11) --
_____ ______ ______ ______
Net increase (decrease)
in net asset value 0.73 (0.54) (0.13) 0.40
_____ ______ ______ ______
Net Asset Value, End
of Period $10.46 $9.73 $10.27 $10.40
_____ ______ ______ ______
_____ ______ ______ ______
Total Return 15.35% 2.06% 10.22% 3.90% 5
Ratios/Supplemental Data:
Net Assets, End of
Period (000's) $99,942 $80,645 $71,400 $58,318
Ratios to average net
assets:
Net investment income
including
reimbursement/waiver 7.25% 7.69% 8.19% 6.41% 6
Operating ^ expenses
including
reimbursement/waiver 0.96% 0.98% 0.99% 0.98% 6
Operating expenses
excluding
reimbursement/waiver 0.96% 0.96% 0.99% 1.00% 6
Portfolio Turnover Rate 150% 162% 112% 41% 5
</TABLE>
1 The Fund (formerly known as the Intermediate Bond Fund) commenced
operations on September 1, 1988.
2 For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail and
Trust Shares.
-5-
<PAGE>
3 Net investment income per share for Trust Shares before waiver of fees
by the Investment Adviser ^ and/or Administrator for the years ended
October 31, 1995 and 1994 were $0.62 and $0.54, respectively.
^ 4 Net investment income per share before waiver of fees by the Investment
Adviser and/or Administrator for the years ended October 31, 1993, 1992, 1990
and 1989 were $0.63, $0.70, $0.76, and $0.82, respectively.
5 Not Annualized.
6 Annualized.
-6-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek the highest level of
current income consistent with prudent risk of capital. Subject to this
objective, Fleet will consider the total rate of return on securities in
managing the Fund. The Fund will invest in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, in corporate debt
obligations such as bonds and debentures, obligations convertible into common
stock^ and "money market" instruments, such as bank obligations and commercial
paper, ^ and in obligations of supranational banks. Examples of those include
the International Bank for Reconstruction and Development ("World Bank"), the
Asian Development Bank and the InterAmerican Development Bank. Obligations of
supranational banks may be supported by appropriated but unpaid commitments of
their member countries and there is no assurance that those commitments will
be undertaken or met in the future. The Fund may also invest, from time to
time, in municipal securities. The purchase of municipal securities may be
advantageous when, as a result of prevailing economic, regulatory or other
circumstances, the performance of such securities, on a pretax basis, is
comparable to that of corporate or U.S. debt obligations. The Fund may also
enter into interest rate futures contracts to hedge against changes in market
values. See "Other Investment Policies." The Fund will not invest in common
stock, and any common stock received through the conversion of convertible
debt obligations will be sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest
substantially all of its assets in debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, debt obligations
rated, at the time of purchase, within the three highest ratings of S&P or
Moody's (or which, if unrated, are determined by the Investment Adviser to be
of comparable quality) and ^"money market" instruments such as those listed
below under "Other Investment Policies." Unrated securities will be
determined to be of comparable quality to rated debt obligations if, among
other things, other outstanding obligations of the issuers of such securities
are rated A or better. Notwithstanding the foregoing, under normal market and
economic conditions, at least 65% of the Fund's assets will be invested in ^
debt obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. When, in the opinion of the Investment Adviser, a
defensive investment posture is warranted, the Fund may invest temporarily and
without limitation in high quality, short-term "money market" instruments.
See Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.
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<PAGE>
In addition, the Fund may acquire obligations issued by Canadian
Provincial Governments. These obligations are similar to U.S. Municipal
Securities except that the income derived therefrom is fully subject to U.S.
Federal taxation. These instruments are denominated in either Canadian or
U.S. dollars and have an established over-the-counter market in the United
States.
The Investment Adviser expects that under normal market conditions
the Fund's portfolio securities will have an average weighted maturity of
three to ten years.
The value of the Fund's portfolio securities will generally vary
inversely with changes in prevailing interest rates. See "Other Investment
Policies" below for information regarding additional investment policies of
the Fund.
The Investment Adviser will use its best efforts to achieve the
Fund's investment objective, although its achievement cannot be assured. The
investment objective of the Fund may not be changed without the approval of
the holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Except as noted below under "Investment Limitations," the
Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Fund to be a complete
investment program.
OTHER INVESTMENT POLICIES
U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS
The Fund may, in accordance with its investment policies, invest
from time to time in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and in ^"money market" instruments,
including bank obligations and commercial paper.
Obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities include U.S. Treasury securities, which differ
only in their interest rates, maturities and time of issuance: Treasury Bills
have initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of more than 10 years. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of the Government
National Mortgage Association, are supported by the full faith and credit of
the U.S. Treasury; others, such as those of the Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the
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<PAGE>
U.S. Government to purchase the agency's obligations; still others, such as
those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is
not obligated to do so by law. Some of these instruments may be variable or
floating rate instruments.
Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable time deposits issued for a
definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System or is insured by the Federal Deposit
Insurance Corporation, or by a savings and loan association or savings bank
which is insured by the Federal Deposit Insurance Corporation. Bank
obligations also include U.S. dollar-denominated obligations of foreign
branches of U.S. banks or of U.S. branches of foreign banks, all of the same
type as domestic bank obligations. Investment in bank obligations is limited
to the obligations of financial institutions having more than $1 billion in
total assets at the time of purchase.
Domestic and foreign banks are subject to extensive but different
government regulation which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
to finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of
U.S. branches of foreign banks may subject the Fund to additional risks,
including future political and economic developments, the possible imposition
of withholding taxes on interest income, possible seizure or nationalization
of foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks
may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting, and recordkeeping standards than those
applicable to domestic branches of U.S. banks. The Fund will invest in the
obligations of U.S. branches of foreign banks or foreign branches of U.S.
banks only when the Investment Adviser believes that the credit risk with
respect to the instrument is minimal.
Commercial paper may include variable and floating rate instruments
which are unsecured instruments that permit the indebtedness thereunder to
vary. Variable rate instruments provide for periodic adjustments in the
interest rate. Floating rate instruments provide for automatic adjustment of
the interest rate whenever some other specified interest rate changes. Some
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<PAGE>
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, the Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell the instrument to the third
party. In the event that an issuer of a variable or floating rate obligation
defaulted on its payment obligation, the Fund might be unable to dispose of
the note because of the absence of a secondary market and could, for this or
other reasons, suffer a loss to the extent of the default. The Fund may also
purchase Rule 144A securities. See "Investment Limitations."
TYPES OF MUNICIPAL SECURITIES
The two principal classifications of municipal securities which may
be held by the Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Private activity bonds held by the Fund
are in most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of such private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" securities,
which are normally issued by special purpose public authorities. If the
issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
VARIABLE AND FLOATING RATE MUNICIPAL SECURITIES
Municipal securities purchased by the Fund may include rated and
unrated variable and floating rate tax-exempt instruments. There may be no
active secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to the Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days' notice and do not have an active trading market) that
are acquired by the Fund
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<PAGE>
are subject to the 10% limit described in Investment
Limitation No. 3 under "Investment Limitations" in this Prospectus.
Repurchase and Reverse Repurchase Agreements
The Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price
("repurchase agreements"). Repurchase agreements will be entered into only
with financial institutions such as banks and broker/dealers which are deemed
to be creditworthy by the Investment Adviser under guidelines approved by
Galaxy's Board of Trustees. The Fund will not enter into repurchase
agreements with Fleet or any of its affiliates. Securities subject to
repurchase agreements may bear maturities exceeding one year. Unless a
repurchase agreement has a remaining maturity of seven days or less or may be
terminated on demand by notice of seven days or less, the repurchase agreement
will be considered an illiquid security and will be subject to the 10% limit
described in Investment Limitation No. 3 under "Investment Limitations" in
this Prospectus.
The seller under a repurchase agreement will be required to maintain
the value of the securities which are subject to the agreement and held by the
Fund at not less than the agreed upon repurchase price. If the seller
defaulted on its repurchase obligation, the Fund would suffer a loss to the
extent that the proceeds from a sale of the underlying securities (including
accrued interest) were less than the repurchase price (including accrued
interest) under the agreement. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities by
the Fund might be delayed pending court action.
The Fund may also borrow funds for temporary purposes by selling
portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date
and price ("reverse repurchase agreements"). Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Fund may
decline below the repurchase price. The Fund would pay interest on amounts
obtained pursuant to a reverse repurchase agreement.
SECURITIES LENDING
The Fund may lend its portfolio securities to financial institutions
such as banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans
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<PAGE>
will generally be short-term, will be made only to borrowers deemed by the
Investment Adviser to be of good standing and only when, in the Investment
Adviser's judgment, the income to be earned from the loan justifies the
attendant
risks. The Fund currently intends to limit the lending of its portfolio
securities so that, at any given time, securities loaned by the Fund represent
not more than one-third of the value of its total assets.
INVESTMENT COMPANY SECURITIES
The Fund may invest in securities issued by other investment
companies which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. Investments in other investment companies will cause
the Fund (and, indirectly, the Fund's shareholders) to bear proportionately
the costs incurred in connection with the investment companies' operations.
Securities of other investment companies will be acquired by the Fund within
the limits prescribed by the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than
5% of the value of its total assets will be invested in the securities of any
one investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of other investment companies
as a group; (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund; and (d) not more than 10% of the
outstanding voting stock of any one closed-end investment company will be
owned in the aggregate by the Fund, other investment portfolios of Galaxy, and
any other investment companies advised by the Investment Adviser. Any change
by the Fund in the future with respect to its policies concerning investments
in securities issued by other investment companies will be made only in
accordance with the requirements of the 1940 Act.
INTEREST RATE FUTURES CONTRACTS
The Fund may enter into contracts (both purchases and sales) which
provide for the future delivery of fixed-income securities (commonly known as
interest rate futures contracts). The Fund will not engage in futures
transactions for speculation, but only to hedge against changes in the market
values of securities which the Fund holds or intends to purchase. The Fund
will engage in futures transactions only to the extent permitted by the
Commodity Futures Trading Commission ("CFTC") and the Securities and Exchange
Commission. The purchase of futures instruments in connection with securities
which the Funds intend to purchase will require an amount of cash and/or U.S.
Government obligations, equal to the market value of the outstanding futures
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<PAGE>
contracts, to be deposited in a segregated account to collateralize the
position and thereby insure that the use of such futures is unleveraged. The
Fund will limit its hedging transactions in futures contracts so that,
immediately after any such transaction, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on which the
futures contract is traded does not exceed 5% of the Fund's total assets after
taking into account any unrealized profits and unrealized losses on the Fund's
open contracts. In addition, no more than one-third of the Fund's total
assets may be covered by such contracts.
Transactions in futures as a hedging device may subject the Fund to
a number of risks. Successful use of futures by the Fund is subject to the
ability of the Investment Adviser to predict correctly movements in the
direction of the market. In addition, there may be an imperfect correlation,
or no correlation at all, between movements in the price of futures contracts
and movements in the price of the instruments being hedged. There is no
assurance that a liquid market will exist for any particular futures contract
at any particular time. Consequently, the Fund may realize a loss on a
futures transaction that is not offset by a favorable movement in the price of
securities which the Fund holds or intends to purchase or may be unable to
close a futures position in the event of adverse price movements. Additional
information concerning futures transactions is contained in Appendix B to the
Statement of Additional Information.
WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS
The Fund may purchase eligible securities on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. The
Fund may also purchase or sell eligible securities on a "delayed settlement"
basis. When-issued and forward commitment transactions, which involve a
commitment by the Fund to purchase or sell particular securities with payment
and delivery taking place at a future date (perhaps one or two months later),
permit the Fund to lock in a price or yield on a security it owns or intends
to purchase, regardless of future changes in interest rates. Delayed
settlement describes settlement of a securities transaction in the secondary
market which will occur sometime in the future. When-issued, forward
commitment and delayed settlement transactions involve the risk, however, that
the yield or price obtained in a transaction may be less favorable than the
yield or price available in the market when the securities delivery takes
place. It is expected that forward commitments, when-issued purchases and
delayed settlements will not exceed 25% of the value of the Fund's total
assets absent unusual market conditions. In the event the Fund's forward
commitments, when-issued purchases and delayed
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<PAGE>
settlements ever exceeded 25% of the value of its total assets, the Fund's
liquidity and the ability of the Investment Adviser to manage the Fund may be
adversely affected. The Fund does not intend to engage in when-issued
purchases, forward commitments and delayed settlements for speculative
purposes, but only in furtherance of their investment objectives.
ASSET-BACKED SECURITIES
The Fund may purchase asset-backed securities, which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another. Assets generating such payments will consist of such instruments as
motor vehicle installment purchase obligations, credit card receivables and
home equity loans. Payment of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with entities issuing the securities.
The estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of the asset-backed security, will be
primarily a function of current market rates, although other economic and
demographic factors will be involved. The Fund will not invest more than 10%
of its total assets in asset-backed securities. See "Asset-Backed Securities"
in the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES
The Fund may invest in mortgage-backed securities that represent
pools of mortgage loans assembled for sale to investors by various
governmental agencies and government-related organizations such as the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC"). Mortgage-backed securities provide a monthly payment consisting
of interest and principal payments. Additional payment may be made out of
unscheduled repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that
may be incurred. Prepayments of principal on mortgage-backed securities may
tend to increase due to refinancing of mortgages as interest rates decline.
To the extent that the Fund purchases mortgage-backed securities at a premium,
mortgage foreclosures and prepayments of principal by mortgagors (which may be
made at any time without penalty) may result in some loss of the Fund's
principal investment to the extent of the premium paid. The yield of the Fund
from investing in mortgaged-backed securities may be affected by reinvestment
of prepayments at higher or lower rates than the original investment.
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<PAGE>
Other mortgage-backed securities are issued by private issuers,
generally originators of and investors in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities. These private mortgage-backed securities may be
supported by U.S. Government mortgage-backed securities or some form of non-
government credit enhancement. Mortgage-backed securities have either fixed
or adjustable interest rates. The rate of return on mortgage-backed
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline; as a result, when
interest rates decline, holders of these securities normally do not benefit
from appreciation in market value to the same extent as holders of other non-
callable debt securities. In addition, like other debt securities, the values
of mortgage-related securities, including government and government-related
mortgage pools, generally will fluctuate in response to market interest rates.
To the extent that collateralized mortgage obligations are considered to be
investment companies, investments in such obligations will be subject to the
percentage limitations described under "Investment Company Securities" above.
STRIPPED OBLIGATIONS
To the extent consistent with its investment objective, the Fund may
purchase Treasury receipts and other "stripped" securities that evidence
ownership in either the future interest payments or the future principal
payments on U.S. Government and other obligations. These participations,
which may be issued by the U.S. Government or by private issuers such as banks
and other institutions are issued at their "face value," and may include
stripped mortgage-backed securities ("SMBS"), which are derivative multi-class
mortgage securities. Stripped securities, particularly SMBS, may exhibit
greater price volatility than ordinary debt securities because of the manner
in which their principal and interest are returned to investors.
SMBS are usually structured with two or more classes that receive
different proportions of the interest and principal distributions from a pool
of mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying
obligations experience greater than anticipated prepayments of principal, the
Fund may fail to fully recoup its initial investment in these securities. The
market value of the class consisting entirely of principal payments generally
is extremely volatile in response to changes in interest rates. The yields on
a class of SMBS that receives all or most of the interest are generally higher
than prevailing
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<PAGE>
market yields on other mortgage-backed obligations because
their cash flow patterns are more volatile and there is a greater risk that
the initial investment will not be fully recouped. SMBS which are not issued
by the U.S. Government (or a U.S. Government agency or instrumentality) are
considered illiquid. Obligations issued by the U.S. Government may be
considered liquid under guidelines established by the Trust's Board of
Trustees if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of net
asset value per share.
GUARANTEED INVESTMENT CONTRACTS
The Fund may invest in guaranteed investment contracts ("GICs")
issued by United States and Canadian insurance companies. Pursuant to GICs,
the Fund makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation
of the issuing insurance company and not a separate account. The purchase
price paid for a GIC becomes part of the general assets of the insurance
company, and the contract is paid from the company's general assets. The Fund
will only purchase GICs that are issued or guaranteed by insurance companies
that at the time of purchase are rated at least AA by S&P or receive a similar
high quality rating from a nationally recognized service which provides
ratings of insurance companies. GICs are considered illiquid securities and
will be subject to the Fund's 10% limitation on such investments, unless there
is an active and substantial secondary market for the particular instrument
and market quotations are readily available.
BANK INVESTMENT CONTRACTS
The Fund may invest in bank investment contracts ("BICs") issued by
banks that meet the quality and asset size requirements for banks described
above under ^"U.S. Government Obligations and Money Market Instruments."
Pursuant to BICs, cash contributions are made to a deposit account at the bank
in exchange for payments at negotiated, floating or fixed interest rates. A
BIC is a general obligation of the issuing bank. BICs are considered illiquid
securities and will be subject to the Fund's 10% limitation on such
investments, unless there is an active and substantial secondary market for
the particular instrument and market quotations are readily available.
PORTFOLIO TURNOVER
The Fund may sell a portfolio investment soon after its acquisition
if the Investment Adviser believes that such a disposition is consistent with
the Fund's investment objective. Portfolio investments may be sold for a
variety of reasons, such
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<PAGE>
as a more favorable investment opportunity or other circumstances bearing on
the desirability of continuing to hold such investments. The rate of portfolio
turnover will not be a limiting factor in making portfolio decisions. A high
rate of portfolio turnover may result in the realization of substantial capital
gains and involves correspondingly greater transaction costs. To the extent
that net capital gains are realized, distributions derived from such gains are
treated as ordinary income for Federal income tax purposes. See "Financial
Highlights" and "Taxes -- Federal."
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental
policy and may not be changed with respect to the Fund without the affirmative
vote of the holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."
The Fund may not:
1. Make loans, except that (i) the Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, and may
enter into repurchase agreements with respect to portfolio securities, and
(ii) the Fund may lend portfolio securities against collateral consisting of
cash or securities which are consistent with the Fund's permitted investments,
where the value of the collateral is equal at all times to at least 100% of
the value of the securities loaned.
2. Borrow money or issue senior securities, except from domestic
banks for temporary purposes and then in amounts not in excess of 10% of the
value of its total assets at the time of such borrowing (provided that the
Fund may borrow pursuant to reverse repurchase agreements in accordance with
its investment policies and in amounts not in excess of 10% of the value of
its total assets at the time of such borrowing); or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of
the value of the Fund's total assets at the time of such borrowing. The Fund
will not purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
3. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase
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<PAGE>
agreements with remaining maturities in excess of seven days, time deposits
with
maturities in excess of seven days, restricted securities, non-negotiable time
deposits and other securities which are not readily marketable.
4. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if immediately after such purchase more than 5% of the
value of its total assets would be invested in such issuer, except that up to
25% of the value of its total assets may be invested without regard to this
limitation.
In addition, the Fund may not purchase any securities which would
cause 25% or more of the value of the Fund's total assets at the time of
purchase to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry; provided, however
that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, (b)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents, and (c) utilities will be classified according to
their services. (For example, gas, gas transmission, electric and gas,
electric and telephone each will be considered a separate industry.)
The Securities and Exchange Commission has adopted Rule 144A which
allows for a broader institutional trading market for securities otherwise
subject to restrictions on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the
Securities Act of 1933 for resales of certain securities to qualified
institutional buyers. The Fund's investment in Rule 144A securities could
have the effect of increasing the level of illiquidity of the Fund during any
period that qualified institutional buyers were no longer interested in
purchasing these securities. For purposes of the 10% limitation on purchases
of illiquid instruments described under Investment Limitation No. 3 above,
Rule 144A securities will not be considered illiquid if the Investment Adviser
has determined, in accordance with guidelines established by the Board of
Trustees, that an adequate trading market exists for such securities.
If a percentage limitation is satisfied at the time of investment, a
later increase in such percentage resulting from a change in the value of the
Fund's portfolio securities will not constitute a violation of the limitation.
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<PAGE>
PRICING OF SHARES
Net asset value per share of the Fund is determined as of the close
of regular trading hours on the New York Stock Exchange (the "Exchange"),
currently 4:00 p.m. (Eastern Time). The net asset value per share is
determined on each day on which the Exchange is open for trading. Currently,
the holidays which Galaxy observes are New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Net asset value per share for purposes of pricing sales and
redemptions is calculated separately for each series of shares by dividing the
value of all securities and other assets attributable to a particular series
of shares of the Fund, less the liabilities attributable to the shares of that
series of the Fund, by the number of outstanding shares of that series of the
Fund.
The Fund's assets are valued for purposes of pricing sales and
redemptions by an independent pricing service ("Service") approved by Galaxy's
Board of Trustees. When, in the judgment of the Service, quoted bid prices
for portfolio securities are readily available and are representative of the
bid side of the market, these investments are valued at the mean between
quoted bid prices (as obtained by the Service from dealers in such securities)
and asked prices (as calculated by the Service based upon its evaluation of
the market for such securities). Other investments are carried at fair value
as determined by the Service, based on methods which include consideration of
yields or prices of bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. The
Service may also employ electronic data processing techniques and matrix
systems to determine value. Short-term securities are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming
a constant amortization to maturity of the difference between the principal
amount due at maturity and cost.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by Galaxy's
distributor, 440 Financial Distributors, Inc. (the "Distributor"), a wholly-
owned subsidiary of ^ First Data Investor Services Group, Inc. (formerly known
as The Shareholder Services Group, Inc. d/b/a 440 Financial). The Distributor
is a registered broker/dealer with principal offices located at ^ 290 Donald
Lynch Boulevard, Marlboro, Massachusetts ^ 01752.
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PURCHASE OF SHARES
The Trust Shares described in this Prospectus are sold to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of Fleet Financial Group, Inc. and to participants in employer-
sponsored defined contribution plans ("Institutions"). Trust Shares sold to
such investors ("Customers") will be held of record by Institutions. The
Institution is responsible for transmitting to the Distributor orders for
purchases of Trust Shares and for wiring required funds in payment to Galaxy's
custodian on a timely basis. The Distributor is responsible for transmitting
such orders to Galaxy's transfer agent for execution. Beneficial ownership of
Trust Shares will be recorded by the Institution and reflected in the account
statements it provides to its Customers. Confirmations of purchases and
redemptions of Trust Shares will be sent to the appropriate Institution.
Purchases of Trust Shares will be effected only on days on which the
Distributor, Galaxy's custodian and the purchasing Institution are open for
business ("Business Days").
A purchase order for Trust Shares received by the Distributor on a
Business Day prior to the close of regular trading hours on the Exchange
(currently, 4:00 p.m. Eastern Time) will be priced at the net asset value
determined on that day, provided that Galaxy's custodian receives the purchase
price in Federal funds or other immediately available funds prior to 4:00 p.m.
on the following Business Day, at which time the order will be executed. If
funds are not received by such date and time, the order will not be accepted
and notice thereof will be given promptly to the Institution which submitted
the order. Payments for orders which are not received or accepted will be
returned after prompt inquiry to the sending Institution. If an Institution
accepts a purchase order from its Customer on a non-Business Day, the order
will not be executed until it is received and accepted by the Distributor on a
Business Day in accordance with the foregoing procedures.
Galaxy reserves the right to reject any purchase order, in whole or
in part.
The issuance of Trust Shares is recorded on the books of the Fund
and share certificates will not be issued.
Customers may purchase Trust Shares through procedures established
by Institutions in connection with the requirements of their Customer
accounts. Such accounts may include discretionary investment management
accounts, custodial accounts, agency accounts and different types of tax-
advantaged accounts (including defined contribution plans). Investors should
contact their Institution (or, in the case of employee plans, their employer)
for further information concerning the types of
-20-
<PAGE>
eligible Customer accounts and the related purchase and redemption procedures.
Although Galaxy does not impose any minimum initial or subsequent
investment requirement with respect to Trust Shares, Institutions or employers
may impose such requirements on the accounts maintained by its Customers, and
may also require that Customers maintain minimum account balances with respect
to Trust Shares.
Trust Shares of the Fund may also be available for purchase through
different types of retirement plans offered by the Institutions to its
Customers. Information pertaining to such plans is available directly from
the Institution.
REDEMPTION OF SHARES
Customers may redeem all or part of their Trust Shares in accordance
with procedures governing their accounts at their Institution. It is the
responsibility of the Institution to transmit redemption orders to the
Distributor and to credit its Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments is imposed by
Galaxy, although the Institution may charge its Customers' accounts for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institution.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by the Distributor.
Payment for redemption orders received by the Distributor on a Business Day
will normally be wired the following Business Day to the Institution. Payment
for redemption orders which are received on a non-Business Day will normally
be wired to the Institution on the next Business Day. However, in both cases
Galaxy reserves the right to wire redemption proceeds within seven days after
receiving the redemption order if, in its judgment, an earlier payment could
adversely affect the Fund.
Galaxy may require any information reasonably necessary to ensure
that a redemption has been duly authorized.
The Fund reserves the right to redeem shares in any account at their
net asset value involuntarily, upon 60 days' written notice, if the value of
the account is less than $250 as a result of redemptions.
-21-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Fund are declared daily
and paid monthly. Net realized capital gains are distributed at least
annually.
Dividends and distributions will be paid in cash. Customers may
elect to have their dividends reinvested in additional Trust Shares of the
Fund at the net asset value of such shares on the payment date. Such
election, or any revocation thereof, must be communicated in writing by an
Institution on behalf of Customers to Galaxy's transfer agent and will become
effective with respect to dividends paid after its receipt. The crediting and
payment of dividends to Customers will be in accordance with the procedures
governing such Customers' accounts at their Institution.
TAXES
FEDERAL
The Fund qualified during its last taxable year and intends to
continue to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). Such qualification generally
relieves the Fund of liability for Federal income taxes to the extent the
Fund's earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least 90% of its investment company taxable
income and 90% of its tax-exempt interest income (if any) net of certain
deductions for such year. In general, the Fund's investment company taxable
income will be its taxable income, including dividends, interest and short-
term capital gains (the excess of net short-term capital gain over net long-
term capital loss), subject to certain adjustments and excluding the excess of
any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. The policy of the Fund is to distribute
as dividends substantially all of its investment company taxable income and
any net tax-exempt interest income each year. Such dividends will be taxable
as ordinary income to the Fund's shareholders who are not currently exempt
from Federal income taxes, whether such dividends are received in cash or
reinvested in additional shares. (Federal income taxes for distributions to
an IRA or a qualified retirement plan are deferred under the Code.) It is
anticipated that no part of any distribution will qualify for the dividends
received deduction for corporations.
-22-
<PAGE>
Distribution by the Fund of the excess of its net long-term capital
gain over its net short-term capital loss is taxable to shareholders as long-
term capital gain, regardless of how long the shareholder has held shares and
whether such gains are received in cash or reinvested in additional
shares. Such distributions are not eligible for the dividends received
deduction.
Dividends declared in October, November or December of any year
which are payable to shareholders of record on a specified date in such months
will be deemed to have been received by shareholders and paid by the Fund on
December 31 of such year if such dividends are actually paid during January of
the following year.
If you are considering buying shares of the Fund on or just before
the record date of a dividend, you should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital,
generally will be taxable to you.
A taxable gain or loss may be realized by a shareholder upon
redemption, transfer or exchange of Fund shares depending upon the tax basis
of such shares and their price at the time of redemption, transfer or
exchange.
The foregoing summarizes some of the important Federal tax
considerations generally affecting the Fund and its shareholders and is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Fund should consult their tax advisers with specific
reference to their own tax situation. Shareholders will be advised annually
as to the Federal income tax consequences of distributions made each year.
STATE AND LOCAL
Investors are advised to consult their tax advisers concerning the
application of state and local taxes, which may have different consequences
than those of the Federal income tax law described above.
MANAGEMENT OF THE FUND
The business and affairs of the Funds are managed under the
direction of Galaxy's Board of Trustees. The Funds' Statement of Additional
Information contains the names of and general background information
concerning the Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at ^ 50 Kennedy Plaza, 2nd Floor,
Providence, Rhode Island 02903, serves as the
-23-
<PAGE>
Investment Adviser to the Funds. Fleet, which commenced operations in 1984,
also provides investment management and advisory services to Fleet Trust
Company
and other individual and institutional clients, and manages the other
investment
portfolios of Galaxy: the Money Market, Government, Tax-Exempt, U.S. Treasury,
Connecticut Municipal Money Market, Massachusetts Municipal Money Market,
Institutional Treasury Money Market, Equity Value, Equity Growth, Equity
Income,
International Equity, Small Company Equity, Asset Allocation, Growth and
Income, Small Cap Value, Short-Term Bond, Corporate Bond, High Quality Bond,
Tax-Exempt Bond, New York Municipal Bond, Connecticut Municipal Bond,
Massachusetts Municipal Bond and Rhode Island Municipal Bond Funds. Fleet is
an indirect wholly-owned subsidiary of Fleet Financial Group, Inc., a
registered bank holding company with total assets of approximately ^ $____
billion at ^ ___________, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and
in accordance with the Fund's investment policies, Fleet manages the Fund,
makes decisions with respect to and places orders for all purchases and sales
of its portfolio securities and maintains related records.
The Fund's portfolio manager, Bruce R. Barton, is primarily
responsible for the day-to-day management of the Fund's investment portfolio.
Mr. Barton, a Senior Vice President, has been with Fleet and its predecessors
since 1984 and has been the Fund's portfolio manager since its inception.
For the services provided and expenses assumed with respect to the
Fund, the Investment Adviser is entitled to receive advisory fees, computed
daily and paid monthly, at an annual rate of .75% of the average daily net
assets of the Fund. The fee for the Fund is higher than fees paid by most
other mutual funds, although the Board of Trustees of Galaxy believes that it
is not higher than the average advisory fees paid by funds with similar
investment objectives and policies.
Fleet may from time to time, in its discretion, waive advisory fees
payable by the Fund in order to help maintain a competitive expense ratio and
may from time to time allocate a portion of its advisory fees to Fleet Trust
Company or other subsidiaries of Fleet Financial Group, Inc. in consideration
for administrative and other services which they provide to beneficial
shareholders. Fleet is currently waiving a portion of the advisory fees
payable to it by the Fund so that it is entitled to receive an advisory fee at
the annual rate of .55% of the Fund's average daily net assets, but Fleet may
in its discretion revise or discontinue this waiver at any time. For the
fiscal year ended October 31, ^ 1995, Fleet received advisory fees (after fee
waivers) at the effective rate of .53% of the Fund's average daily net assets.
-24-
<PAGE>
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently prohibit a bank holding
company registered under the Bank Holding Company Act of 1956, as amended, or
any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as Trust Shares of the Fund, but do not prohibit such a bank holding company
or its affiliates or banks generally from acting as investment adviser,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of customers. The
Investment Adviser, custodian and Institutions which have agreed to provide
shareholder support services that are banks or bank affiliates are subject to
such banking laws and regulations. Should legislative, judicial, or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Fund, Galaxy might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operation. It is anticipated, however, that any resulting change in
the Fund's method of operation would not affect the Fund's net asset value per
share or result in financial loss to any shareholder. State securities laws
on this issue may differ from federal law and banks and financial institutions
may be required to register as dealers pursuant to state law.
ADMINISTRATOR
^ First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), located
at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as the
Fund's
administrator. ^ First Data is a wholly-owned subsidiary of ^ First Data
Corporation.
^ First Data generally assists the Fund in its administration and
operation. ^ First Data also serves as administrator to the other portfolios
of Galaxy. For the services provided to the Fund, ^ First Data is entitled to
receive administration fees, computed daily and paid monthly, at the annual
rate of .09% of the first $2.5 billion of the combined average daily net
assets of the Fund and the other portfolios offered by Galaxy (collectively,
the "Portfolios"), .085% of the next $2.5 billion of combined average daily
net assets and .08% of combined average daily net assets over $5 billion. In
addition, ^ First Data also receives a separate annual fee from each Portfolio
for certain fund accounting services. From time to time, ^ First Data may
waive all or a portion of the administration fee payable to it by the Fund,
either voluntarily
-25-
<PAGE>
or pursuant to applicable statutory expense limitations. ^
For the fiscal year ended October 31, ^ 1995, the Fund paid administration
fees at the effective rate of ^.088% of the Fund's average daily net assets.
DESCRIPTION OF GALAXY AND ITS SHARES
Galaxy was organized as a Massachusetts business trust on March 31,
1986. Galaxy's Declaration of Trust authorized the Board of Trustees to
classify or reclassify any unissued shares into one or more classes or series
of shares. Pursuant to such authority, the Board of Trustees has authorized
the issuance of an unlimited number of shares in each of two series in the
Fund as follows: Class D shares (Trust Shares) and Class D - Series 1 shares
(Retail A Shares), both series representing interests in the Fund. The Fund
is classified as a diversified company under the 1940 Act. The Board of
Trustees has also authorized the issuance of additional classes and series of
shares representing interests in other portfolios of Galaxy. For information
regarding the Fund's Retail Shares and these other portfolios, which are
offered through separate prospectuses, contact the Distributor at (800) 628-
0414.
Shares of each series in the Fund bear their pro rata portion of all
operating expenses paid by the Fund except as follows. Holders of the Fund's
Retail A Shares bear the fees that are paid to Institutions under Galaxy's
Shareholder Services Plan described below. Currently, these payments are not
made with respect to the Fund's Trust Shares ^. In addition, shares of each
series in the Fund bear differing transfer agency expenses. Standardized
yield and total return quotations are computed separately for each series of
shares. ^ The differences in the expenses paid by the respective series will
affect their performance.
^ Retail A Shares of the Fund are sold ^ with a maximum front-end
sales charge of 3.75% and have certain exchange and other privileges which are
not available with respect to Trust Shares.
Each share of Galaxy (irrespective of series designation) has a par
value of $.001 per share, represents an equal proportionate interest in the
related Fund with other shares of the same class (irrespective of series
designation), and is entitled to such dividends and distributions out of the
income earned on the assets belonging to such Fund as are declared in the
discretion of Galaxy'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
-26-
<PAGE>
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.
Galaxy is not required under Massachusetts law to hold annual
shareholder meetings and intends to do so only if required by the 1940 Act.
Shareholders have the right to remove Trustees.
SHAREHOLDER SERVICES PLAN
Galaxy intends to enter into servicing agreements with Institutions
(including Fleet Bank and its affiliates) pursuant to which Institutions will
render certain administrative and support services to Customers who are the
beneficial owners of Retail A Shares. Such services will be provided to
Customers who are the beneficial owners of Retail A Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail A Shares. In consideration for
payment of up to .15% (on an annualized basis) of the average daily net asset
value of Retail A Shares owned beneficially by their Customers, Institutions
may provide one or more of the following services to such Customers:
aggregating and processing purchase and redemption requests and placing net
purchase and redemption orders with the Distributor; processing dividend
payments from the Fund; providing sub-accounting with respect to Retail A
Shares or the information necessary for sub-accounting; and providing periodic
mailings to Customers. In consideration for payment of up to a separate .15%
(on an annualized basis) of the average daily net asset value of Retail A
Shares owned beneficially by their Customers, Institutions may provide one or
more of these additional services to such Customers: providing Customers with
information as to their positions in Retail A Shares; responding to Customer
inquiries; and providing a service to invest the assets of Customers in Retail
A Shares. These services are described more fully in Galaxy's Statement of
Additional Information under "Shareholder Services Plan."
Although the Shareholder Services Plan has been approved with
respect to both Retail A Shares and Trust Shares of the Fund, as of the date
of this Prospectus, Galaxy intends to enter into servicing agreements under
the Shareholder Services Plan only with respect to Retail A Shares of the
Fund, and to limit the payment under these servicing agreements for each Fund
to no more than .15% (on an annualized basis) of the average daily net asset
value of the Retail A Shares of the Fund beneficially owned by Customers of
Institutions. Galaxy understands that Institutions may charge fees to their
Customers who are owners of Retail A Shares in connection with their accounts
with such institutions. After such fees would be in addition to any amounts
which may be received by an Institution
-27-
<PAGE>
under the Shareholder Services Plan. Under the terms of each servicing
agreement entered into with Galaxy, Institutions are required to provide their
Customers with a schedule of any fees that they may charge in connection with
Customer investments in Retail A Shares.
AFFILIATE AGREEMENT FOR SUB-ACCOUNT SERVICES
^ First Data has entered into an agreement with Fleet Trust Company,
an affiliate of the Investment Adviser, pursuant to which Fleet Trust Company
performs certain sub-account and administrative functions ("Sub-Account
Services") on a per account basis with respect to Trust Shares of the Fund
held by defined contribution plans, including: maintaining records reflecting
separately with respect to each plan participant's sub-account all purchases
and redemptions of Trust Shares and the dollar value of Trust Shares in each
sub-account; crediting to each participant's sub-account all dividends and
distributions with respect to that sub-account; and transmitting to each
participant a periodic statement regarding the sub-account as well as any
proxy materials, reports and other material Fund communications. Fleet Trust
Company is compensated by ^ First Data for the Sub-Account Services and in
connection therewith the transfer agency fees payable by Trust Shares of the
Fund to ^ First Data have been increased by an amount equal to these fees.
In substance, therefore, the holders of Trust Shares of the Fund indirectly
bear these fees.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A., located at 1 Chase Manhattan Plaza,
New York, New York 10081, a wholly-owned subsidiary of The Chase Manhattan
Corporation, serves as the custodian of the Fund's assets, and ^ First Data
Investor Services Group, Inc. (formerly known as The Shareholder Services
Group, Inc. d/b/a 440 Financial) ("First Data"), a wholly-owned subsidiary of
^ First Data Corporation, serves as the Funds' transfer and dividend
disbursing agent. Services performed by both entities for the Fund are
described in the Statement of Additional Information. Communications to ^
First Data should be directed to ^ First Data at P.O. Box 15108, 4400 Computer
Drive, Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and ^ First Data bear all expenses in
connection with the performance of their services for the Fund. Galaxy bears
the expenses incurred in the Fund's operations. Such expenses include taxes;
interest; fees (including fees paid to its trustees and officers who are not
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<PAGE>
affiliated with ^ First Data); SEC fees; state securities qualification fees;
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders; advisory, administration, fund
accounting and custody fees; charges of the transfer agent and dividend
disbursing agent; certain insurance premiums; outside auditing and legal
expenses; costs of independent pricing services; costs of shareholders'
reports and shareholder meetings; and any extraordinary expenses. The Fund
also pays for brokerage fees and commissions in connection with the purchase
of portfolio securities.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders,
the performance and yields of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives and to stock or other
relevant bond indexes or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the performance of the Fund may be compared to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds.
Performance and yield data as reported in national financial
publications including, but not limited to, MONEY MAGAZINE, FORBES, BARRON'S,
THE WALL STREET JOURNAL and THE NEW YORK TIMES, or publications of a local or
regional nature, may also be used in comparing the performance and yields of
the ^ Fund. The performance and yield data ^ will be calculated separately
for Trust Shares and Retail A Shares of the Fund.
The standard yield is computed by dividing the Fund's average daily
net investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net asset value per share on the last
day of the period, and annualizing the result on a semi-annual basis. The
Fund may also advertise its "effective yield" which is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested.
The Fund may also advertise its performance using "average annual
total return" over various periods of time. Such total return figures reflect
the average percentage change in the value of an investment in the Fund from
the beginning date of the measuring period to the end of the measuring period.
Average total return figures will be given for the most recent one-, five-
and ten-year periods (if applicable), and may be given for other periods as
well, such as from the commencement of the Fund's operations, or on a year-by-
year basis. The Fund may also
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<PAGE>
use "aggregate total return" figures for various periods, representing the
cumulative change in the value of an investment in the Fund for the specified
period. Both methods of calculating total return assume that dividend and
capital gain distributions made by the Fund during the period are reinvested in
Fund shares.
Performance and yields of the Fund will fluctuate and any quotation
of performance or yield should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance and yield are generally functions of kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses, and market conditions.
Any additional fees charged by Institutions with respect to accounts
of Customers that have invested in Trust Shares of the Fund will not be
included in calculations of yield and performance.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing
the Fund's investment operations and annual financial statements audited by
independent certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of
the outstanding shares" of ^ either Galaxy, the Fund or a particular
investment portfolio means, with respect to the approval of an investment
advisory agreement, distribution plan or a change in an investment objective
or fundamental investment policy, the affirmative vote of the holders of the
lesser of (a) more than 50% of the outstanding shares of the Fund or Galaxy,
or (b) 67% or more of the shares of the Fund or Galaxy present at a meeting if
more than 50% of the outstanding shares of the Fund or Galaxy are represented
at the meeting in person or by proxy.
The portfolio manager of the Fund and other investment professionals
may from time to time discuss in advertising, sales literature or other
material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include but are not
limited to the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and
-30-
<PAGE>
capital markets; investment strategies and techniques; investment products;
and tax, retirement and investment planning.
-31-
<PAGE>
TRUST
THE GALAXY FUND
High Quality Bond Fund
Prospectus
March 1, ^ 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR
BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
______________________
TABLE OF CONTENTS
PAGE
____
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVE AND POLICIES 6
In General 6
Other Investment Policies 7
INVESTMENT LIMITATIONS 16
PRICING OF SHARES 18
HOW TO PURCHASE AND REDEEM SHARES 19
Distributor 19
Purchase of Shares 19
Redemption of Shares 20
DIVIDENDS AND DISTRIBUTIONS 21
TAXES 21
Federal 21
State and Local 22
MANAGEMENT OF THE FUND 23
Investment Adviser 23
Authority to Act as Investment Adviser 24
Administrator 24
DESCRIPTION OF GALAXY AND ITS SHARES 25
Shareholder Services Plan 26
Affiliate Agreement for Sub-Account Services 27
CUSTODIAN AND TRANSFER AGENT 27
EXPENSES 28
PERFORMANCE AND YIELD INFORMATION 28
MISCELLANEOUS 29
<PAGE>
THE GALAXY FUND
For applications and
^ 4400 Computer Drive information regarding initial
^ Westboro, Massachusetts purchases and current
^ 01581-5108 performance, call (800)
628-0414. For additional purchases,
redemptions, exchanges and other shareholder
services, call (800) 628-0413.
The Galaxy Fund ("Galaxy") is an open-end management investment company. This
Prospectus describes a series of Galaxy's shares ("Trust Shares") which
represent interests in the High Quality Bond Fund (the "Fund") offered by
Galaxy.
The Fund's investment objective is to seek a high level of current income
consistent with prudent risk of capital. Under normal market and economic
conditions, the Fund will invest substantially all of its assets in high
quality debt obligations that are rated at the time of purchase within the two
highest ratings of Standard & Poor's ^ Ratings Group ("S&P") or Moody's
Investors Service Inc. ("Moody's") (or which, if unrated, are of comparable
quality) and in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and other "money market" instruments.
This prospectus describes Trust Shares in the Fund. Trust Shares are offered
to investors maintaining qualified accounts at bank and trust institutions,
including institutions affiliated with Fleet Financial Group, Inc. and to
participants in employer-sponsored defined contribution plans. Galaxy is also
authorized to issue ^ two additional series of shares in the Fund ^, Retail A
Shares and Retail B Shares (Retail A Shares and Retail B Shares are referred to
herein collectively as "Retail Shares"). Retail Shares are offered under a
separate prospectus primarily to individuals or corporations purchasing either
for their own accounts or for the accounts of others and to Fleet Brokerage ^
Securities, Inc., Fleet Securities, Inc., Fleet Financial Group, Inc., its
affiliates, their correspondent banks and other qualified banks, savings and
loans associations and broker/dealers on behalf of their customers. Trust
Shares, Retail A Shares and Retail B Shares represent equal pro rata interests
in the Fund, except they bear different expenses which reflect the
difference in the range of service provided to them. See "Financial
Highlights," "Management of the Fund" and Description of Galaxy and Its Shares"
herein.
<PAGE>
The Fund is distributed by 440 Financial Distributors, Inc. and advised by
Fleet Investment Advisors Inc. (the "Investment Adviser" or "Fleet").
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO
THAT SHARES OF THE FUNDS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This Prospectus sets forth concisely the information that prospective investors
should consider before investing. Investors should read this Prospectus and
retain it for future reference. Additional information about the Fund,
contained in the Statement of Additional Information bearing the same date, has
been filed with the Securities and Exchange Commission. The current Statement
of Additional Information is available upon request without charge by
contacting Galaxy at its telephone numbers or address shown above. The
Statement of Additional Information, as it may be amended from time to time, is
incorporated by reference in its entirety into this Prospectus.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MARCH 1, ^ 1996
-2-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to its Trust Shares, and (ii) the ^ operating
expenses ^ for Trust Shares of the Fund. ^ Examples based on the table are
also shown.
<TABLE>
<CAPTION>
HIGH
QUALITY
BOND FUND
SHAREHOLDER TRANSACTION EXPENSES (TRUST SHARES)
________________________________ ______________
<S> <C>
Sales Load None
Sales Load on Reinvested
Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
_______________________________________
Advisory Fees
(After Fee Waivers) .55%
^ 12b-1 Fees None
Other Expenses (After Expense
Reimbursements) ^.36%
_____
Total Fund Operating Expenses
(After Fee Waivers and Expense
Reimbursements) ^.91%
_____
_____
</TABLE>
EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING
(1) A ^ 5% ANNUAL RETURN, AND (2) REDEMPTION OF YOUR INVESTMENT AT THE END OF
THE FOLLOWING PERIODS:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
______ _______ _______ ________
High Quality Bond Fund
(Trust Shares)^ $9 $28 $49 $110
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in Trust Shares of the
Fund will bear directly or indirectly. They are based on expenses incurred by
the Fund during the last fiscal year, restated to reflect the expenses which
the Fund expects to incur during the current fiscal year on its Trust Shares.
Without voluntary fee waivers and expense reimbursement by the Investment
Adviser, Advisory Fees would be .75% and Total Fund Operation Expenses
would be 1.11% for Trust Shares of the Fund. For more complete
descriptions of these costs and expenses, see "Management of the Fund"
and "Description of Galaxy
-3-
<PAGE>
and its Shares" in this Prospectus and the financial statements and notes
incorporated by reference ^ into the Statement of Additional
Information.
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This Prospectus describes the Trust Shares in the Fund. Galaxy is also
authorized to issue ^ two additional series of shares in the Fund, Retail ^ A
Shares and Retail B Shares. As described below under "Description of Galaxy
and Its Shares," Trust Shares, Retail A Shares and Retail B Shares represent
equal pro rata interests in the Fund, except that (i) effective October 1,
1994^, Retail A Shares of the Fund bear the expense incurred under Galaxy's
Shareholder Services Plan for Retail A Shares and Trust Shares at an annual
rate ^ not to exceed .15% of the average daily net asset value of the Fund's
outstanding Retail A Shares (currently, these fees are not paid with respect to
the Fund's Trust Shares) ^, (ii) Retail B shares of the Fund bear the expenses
incurred under Galaxy's Distribution and Services Plan for Retail B shares at
an annual rate not to exceed .80% of the average daily net asset value of the
Fund's outstanding Retail B Shares, and (iii) Trust Shares, Retail A Shares and
Retail B Shares bear differing transfer agency expenses. Retail Shares are
offered under a separate prospectus.
The financial highlights presented below have been audited by Coopers and
Lybrand L.L.P., Galaxy's independent accountants, whose report is contained in
Galaxy's Annual Report to Shareholders dated October 31, ^ 1995. Such
financial highlights should be read in conjunction with the financial
statements contained in the Annual Report to Shareholders and incorporated by
reference ^ into the Statement of Additional Information. Information in the
financial highlights for periods prior to the fiscal year ended October 31,
1994 reflect the investment results of both Trust Shares and Retail A Shares of
the Fund. More information about the performance of the Fund is also contained
in the Annual Report to Shareholders, which may be obtained without charge by
contacting Galaxy at its telephone numbers or address provided above.
-4-
<PAGE>
High Quality Bond Fund
(For a share 2 outstanding throughout each period.)
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
October 31, October 31, 2 October 31,
1995 1994 1993 1992 1991 1,2
_________________ __________________ ____________
Trust Shares
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.54 $11.37 $10.60 $10.35 $10.00
_____ ______ ______ ______ ______
Income from
Investment
Operations
Net Investment
Income 3,4 0.64 0.65 0.66 0.68 0.64
Net realized and
unrealized gain
(loss)
on investments 1.09 (1.56) 0.93 0.36 0.33
_____ ______ ______ ______ ______
Total from
Investment Operations: 1.73 (0.91) 1.59 1.04 0.97
_____ ______ ______ ______ ______
Less ^ Dividends:
Dividends from net
investment income (0.64) (0.65) (0.66) (0.71) (0.62)
^ Dividends from net
realized capital gains -- -- (0.16) (0.08) --
^ Dividends in excess of
net realized
capital gains -- (0.27) -- -- --
_____ ______ ______ ______ ______
Total ^ Dividends: (0.64) (0.92) (0.82) (0.79) (0.62)
______ ______ ______ ______ ______
Net increase (decrease)
in net asset value 1.09 (1.83) 0.77 0.25 0.35
_____ ______ ______ ______ ______
Net Asset Value,
End of Period $ 10.63 $9.54 $11.37 $10.60 $10.35
_______ ______ ______ ______ ______
_______ ______ ______ ______ ______
Total Return 18.66% (8.39%) 15.63% 10.32% 10.04%
5
Ratios/Supplemental
Data:
Net Assets,
End of Period
(000's) $134,631 $118,776 $162,594 $108,774 $57,580
Ratios to average
net assets:
Net investment
income including
reimbursement/waiver 6.33% 6.28% 5.98% 6.55% 7.25%
6
Operating ^ expenses
including
reimbursement/waiver 0.85% 0.78% 0.76% 0.87% 0.95%
6
Operating expenses
excluding
reimbursement/waiver 1.07% 0.98% 0.96% 0.94% 0.95%
6
Portfolio Turnover Rate 110% 108% 128% 121% 145%
5
</TABLE>
___________________
1 The Fund commenced operations on December 14, 1990.
2 For periods prior to the year ended October 31, 1994, the per share amounts
and selected ratios reflect the financial results of both Retail and Trust
Shares.
3 Net investment income per share for Trust Shares before waiver of fees by the
Investment Adviser and/or Administrator for the ^ years ended October 31, 1995
and 1994 were $0.62 and $0.63 ^, respectively.
4 Net investment income per share before waiver of fees by the Investment
Adviser and/or Administrator for the years ended October 31, 1993, 1992 and
1991 were $0.63, ^ $0.67 and $0.64 ^, respectively.
5 Not Annualized.
6 Annualized.
-5-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek a high level of current income
consistent with prudent risk of capital. The Fund will invest substantially
all of its assets in corporate debt obligations such as bonds, debentures,
obligations convertible into common stock, "money market" instruments such as
bank obligations and commercial paper, in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and in obligations of
supranational banks. Examples of those include the International Bank for
Reconstruction and Development ("World Bank"), the Asian Development Bank and
the InterAmerican Development Bank. Obligations of supranational banks may be
supported by appropriated but unpaid commitments of their member countries and
there is no assurance that those commitments will be undertaken or met in the
future. The Fund may also invest, from time to time, in municipal securities.
The purchase of municipal securities may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of such
securities, on a pretax basis, is comparable to that of corporate or U.S. debt
obligations. The Fund may enter into interest rate futures contracts to hedge
against changes in market values of fixed-income instruments that the Fund
holds or intends to purchase. See "Other Investment Policies." At least 65%
of the Fund's total assets will be invested in non-convertible bonds. Any
common stock received through the conversion of convertible debt obligations
will be sold in an orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest substantially
all of its assets in high quality debt obligations that are rated, at the time
of purchase, within the two highest ratings of S&P or Moody's (or, if unrated,
are determined by the Investment Adviser to be of comparable quality) and in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and other "money market" instruments such as those listed
below under "Other Investment Policies." Unrated securities will be determined
to be of comparable quality to high quality debt obligations if, among other
things, other outstanding obligations of the issuers of such securities are
rated AA or A-2/P-2 or better. When, in the opinion of the Investment Adviser,
a defensive investment posture is warranted, the Fund may invest temporarily
and without limitation in high quality, short-term "money market" instruments.
See Appendix A to the Statement of Additional Information for a description of
S&P's and Moody's rating categories.
-6-
<PAGE>
The Fund may also invest up to 5% of its total assets in dollar-denominated
high quality debt obligations of U.S. companies issued outside the United
States. In addition, the Fund may acquire high quality debt obligations issued
by Canadian Provincial Governments, which are similar to U.S. Municipal
Securities except that the income derived therefrom is fully subject to U.S.
Federal taxation. These instruments are denominated in either Canadian or U.S.
dollars and have an established over-the-counter market in the United States.
The Fund seeks to provide a current yield greater than that generally available
from a portfolio of high quality short-term obligations. The Fund's average
weighted maturity will vary from time to time depending on, among other things,
current market and economic conditions and the comparative yields on
instruments with different maturities. The Fund adjusts its average weighted
maturity and its holdings of corporate and U.S. Government debt securities in a
manner consistent with the Investment Adviser's assessment of prospective
changes in interest rates. The success of this strategy depends upon the
Investment Adviser's ability to predict changes in interest rates.
The value of the Fund's portfolio securities will generally vary inversely with
changes in prevailing interest rates. The high quality credit criteria applied
to the selection of portfolio securities are intended to reduce adverse price
changes due to credit considerations. See "Other Investment Policies" below
for information regarding additional investment policies of the Fund.
The Investment Adviser will use its best efforts to achieve the Fund's
investment objective, although its achievement cannot be assured. The
investment objective of the Fund may not be changed without the approval of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Except as noted below under "Investment Limitations," the
Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Fund to be a complete
investment program.
OTHER INVESTMENT POLICIES
U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS
The Fund may, in accordance with its investment policies, invest from time to
time in obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and in ^ "money market" instruments, including bank
obligations and commercial paper.
-7-
<PAGE>
Obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and time of issuance: Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one
to ten years; and Treasury Bonds generally have initial maturities of more than
10 years. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as those of the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law. Some of these
instruments may be variable or floating rate instruments.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit, and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank which is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation, or
by a savings and loan association or savings bank which is insured by the
Federal Deposit Insurance Corporation. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations.
Investment in bank obligations is limited to the obligations of financial
institutions having more than $1 billion in total assets at the time of
purchase.
Domestic and foreign banks are subject to extensive but different government
regulation which may limit the amount and types of their loans and the interest
rates that may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds to
finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject the Fund to additional risks, including
future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In addition,
foreign branches of U.S. banks and
-8-
<PAGE>
U.S. branches of foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks. The Fund will invest in the obligations of U.S. branches of foreign
banks or foreign branches of U.S. banks only when the Investment Adviser
believes that the credit risk with respect to the instrument is minimal.
Commercial paper may include variable and floating rate instruments which are
unsecured instruments that permit the indebtedness thereunder to vary.
Variable rate instruments provide for periodic adjustments in the interest
rate. Floating rate instruments provide for automatic adjustment of the
interest rate whenever some other specified interest rate changes. Some
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, the Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell the instrument to a third party.
In the event that an issuer of a variable or floating rate obligation defaulted
on its payment obligation, the Fund might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the extent of the default. The Fund may also
purchase Rule 144A securities. See "Investment Limitations."
TYPES OF MUNICIPAL SECURITIES
The two principal classifications of municipal securities which may be held by
the Fund are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of such private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
The Fund's portfolio may also include "moral obligation" securities, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
-9-
<PAGE>
VARIABLE AND FLOATING RATE MUNICIPAL SECURITIES
Municipal Securities purchased by the Fund may include rated and unrated
variable and floating rate tax-exempt instruments. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to the Fund will approximate their par value.
Illiquid variable and floating rate instruments (instruments which are not
payable upon seven days' notice and do not have an active trading market) that
are acquired by the Fund are subject to the 10% limit described in Investment
Limitation No. 3 under "Investment Limitations" in this Prospectus.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
The Fund may purchase portfolio securities subject to the seller's agreement to
repurchase them at a mutually specified date and price ("repurchase
agreements"). Repurchase agreements will be entered into only with financial
institutions such as banks and broker/dealers which are deemed to be
creditworthy by the Investment Adviser under guidelines approved by Galaxy's
Board of Trustees. The Fund will not enter into repurchase agreements with
Fleet or any of its affiliates. Securities subject to repurchase agreements may
bear maturities exceeding one year. Unless a repurchase agreement has a
remaining maturity of seven days or less or may be terminated on demand by
notice of seven days or less, the repurchase agreement will be considered an
illiquid security and will be subject to the 10% limit described in Investment
Limitation No. 3 under "Investment Limitations" in this Prospectus.
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by the Fund at
not less than the agreed upon repurchase price. If the seller defaulted on its
repurchase obligation, the Fund would suffer a loss to the extent that the
proceeds from a sale of the underlying securities (including accrued interest)
were less than the repurchase price (including accrued interest) under the
agreement. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action.
The Fund may also borrow funds for temporary purposes by selling portfolio
securities to financial institutions such as banks and broker/dealers and
agreeing to repurchase them at a mutually specified date and price ("reverse
repurchase agreements"). Reverse repurchase agreements involve the risk that
the market value of the securities sold by the Fund may
-10-
<PAGE>
decline below the repurchase price. The Fund would pay interest on amounts
obtained pursuant to a reverse repurchase agreement.
SECURITIES LENDING
The Fund may lend its portfolio securities to financial institutions such as
banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be short-term,
will be made only to borrowers deemed by the Investment Adviser to be of good
standing and only when, in the Investment Adviser's judgment, the income to be
earned from the loan justifies the attendant risks. The Fund currently intends
to limit the lending of its portfolio securities so that, at any given time,
securities loaned by the Fund represent not more than one-third of the value of
its total assets.
INVESTMENT COMPANY SECURITIES
The Fund may invest in securities issued by other investment companies which
invest in high quality, short-term debt securities and which determine their
net asset value per share based on the amortized cost or penny-rounding method.
Investments in other investment companies will cause the Fund (and, indirectly,
the Fund's shareholders) to bear proportionately the costs incurred in
connection with the investment companies' operations. Securities of other
investment companies will be acquired by the Fund within the limits prescribed
by the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of other investment companies as a group; (c) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund; and (d) not more than 10% of the outstanding voting stock of
any one closed-end investment company will be owned in the aggregate by the
Fund, other investment portfolios of Galaxy, and any other investment companies
advised by the Investment Adviser. Any change by the Fund in the future with
respect to its policies concerning investments in securities issued by other
investment companies will be made only in accordance with the requirements
of the 1940 Act.
-11-
<PAGE>
INTEREST RATE FUTURES CONTRACTS
The Fund may enter into contracts (both purchases and sales) which provide for
the future delivery of fixed-income securities (commonly known as interest rate
futures contracts). The Fund will not engage in futures transactions for
speculation, but only to hedge against changes in the market values of
securities which the Fund hold or intend to purchase. The Fund will engage in
futures transactions only to the extent permitted by the Commodity Futures
Trading Commission ("CFTC") and the Securities and Exchange Commission ("SEC").
The purchase of futures instruments in connection with securities which the
Funds intend to purchase will require an amount of cash and/or U.S. Government
obligations, equal to the market value of the outstanding futures contracts, to
be deposited in a segregated account to collateralize the position and thereby
insure that the use of such futures is unleveraged. The Fund will limit its
hedging transactions in futures contracts so that, immediately after any such
transaction, the aggregate initial margin that is required to be posted by the
Fund under the rules of the exchange on which the futures contract is traded
does not exceed 5% of the Fund's total assets after taking into account any
unrealized profits and unrealized losses on the Fund's open contracts. In
addition, no more than one-third of the Fund's total assets may be covered by
such contracts.
Transactions in futures as a hedging device may subject the Fund to a number of
risks. Successful use of futures by the Fund is subject to the ability of the
Investment Adviser to predict correctly movements in the direction of the
market. In addition, there may be an imperfect correlation, or no correlation
at all, between movements in the price of futures contracts and movements in
the price of the instruments being hedged. There is no assurance that a liquid
market will exist for any particular futures contract at any particular time.
Consequently, the Fund may realize a loss on a futures transaction that is not
offset by a favorable movement in the price of securities which the Fund holds
or intends to purchase or may be unable to close a futures position in the
event of adverse price movements. Additional information concerning futures
transactions is contained in Appendix B to the Statement of Additional
Information.
WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS
The Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. The Fund may also
purchase or sell eligible securities on a "delayed settlement" basis. When-
issued and forward commitment transactions, which involve a commitment by the
Fund to purchase or sell particular securities with payment and delivery taking
place at a future date (perhaps one or two
-12-
<PAGE>
months later), permit the Fund to lock in a price or yield on a security it
owns or intends to purchase, regardless of future changes in interest rates.
Delayed settlement describes settlement of a securities transaction in the
secondary market which will occur sometime in the future. When-issued, forward
commitment and delayed settlement transactions involve the risk, however, that
the yield or price obtained in a transaction may be less favorable than the
yield or price available in the market when the securities delivery takes
place. It is expected that forward commitments, when-issued purchases and
delayed settlements will not exceed 25% of the value of the Fund's total assets
absent unusual market conditions. In the event the Fund's forward commitments,
when-issued purchases and delayed settlements ever exceeded 25% of the value of
its total assets, the Fund's liquidity and the ability of the Investment
Adviser to manage the Fund may be adversely affected. The Fund does not intend
to engage in when-issued purchases, forward commitments and delayed settlements
for speculative purposes, but only in furtherance of their investment
objectives.
ASSET-BACKED SECURITIES
The Fund may purchase asset-backed securities, which represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, most often a pool of assets similar to one another. Assets
generating such payments will consist of such instruments as motor vehicle
installment purchase obligations, credit card receivables and home equity
loans. Payment of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with entities issuing the securities. The
estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of the asset-backed security, will be primarily
a function of current market rates, although other economic and demographic
factors will be involved. The Fund will not invest more than 10% of its total
assets in asset-backed securities. See "Asset-Backed Securities" in the
Statement of Additional Information.
MORTGAGE-BACKED SECURITIES
The Fund may invest in mortgage-backed securities (including collateralized
mortgage obligations) that represent pools of mortgage loans assembled for sale
to investors by various governmental agencies and government-related
organizations such as the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Mortgage-backed securities provide a monthly
payment consisting of interest and principal payments. Additional
-13-
<PAGE>
payment may be made out of unscheduled repayments of principal resulting from
the sale of the underlying residential property, refinancing or foreclosure,
net of fees or costs that may be incurred. Prepayments of principal on
mortgage-backed securities may tend to increase due to refinancing of mortgages
as interest rates decline. To the extent that the Fund purchases mortgage-
backed securities at a premium, mortgage foreclosures and prepayments of
principal by mortgagors (which may be made at any time without penalty) may
result in some loss of the Fund's principal investment to the extent
of the premium paid. The yield of the Fund from investing in mortgaged-backed
securities may be affected by reinvestment of prepayments at higher or lower
rates than the original investment.
Other mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage loans, including savings associations,
mortgage bankers, commercials banks, investment bankers, and special purpose
entities. These private mortgage-backed securities may be supported by U.S.
Government mortgage-backed securities or some form of non-government credit
enhancement. Mortgage-backed securities have either fixed or adjustable
interest rates. The rate of return on mortgage-backed securities may be
affected by prepayments of principal on the underlying loans, which generally
increase as interest rates decline; as a result, when interest rats decline,
holders of these securities normally do not benefit from appreciation in market
value to the same extent as holders of other non-callable debt securities. In
addition, like other debt securities, the values or mortgage-related
securities, including government and government-related mortgage pools,
generally will fluctuate in response to market interest rates. To the extent
that collateralized mortgage obligations are considered to be investment
companies, investments in such obligations will be subject to the percentage
limitations described under "Investment Company
Securities" above.
STRIPPED OBLIGATIONS
To the extent consistent with its investment objective, the Fund may purchase
Treasury receipts and other "stripped" securities that evidence ownership in
either the future interest payments or the future principal payments on U.S.
Government and other obligations. These participations, which may be
issued by the U.S. Government or by private issuers, such as banks and
other institutions, are issued at their "face value," and may include
stripped mortgage-backed securities ("SMBS"), which are
derivative multi-class mortgage securities. Stripped securities,
particularly SMBS, may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
-14-
<PAGE>
SMBS are usually structured with two or more classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage-backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying
obligations experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on
other mortgage-backed obligations because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped. SMBS which are not issued by the U.S. Government (or a U.S.
Government agency or instrumentality) are considered illiquid. Obligations
issued by the U.S. Government may be considered liquid under guidelines
established by the Trust's Board of Trustees if they can be disposed of
promptly in the ordinary course of business at a value reasonably close to that
used in the calculation of net asset value per share.
GUARANTEED INVESTMENT CONTRACTS
The Fund may invest in guaranteed investment contracts ("GICs") issued by
United States and Canadian insurance companies. Pursuant to GICs, the Fund
makes cash contributions to a deposit fund of the insurance company's general
account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation of
the issuing insurance company and not a separate account. The purchase price
paid for a GIC becomes part of the general assets of the insurance company, and
the contract is paid from the company's general assets. The Fund will only
purchase GICs that are issued or guaranteed by insurance companies that at
the time of purchase are rated at least AA by S&P or receive
a similar high quality rating from a nationally recognized service which
provides ratings of insurance companies. GICs are considered illiquid
securities and will be subject to the Fund's 10% limitation on such
investments, unless there is an active and substantial secondary market for the
particular instrument and market quotations are readily available.
BANK INVESTMENT CONTRACTS
The Fund may invest in bank investment contracts ("BICs") issued by banks that
meet the quality and asset size requirements for banks described above under
^"U.S. Government Obligations and
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<PAGE>
Money Market Instruments." Pursuant to BICs, cash contributions
are made to a deposit account at the bank in exchange for payments at
negotiated, floating or fixed interest rates. A BIC is a general obligation of
the issuing bank. BICs are considered illiquid securities and will be
subject to the Fund's 10% limitation on such investments, unless there
is an active and substantial secondary market for the particular
instrument and market quotations are readily available.
PORTFOLIO TURNOVER
The Fund may sell a portfolio investment soon after its acquisition if the
Investment Adviser believes that such a disposition is consistent with the
Fund's investment objective. Portfolio investments may be sold for a variety of
reasons, such as a more favorable investment opportunity or other circumstances
bearing on the desirability of continuing to hold such investments. The rate
of portfolio turnover will not be a limiting factor in making portfolio
decisions. A high rate of portfolio turnover may result in the realization of
substantial capital gains and involves correspondingly greater
transaction costs. To the extent that net capital gains are
realized, distributions derived from such gains are treated as ordinary
income for Federal income tax purposes. See "Financial Highlights" and "Taxes
- --
Federal."
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy and may
not be changed with respect to the Fund without the affirmative vote of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."
The Fund may not:
1. Make loans, except that (i) the Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, and may
enter into repurchase agreements with respect to portfolio securities, and (ii)
the Fund may lend portfolio securities against collateral consisting of cash or
securities which are consistent with the Fund's permitted investments, where
the value of the collateral is equal at all times to at least 100% of the value
of the securities loaned.
2. Borrow money or issue senior securities, except from domestic banks for
temporary purposes and then in amounts not in excess of 10% of the value of its
total
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<PAGE>
assets at the time of such borrowing (provided that the Fund may borrow
pursuant to reverse repurchase agreements in accordance with its investment
policies and in amounts not in excess of 10% of the value of its total assets
at the time of such borrowing); or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or 10% of the value of the Fund's
total assets at the time of such borrowing. The Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess
of 5% of its total assets are outstanding.
3. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days, time deposits with maturities in excess of seven days,
restricted securities, non-negotiable time deposits and other securities which
are not readily marketable.
4. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer, except that up to 25% of the value of its
total assets may be invested without regard to this limitation.
In addition, the Fund may not purchase any securities which would cause 25% or
more of the value of the Fund's total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their principal
business activities in the same industry; provided, however that (a) there
is no limitation with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, (b) wholly-owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing
the activities of the parents, and (c) utilities will be classified
according to their services. (For example, gas, gas transmission, electric and
gas, electric and telephone each will be considered a separate industry.)
The Securities and Exchange Commission has adopted Rule 144A which allows for a
broader institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act
of 1933 for resales of certain securities to qualified institutional buyers.
The Fund's investment in Rule 144A securities could have the effect of
increasing the level of illiquidity of the Fund during any period that
qualified institutional buyers were no longer interested in purchasing these
securities. For purposes of
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<PAGE>
the 10% limitation on purchases of illiquid instruments described under
Investment Limitation No. 3 above, Rule 144A securities will not be
considered illiquid if the Investment Adviser has determined,
in accordance with guidelines established by the Board of Trustees,
that an adequate trading market exists for such securities.
If a percentage limitation is satisfied at the time of investment, a later
increase in such percentage resulting from a change in the value of the Fund's
portfolio securities will not constitute a violation of the limitation.
PRICING OF SHARES
Net asset value per share of the Fund is determined as of the close of regular
trading hours on the New York Stock Exchange (the "Exchange"), currently 4:00
p.m. (Eastern Time). The net asset value per share is determined on each day
on which the Exchange is open for trading. Currently, the holidays which
Galaxy observes are New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Net asset
value per share for purposes of pricing sales and redemptions is calculated
separately for each series of shares by dividing the value of all
securities and other assets attributable to a particular series
of the Fund, less the liabilities attributable to shares of that series of the
Fund, by the number of outstanding shares of that series of the Fund.
The Fund's assets are valued for purposes of pricing sales and redemptions by
an independent pricing service ("Service") approved by Galaxy's Board of
Trustees. When, in the judgment of the Service, quoted bid prices for portfolio
securities are readily available and are representative of the bid side of the
market, these investments are valued at the mean between quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices (as
calculated by the Service based upon its evaluation of the market for such
securities). Other investments are carried at fair value as determined by the
Service, based on methods which include consideration of yields or prices of
bonds of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. The Service may also
employ electronic data processing techniques and matrix systems to determine
value. Short-term securities are valued at amortized cost, which approximates
market value. The amortized cost method involves valuing a security at its cost
on the date of purchase and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at
maturity and cost.
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<PAGE>
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by Galaxy's distributor, 440
Financial Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of
^
First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc. d/b/a 440 Financial). The Distributor is a registered
broker/dealer with principal offices located at ^ 290 Donald Lynch Boulevard,
Marlboro, Massachusetts ^ 01752.
PURCHASE OF SHARES
The Trust Shares described in this Prospectus are sold to investors maintaining
qualified accounts at bank and trust institutions, including subsidiaries of
Fleet Financial Group, Inc. and to participants in employer-sponsored defined
contribution plans ("Institutions"). Trust Shares sold to such investors
("Customers") will be held of record by Institutions. The Institution is
responsible for transmitting to the Distributor orders for purchases of Trust
Shares and for wiring required funds in payment to Galaxy's custodian on a
timely basis. The Distributor is responsible for transmitting such orders to
Galaxy's transfer agent for execution. Beneficial ownership
of Trust Shares will be recorded by the Institution and reflected in the
account statements it provides to its Customers. Confirmations of purchases
and redemptions of Trust Shares will be sent to the appropriate Institution.
Purchases of Trust Shares will be effected only on days on which the
Distributor, Galaxy's custodian and the purchasing Institution are open for
business ("Business Days").
A purchase order for Trust Shares received by the Distributor on a Business Day
prior to the close of regular trading hours on the Exchange (currently, 4:00
p.m. Eastern Time) will be priced at the net asset value determined on that
day, provided that Galaxy's custodian receives the purchase price in Federal
funds or other immediately available funds prior to 4:00 p.m. on the following
Business Day, at which time the order will be executed. If funds are not
received by such date and time, the order will not be accepted and notice
thereof will be given promptly to the Institution which submitted the order.
Payments for orders which are not received or accepted will be returned after
prompt inquiry to the sending Institution. If an Institution accepts a
purchase order from its Customer on a non-Business Day, the order will not be
executed until it is received and accepted by the Distributor on a Business Day
in accordance with the foregoing procedures.
Galaxy reserves the right to reject any purchase order, in whole or in part.
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<PAGE>
The issuance of Trust Shares is recorded on the books of the Fund and Trust
Share certificates will not be issued.
Customers may purchase Trust Shares through procedures established by
Institutions in connection with the requirements of their Customer accounts.
Such accounts may include discretionary investment management accounts,
custodial accounts, agency accounts and different types of tax-advantaged
accounts, (including defined contribution plans). Investors should contact
their Institution (or, in the case of employee plans, their employer) for
further information concerning the types of eligible Customer accounts and the
related purchase and redemption procedures.
Although Galaxy does not impose any minimum initial or subsequent investment
requirement with respect to Trust Shares, Institutions may impose such
requirements on the accounts maintained by its Customers, and may also
require that Customers maintain minimum account balances with respect to Trust
Shares.
Trust Shares of the Fund may also be available for purchase through different
types of retirement plans offered by the Institutions to its Customers.
Information pertaining to such plans is available directly from the
Institution.
REDEMPTION OF SHARES
Customers may redeem all or part of their Trust Shares in accordance with
procedures governing their accounts at their Institution. It is the
responsibility of the Institution to transmit redemption orders to the
Distributor and to credit its Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments is imposed by
Galaxy, although the Institution may charge its Customers' accounts for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institution.
Redemption orders are effected at the net asset value per share next determined
after receipt and acceptance of the order by the Distributor. Payment for
redemption orders received by the Distributor on a Business Day will normally
be wired the following Business Day to the Institution. Payment for redemption
orders which are received on a non-Business Day will normally be wired to the
Institution on the next Business Day. However, in both cases Galaxy reserves
the right to wire redemption proceeds within seven days after receiving the
redemption order if, in its judgment, an earlier payment could adversely affect
the Fund.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
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<PAGE>
The Fund reserves the right to redeem shares in any account at their net asset
value involuntarily, upon 60 days' written notice, if the value of the account
is less than $250 as a result of redemptions.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Fund are declared daily and paid
monthly. Net realized capital gains are distributed at least annually.
Dividends and distributions will be paid in cash. Customers may elect to have
their dividends reinvested in additional Trust Shares of the Fund at the net
asset value of such shares on the ex-dividend date. Such election, or any
revocation thereof, must be communicated in writing by an Institution on behalf
of Customers to Galaxy's transfer agent and will become effective with respect
to dividends paid after its receipt. The crediting and payment of dividends to
Customers will be in accordance with the procedures governing such Customers'
accounts at their Institution.
TAXES
FEDERAL
The Fund qualified during its last taxable year and intends to continue to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). Such qualification generally relieves the Fund
of liability for Federal income taxes to the extent the Fund's earnings are
distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its shareholders
an amount equal to at least 90% of its investment company taxable income and
90% of its tax-exempt interest income (if any) net of certain deductions for
such year. In general, the Fund's investment company taxable income will be
its taxable income, including dividends, interest and short-term capital gains
(the excess of net short-term capital gain over net long-term capital loss),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The policy of the Fund is to distribute as dividends
substantially all of its investment company taxable income and any net tax-
exempt interest income each year. Such dividends will be taxable as
ordinary income to the Fund's shareholders who are not currently exempt from
Federal income
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<PAGE>
taxes, whether such dividends are received in cash or
reinvested in additional shares. (Federal income taxes for
distributions to an IRA or a qualified retirement plan are deferred
under the Code.) It is anticipated that no part of any
distribution will qualify for the dividends received deduction for
corporations.
Distribution by the Fund of the excess of its net long-term capital gain over
net short-term capital loss is taxable to shareholders as long-term capital
gain, regardless of how long the shareholder has held shares and whether such
gains are received in cash or reinvested in additional shares. Such
distributions are not eligible for the dividends received deduction.
Dividends declared in October, November or December of any year which are
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by the Fund on December
31 of such year if such dividends are actually paid during January of the
following year.
If you are considering buying shares of the Fund on or just before the record
date of a dividend, you should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, generally will be
taxable to you.
A taxable gain or loss may be realized by a shareholder upon redemption,
transfer or exchange of Fund shares depending upon the tax basis of such shares
and their price at the time of redemption, transfer or exchange.
The foregoing summarizes some of the important Federal tax considerations
generally affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisers with specific reference to their own tax
situation. Shareholders will be advised annually as to the Federal income tax
consequences of distributions made each year.
STATE AND LOCAL
Investors are advised to consult their tax advisers concerning the application
of state and local taxes, which may have different consequences than those of
the Federal income tax law described above.
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<PAGE>
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of
Galaxy's Board of Trustees. The Fund's Statement of Additional Information
contains the names of and general background information concerning the
Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at ^ 50 Kennedy Plaza, 2nd Floor, Providence,
Rhode Island 02903, serves as the Investment Adviser to the Funds. Fleet,
which commenced operations in 1984, also provides investment management and
advisory services to individual and institutional clients; and manages other
investment portfolios of Galaxy: the Money Market, Government, Tax-Exempt,
U.S. Treasury, Connecticut Municipal Money Market, Massachusetts Municipal
Money Market, Institutional Treasury Money Market, Equity Value, Equity Growth,
Equity Income, International Equity, Small Company Equity, Asset Allocation,
Growth and Income, Small Cap Value, Short-Term Bond, Intermediate ^ Government
Income, Corporate Bond, Tax-Exempt Bond, New York Municipal Bond, Connecticut
Municipal Bond, Massachusetts Municipal Bond and Rhode Island Municipal Bond
Funds. Fleet is an indirect wholly-owned subsidiary of Fleet Financial Group,
Inc., a registered bank holding company with total assets of approximately ^
$___ billion at ^___________, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and in
accordance with the Fund's investment policies, Fleet manages the Fund, makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities and maintains related records.
The Fund's portfolio manager, Kenneth W. Thomas, is primarily responsible for
the day-to-day management of the Fund's investment portfolio. Mr. Thomas, a
Vice President, has been with Fleet and its predecessors since 1985 and has
been the Fund's portfolio manager since its inception.
For the services provided and expenses assumed with respect to the Fund, the
Investment Adviser is entitled to receive advisory fees, computed daily and
paid monthly, at the annual rate of .75% of the average daily net assets of the
Fund. The fee for the Fund is higher than fees paid by most other mutual funds,
although the Board of Trustees of Galaxy believes that it is not higher than
average advisory fees paid by funds with similar investment objectives and
policies.
Fleet may from time to time, in its discretion, waive advisory fees payable by
the Fund in order to help maintain a competitive expense ratio and may from
time to time allocate a portion of its advisory fees to Fleet Trust Company or
other
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<PAGE>
subsidiaries of Fleet Financial Group, Inc. in consideration for administrative
and other services which they provide to beneficial shareholders. Fleet is
currently waiving a portion of the advisory fees payable to it by the Fund so
that it is entitled to receive an advisory fee at the annual rate of .55% of
the Fund's average daily net assets, but Fleet may in its discretion revise or
discontinue this waiver at any time. For the fiscal year ended October 31, ^
1995, Fleet received advisory fees (after fee waivers) at the effective rate of
.53% of the Fund's average daily net assets.
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as Trust Shares of the Fund, but do not prohibit such a bank holding company or
its affiliates or banks generally from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of customers.
The Investment Adviser, custodian and Institutions which have agreed to
provide shareholder support services that are banks or bank affiliates are
subject to such banking laws and regulations. Should legislative, judicial,
or administrative action prohibit or restrict the activities of such
companies in connection with their services to the Fund, Galaxy might
be required to alter materially or discontinue its arrangements
with such companies and change its method of operation. It is anticipated,
however, that any resulting change in the Fund's method of operation
would not affect the Fund's net asset value per share or result in financial
loss to any shareholder. State securities laws on this issue may
differ from federal law and banks and financial institutions may be
required to register as dealers pursuant to state law.
ADMINISTRATOR
^ First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc. d/b/a 440 Financial) ("First Data"), located at 4400
Computer Drive, Westboro, Massachusetts 01581-5108, serves as the Fund's
administrator. ^ First Data is a wholly-owned subsidiary of ^
First Data Corporation.
^ First Data generally assists the Fund in its administration and operation. ^
First Data also serves as administrator to the other portfolios of Galaxy. For
the services provided to the Fund, ^ First Data is entitled to
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<PAGE>
receive administration fees, computed daily and paid monthly, at
the annual rate of .09% of the first $2.5 billion of the combined
average daily net assets of the Fund and the other portfolios
offered by Galaxy (collectively, the "Portfolios"), .085% of the next
$2.5 billion of combined average daily net assets and .08% of combined
average daily net assets over $5 billion. In addition, ^ First Data also
receives a separate annual fee from each Portfolio for certain fund
accounting services. From time to time, ^ First Data may
waive all or a portion of the administration fee payable to it by the
Fund, either voluntarily or pursuant to applicable statutory expense
limitations. ^ For the fiscal year ended October 31, ^ 1995, the
Fund paid administration fees at the effective rate
of ^.088% of the Fund's average daily net assets.
DESCRIPTION OF GALAXY AND ITS SHARES
Galaxy was organized as a Massachusetts business trust on March 31, 1986.
Galaxy's Declaration of Trust authorizes the Board of Trustees to classify or
reclassify any unissued shares into one or more classes or series of shares.
Pursuant to such authority, the Board of Trustees has authorized the issuance
of an unlimited number of shares in each of ^ three series in the Fund as
follows: Class J-Series 1 shares (Trust Shares) ^, Class J-Series
2 shares (Retail ^ A Shares) and Class J-Series 3 shares (Retail B
Shares), each series representing ^ interests in the Fund.
The Fund is classified as a diversified company under the 1940 Act. The
Board of Trustees has also authorized the issuance of additional classes
and series of shares representing interest in other portfolios of Galaxy.
For information regarding the Fund's Retail Shares and these other
portfolios, which are offered through separate prospectuses, contact
the Distributor at (800) 628-0414.
Shares of each series in the Fund bear their pro rata portion of all operating
expenses paid by the fund except as follows. Holders of the Fund's Retail A
Shares bear the fees that are paid to Institutions under Galaxy's Shareholder
Service Plan described below. Holders of the Fund's Retail B Shares bear
the fees described in the prospectus for such shares that are paid under
Galaxy's Distribution and Services Plan at an annual rate not to exceed
.80% of the average daily net asset value of the Fund's outstanding Retail
B Shares. Currently, these payments are not made with respect to the
Fund's Trust Shares ^. In addition, shares of each series in the Fund
bear differing transfer agency expenses. Standardized yield and total return
quotations are computed separately for each series of shares. ^ The
difference in the expenses paid by the respective series will affect
their performance.
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<PAGE>
^ Retail A Shares of the Fund are sold ^ with a maximum front-end sales charge
of 3.75%. Retail B Shares are sold with a maximum contingent deferred sales
charge of 5.0%. Retail A and Retail B Shares have certain exchange and other
privileges which are not available with respect to Trust Shares.
Each share of Galaxy (irrespective of series designation) has a par value of
$.001 per share, represents an equal proportionate interest in the related Fund
with other shares of the same class (irrespective of series designation), and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to such Fund as are declared in the discretion of Galaxy'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.
Galaxy is not required under Massachusetts law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. Shareholders
have the right to remove Trustees.
SHAREHOLDER SERVICES PLAN
Galaxy intends to enter into servicing agreements with Institutions (including
Fleet Bank and its affiliates) pursuant to which Institutions will render
certain administrative and support services to Customers who are the beneficial
owners of Retail A Shares. Such services will be provided to Customers who are
the beneficial owners of Retail A Shares and are intended to supplement the
services provided by Galaxy's administrator and transfer agent to the
shareholders of record of the Retail A Shares. In consideration for payment of
up to .15% (on an annualized basis) of the average daily net asset value of
Retail A Shares owned beneficially by their Customers, Institutions may provide
one or more of the following services to such Customers: aggregating and
processing purchase and redemption requests and placing net purchase and
redemption orders with the Distributor; processing dividend payments from the
Fund; providing sub-accounting with respect to Retail A Shares or the
information necessary for sub-accounting; and providing periodic mailings to
Customers. In consideration for payment of up to a separate .15% (on an
annualized basis) of the average daily net asset value
of Retail A Shares owned beneficially by their Customers, Institutions may
provide one or more of these additional services to such Customers: providing
Customers with information as to their positions in Retail A Shares; responding
to Customer inquiries; and providing a service to invest the assets of
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<PAGE>
Customers in Retail A Shares. These services are described more fully in
Galaxy's Statement of Additional Information under "Shareholder Services Plan."
Although the Shareholder Services Plan ^ has been approved with respect to both
Retail A Shares and Trust Shares of the Fund, as of the date of this
Prospectus, Galaxy intends to enter into servicing agreements under the
Shareholder Services Plan only with respect to Retail A Shares of the Fund, and
to limit the payment under these servicing agreements for the Fund to no more
than .15% (on an annualized basis) of the average daily net asset value of the
Retail A Shares of the Fund beneficially owned by Customers of Institutions.
Galaxy understands that Institutions may charge fees to their Customers who are
owners of Retail A Shares in connection with their accounts with such
Institutions. Any such fees would be in addition to any amounts which may be
received by an Institution under the Shareholder Services Plan. Under the
terms of each servicing agreement entered into with Galaxy, Institutions are
required to provide their Customers with a schedule of any fees that they may
charge in connection with Customer investments in Retail A Shares.
AFFILIATE AGREEMENT FOR SUB-ACCOUNT SERVICES
^ First Data has entered into an agreement with Fleet Trust Company, an
affiliate of the Investment Adviser, pursuant to which Fleet Trust Company
performs certain sub-account and administrative functions ("Sub-Account
Services") on a per account basis with respect to Trust Shares of the
Fund held by defined contribution plans, including: maintaining records
reflecting separately with respect to each plan participant's sub-account all
purchases and redemptions of Trust Shares and the dollar value of Trust
Shares in each sub-account; crediting to each Participant's
sub-account all dividends and distributions with respect to that sub-account;
and transmitting to each participant a periodic statement regarding the sub-
account as well as any proxy materials, reports and other material Fund
communications. Fleet Trust Company is compensated by ^ First Data for the Sub-
Account Services and in connection therewith the transfer agency fees payable
by Trust Shares of the Fund to ^ First Data have been increased by an amount
equal to these fees. In substance, therefore, the holders of Trust Shares of
the Fund indirectly bear these fees.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A., located at 1 Chase Manhattan Plaza, New York,
New York 10081, a wholly-owned subsidiary of The Chase Manhattan Corporation,
serves as the custodian of the Fund's assets, and ^ First Data Investor
Services Group, Inc. (formerly known as The Shareholder Services
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<PAGE>
Group, Inc. d/b/a 440 Financial) ("First Data"), a wholly-owned subsidiary
^ First Data Corporation, serves as the ^ Fund's transfer and dividend
disbursing agent. Services performed by both entities for the
Fund are described in the Statement of Additional Information. Communications
to ^ First Data should be directed to ^ First Data at P.O. Box 15108-5108, 4400
Computer Drive, Westboro, Massachusetts 01581.
EXPENSES
Except as noted below, Fleet and 440 Financial bear all expenses in connection
with the performance of their services for the Fund. Galaxy bears the expenses
incurred in the Fund's operations. Such expenses include taxes; interest; fees
(including fees paid to its trustees and officers who are not affiliated with
^ First Data); SEC fees; state securities qualification fees; costs of
preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders; advisory, administration,
shareholder servicing, fund accounting and custody fees; charges
of the transfer agent and dividend disbursing agent; certain insurance
premiums; outside auditing and legal expenses; costs of independent pricing
services; costs of shareholders' reports and shareholder meetings; and any
extraordinary expenses. The Fund also pays for brokerage fees and commissions
in connection with the purchase of portfolio securities.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the
performance and yields of the Fund may be quoted and compared to those of other
mutual funds with similar investment objectives and to stock or other relevant
bond indexes or to rankings prepared by independent services or other financial
or industry publications that monitor the performance of mutual funds. For
example, the performance of the Funds may be compared to data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service which
monitors the performance of mutual funds. Performance and yield data as
reported in national financial publications including, but not limited to,
MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK
TIMES, or publications of a local or regional nature, may also be used in
comparing the performance and yields of the Fund. The performance and yield
data ^ will be calculated separately for Trust Shares, Retail A Shares and
Retail B Shares of the Fund.
The standard yield is computed by dividing the Fund's average daily net
investment income per share during a 30-day (or one month) base period
identified in the advertisement by the net
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<PAGE>
asset value per share on the last day of the period, and annualizing the
result on a semi-annual basis. The Fund may also advertise its
"effective yield" which is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested.
The Fund may also advertise its performance using "average annual total return"
over various periods of time. Such total return figures reflect the average
percentage change in the value of an investment in the Fund from the beginning
date of the measuring period to the end of the measuring period. Average total
return figures will be given for the most recent one-, five- and ten-year
periods (if applicable), and may be given for other periods as well, such as
from the commencement of the Fund's operations, or on a year-by-year basis.
The Fund may also use "aggregate total return" figures for various periods,
representing the cumulative change in the value of an investment in the Fund
for the specified period. Both methods of calculating total return assume that
dividend and capital gain distributions made by the Fund during the period are
reinvested in Fund shares.
Performance and yields of the Fund will fluctuate and any quotation of
performance or yield should not be considered as representative of future
performance. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in the Fund's shares with bank deposits, savings accounts
and similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses, and
market conditions.
Any additional fees charged by Institutions with respect to accounts of
Customers that have invested in Trust Shares of the Fund will not be included
in calculations of yield and performance.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of ^ either Galaxy or a particular Fund means, with respect
to the approval of an investment advisory agreement or a change in an
investment objective or fundamental investment policy, the affirmative vote of
the holders of the lesser of (a) more than 50% of the
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outstanding shares of the Fund or Galaxy, or (b) 67% or more of the shares
of the Fund or Galaxy present at a meeting if more than 50% of the
outstanding shares of the Fund or Galaxy are represented at the meeting in
person or by proxy.
The portfolio manager of the Fund and other investment professionals may from
time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders
and prospective investors. The topics may include but are not limited
to the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may
compare to various market indices; shareholder profiles and
hypothetical investor scenarios; the economy; the financial and capital
markets; investment strategies and techniques; investment products;
and tax, retirement and investment planning.
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<PAGE>
THE GALAXY FUND
Statement of Additional Information
^ Trust Shares of the
Short-Term Bond Fund
Intermediate Government Income Fund
High Quality Bond Fund
^ March 1, 1996
<PAGE>
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectuses (the "Prospectuses") for Trust
Shares of the Short-Term Bond, Intermediate Government Income and High
Quality Bond Funds, each dated March 1, 1996, of The Galaxy Fund ("Galaxy"), as
they may from time to time be supplemented or revised. This Statement of
Additional Information is incorporated by reference in its entirety into each
such Prospectus. No investment in shares of the Funds should be made without
reading the Prospectuses. Copies of the Prospectuses may be obtained by
writing
Galaxy c/o ^ First Data Investor Services Group, Inc. ^, 4400 Computer Drive,
Westboro, Massachusetts ^ 01581 or by calling Galaxy at (800) 628-0414.
GALAXY FUNDS
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES
Variable and Floating Rate Obligations
Bank Obligations
Asset-Backed Securities
Municipal Securities
When-Issued Securities and Forward Commitment and
Delayed Settlement Transactions
Stand-By Commitments
Repurchase Agreements; Reverse Repurchase Agreements;
Loans of Portfolio Securities
Government Securities
^
Foreign Currency Exchange Transactions -- Short-Term
Bond Fund
^
Additional Investment Limitations
^
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DESCRIPTION OF SHARES
ADDITIONAL INFORMATION CONCERNING TAXES
In General
Short-Term Bond Fund ^
Taxation of Certain Financial Instruments
State Taxation
TRUSTEES AND OFFICERS
Shareholder and Trustee Liability
^ ADVISORY, ADMINISTRATION,
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS
Custodian and Transfer Agent
PORTFOLIO TRANSACTIONS
SHAREHOLDER SERVICES PLAN
EXPENSES
DISTRIBUTOR
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Page
AUDITORS
COUNSEL
PERFORMANCE AND YIELD INFORMATION
^
Yield and Performance of the ^ Funds ^
MISCELLANEOUS
FINANCIAL STATEMENTS
APPENDIX A A-1
APPENDIX B B-1
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THE GALAXY FUND
The Galaxy Fund ("Galaxy") is an open-end management investment company
currently offering shares of beneficial interest in twenty-four investment
portfolios.
This Statement of Additional Information relates to ^ Trust Shares of Three
of those investment portfolios: the ^ Short-Term Bond Fund, Intermediate
Government Income Fund (formerly Intermediate Bond Fund) and High Quality
Bond Fund^ and Corporate Bond Fund^ (the "Funds"). This Statement of
Additional Information provides additional investment information with respect
to all Funds and should be read in conjunction with the current Prospectuses.
INVESTMENT OBJECTIVES AND POLICIES
VARIABLE AND FLOATING RATE OBLIGATIONS
The ^ Funds may purchase variable and floating rate instruments as described
in their Prospectuses. If such an instrument is not rated, the investment
adviser to the Funds (Fleet Investment Advisors Inc. ("Fleet" or the
"Investment Adviser")) must determine that such instrument is comparable to
rated instruments eligible for purchase by a Fund and will consider
the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such ^ instruments and will continuously
monitor their financial status in order to meet payment on demand.
In determining average weighted portfolio maturity of each of these Funds, a
variable or floating rate instrument issued or guaranteed by the U.S.
Government or an agency or instrumentality thereof will be deemed to have a
maturity equal to the period remaining until the obligation's next interest
rate adjustment. ^ Variable and floating rate obligations ^ with a demand
feature will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand notice period.
^ BANK OBLIGATIONS
^ Investments by the Funds in non-negotiable time deposits are limited to no
more than 5% of each such Fund's total assets at the time of purchase. ^
<PAGE>
ASSET-BACKED SECURITIES
Asset-backed securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in an underlying pool
of assets, or as debt instruments, which are also known as collateralized
obligations, and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties.
The yield characteristics of asset-backed securities differ from traditional
debt securities. A major difference is that the principal amount of the
obligations may be prepaid at any time because the underlying assets (i.e.
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected prepayments,
will decrease, yield to maturity.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore prepayment
rates are influenced by a variety of economic and social factors.
In general, the collateral supporting non-mortgage asset-backed securities
is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Like other fixed income securities,
when interest rates rise, the value of an asset-backed security generally
will decline; however, when interest rates decline, the value of an asset-
backed security with prepayment features may not increase as much
as that of other fixed income securities.
Asset-backed securities are subject to greater risk of default during
periods of economic downturn. Also, the secondary market for certain asset-
backed securities may not be as liquid as the market for other types of
securities, which could result in a Fund's experiencing difficulty in valuing
or liquidating such securities. For these reasons, under certain
circumstances, asset-backed securities may be considered illiquid securities.
MUNICIPAL SECURITIES
The ^ Funds may also invest in Municipal Securities when such investments
are deemed appropriate by Fleet in light of the Funds' investment objectives.
As a result of the favorable tax treatment afforded such obligations under the
Internal Revenue Code of 1986, as amended, yields on municipal obligations can
generally be expected under normal market conditions to be lower than yields on
corporate and U.S. Government obligations, although from time to time^
Municipal Securities have outperformed, on a total return basis, comparable
corporate and federal debt obligations as a result of prevailing economic,
regulatory or other circumstances.
Municipal Securities acquired by the Funds include debt obligations
issued by governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating
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<PAGE>
expenses, and the extension of loans to public institutions and facilities.
Private activity bonds that are issued by or on behalf of public authorities to
finance various privately operated facilities are "Municipal Securities" if the
interest paid thereon is exempt from regular Federal income tax and not treated
as a specific tax preference item under the Federal alternative minimum tax.
The two principal categories of Municipal Securities include "general
obligation" and "revenue" issues. The Funds' portfolios may also
include "moral obligation" issues, which are normally issued by special purpose
authorities. There are, of course, variations in the quality of Municipal
Securities, both within a particular category and between categories, and the
yields on Municipal Securities depend upon a variety of factors, including
general market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of a
nationally recognized statistical rating organization ("NRSRO"), such as
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's ^ Ratings
Group ("S&P"), described in the Prospectus for each Fund and in Appendix A
hereto, represent such rating services' opinion as to the quality of Municipal
Securities. It should be emphasized that these ratings are general and are not
absolute standards of quality. Municipal Securities with the same maturity,
interest rate and rating may have different yields. Municipal Securities of
the same maturity and interest rate with different ratings may have the same
yield. Subsequent to its purchase by a Fund, an issue of Municipal Securities
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Fund.
The payment of principal and interest on most Municipal Securities purchased
by the Funds will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities and each multistate
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Funds' Prospectuses. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer." An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment
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of interest on and principal of its Municipal Securities may be materially
adversely affected by litigation or other conditions.
Among other instruments, the Funds may purchase short-term General
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and
other forms of short-term loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues. In addition, the Funds may invest in long-term
tax-exempt instruments,such as municipal bonds and private activity bonds to
the extent consistent with the limitations set forth in the Prospectus for each
Fund ^.
Private activity bonds are or have been issued to obtain funds to provide,
among other things, privately operated housing facilities, pollution control
facilities, convention or trade show facilities, mass transit, airport, port or
parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Private activity bonds are also
issued to privately held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local governments are
authorized in most states to issue private activity bonds for such purposes in
order to encourage corporations to locate within their communities. The
principal and interest on these obligations may be payable from the general
revenues of the users of such facilities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Securities. For example, under the Tax Reform Act of
1986, interest on certain private activity bonds must be included in an
investor's federal alternative minimum taxable income, and corporate investors
must include all tax-exempt interest in their federal alternative minimum
taxable income. Galaxy cannot, of course, predict what legislation may be
proposed in the future regarding the income tax status of interest on Municipal
Securities, or which proposals, if any, might be enacted.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Funds
nor Fleet
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<PAGE>
will review the proceedings relating to the issuance of Municipal Securities or
the bases for such opinions.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT AND DELAYED SETTLEMENT
TRANSACTIONS
When a Fund agrees to purchase securities on a "when-issued," "forward
commitment" or "delayed settlement" basis, the Fund's custodian will set aside
cash or liquid portfolio securities equal to the amount of the commitment in a
separate account. In the event of a decline in the value of the securities
that the custodian has set aside, the Fund may be required to place additional
assets in the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitment. A Fund's net assets may
fluctuate to a greater degree if it sets aside portfolio securities to cover
such purchase commitments than if it sets aside cash. Because a Fund sets
aside liquid assets to satisfy its purchase commitments in the manner
described, its liquidity and ability to manage its portfolio might be affected
in the event its commitments to purchase "forward commitments," commitments to
purchase "when-issued" securities or commitments to purchase securities on a
"delayed settlement" basis exceeded 25% of the value of its assets.
When a Fund engages in "when-issued," "forward commitment" or "delayed
settlement" transactions, it relies on the seller to consummate the trade.
Failure of the seller to do so may result in the Fund's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous for a
security. For purposes of determining the average weighted maturity of a
Fund's portfolio, the maturity of "when-issued" securities is calculated from
the date of settlement of the purchase to the maturity date.
STAND-BY COMMITMENTS
Under a "stand-by commitment," a dealer agrees to purchase from a Fund, at
the Fund's option, specified securities at a specified price. "Stand-by
commitments" are exercisable by the Fund at any time before the maturity of the
underlying security,
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<PAGE>
and may be sold, transferred or assigned by the Fund only with respect to the
underlying instruments.
Although "stand-by commitments" are often available without the payment of
any direct or indirect consideration, if necessary or advisable, a Fund may pay
for a "stand-by commitment" either separately in cash or by paying a higher
price for securities that are acquired subject to the commitment. Where the
Fund pays any consideration directly or indirectly for a "stand-by commitment,"
its cost will be reflected as unrealized depreciation for the period during
which the commitment is held by the Fund.
The ^ Funds will enter into "stand-by commitments" only with banks and
broker/dealers that present minimal credit risks. In evaluating the
creditworthiness of the issuer of a "stand-by commitment," the Fund's
Investment Adviser will review periodically the issuer's assets, liabilities,
contingent claims and other relevant financial information.
The Funds will acquire "stand-by commitments" solely to facilitate liquidity
and do not intend to exercise their rights thereunder for trading purposes.
"Stand-by commitments" will be valued at zero in determining a Fund's net asset
value.
REPURCHASE AGREEMENTS; REVERSE REPURCHASE AGREEMENTS; LOANS OF PORTFOLIO
SECURITIES
^ Each Fund may enter into repurchase agreements. The repurchase price
under repurchase agreements generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by a Fund's custodian
or sub-custodian in a segregated account or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the Investment Company Act of 1940, as amended (the "1940 Act").
^ Each Fund may enter into reverse repurchase agreements. Whenever a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets such as cash or liquid securities equal to the
repurchase price (including accrued interest). The Fund will monitor the
account to ensure such equivalent value is maintained. Reverse repurchase
agreements are considered to be borrowings by a Fund under the 1940 Act.
A Fund that loans portfolio securities would continue to accrue interest on
the securities loaned and would also earn income on the loans. Any cash
collateral received by the ^ Funds
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<PAGE>
would be invested in high quality, short-term "money market" instruments.
GOVERNMENT SECURITIES
Examples of the types of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (hereinafter, "U.S. Government
obligations") that may be held by the Funds include, without limitation, direct
obligations of the U.S. Treasury, and securities issued or guaranteed by the
Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Resolution Trust Corporation and Maritime Administration.
^ FOREIGN CURRENCY EXCHANGE TRANSACTIONS -- SHORT-TERM BOND FUND
Because the Short-Term Bond Fund may buy and sell securities
denominated in currencies other than the U.S. dollar, and receive
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Fund may enter into foreign currency exchange transactions to convert
United States currency to foreign currency and foreign currency to United
States currency as well as convert foreign currency to other foreign
currencies. The Fund either enters into these transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market, or uses forward contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by the Fund to
purchase or sell a specific currency at a specified price and future date,
which may be any fixed number of days from the date of the contract. Forward
foreign currency exchange contracts establish an exchange rate at a future
date. These contracts are transferable in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward foreign currency exchange contract generally has no
deposit requirement and is traded at a net price without commission. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.
The Fund may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign
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<PAGE>
currency exchange rates between the trade and settlement dates of specific
securities transactions or changes in foreign currency exchange rates that
would adversely affect a portfolio position or an anticipated portfolio
position. Since consideration of the prospect for currency parities will be
incorporated into the Fund's long-term investment decisions, the Fund will not
routinely enter into foreign currency hedging transactions with respect to
portfolio security transactions; however, it is important to have the
flexibility to enter into foreign currency hedging transactions when it is
determined that the transactions would be in the Fund's best interest. Although
these transactions tend to minimize the risk of loss due to a decline in the
value of the hedged currency, at the same time they tend to limit any potential
gain that might be realized should the value of the hedged currency increase.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
^
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ADDITIONAL INVESTMENT LIMITATIONS
In addition to the investment limitations disclosed in their Prospectuses,
the Funds are subject to the following investment limitations, which may be
changed with respect to a particular Fund only by a vote of the holders of a
majority of such Fund's outstanding shares (as defined under "Miscellaneous" in
the Prospectuses).
Each Fund may not:
1. Purchase securities on margin (except such short-term credits as may be
necessary for the clearance of purchases), make short sales of
securities or maintain a short position.
2. Act as an underwriter within the meaning of the Securities Act of 1933;
except insofar as a Fund might be deemed to be an underwriter upon
disposition of restricted portfolio securities; and except to the
extent that the purchase of securities directly from the issuer thereof
in accordance with the Fund's investment objective, policies and
limitations may be deemed to be underwriting.
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<PAGE>
3. Purchase or sell real estate; except that each ^ Fund may
purchase securities that are secured by real estate, and ^ may purchase
securities of issuers which deal in real estate or interests therein.
4. Purchase or sell commodities or commodity contracts or invest in oil,
gas, or other mineral exploration or development programs or mineral
leases; provided however, that each Fund may enter into
interest rate futures contracts to the extent permitted under the
Commodity Exchange Act and the 1940 Act; and further provided that the
Short-Term Bond^ and Corporate Bond Funds may enter into forward
currency contracts and foreign currency futures contracts and related
options to the extent permitted by their respective investment
objectives and policies.
5. Invest in or sell put options, call options, straddles, spreads, or any
combination thereof^.
6. Invest in companies for the purpose of exercising management or
control.
7. Purchase securities of other investment companies except in connection
with a merger, consolidation, reorganization, or acquisition of assets;
provided, however, that ^ all Funds may acquire such securities in
accordance with the 1940 Act ^.
In addition to the above limitations:
^ 8. The Funds, with the exception of the ^ Short-Term Bond Fund, may not
purchase foreign securities, except that the ^Intermediate Government
Income and High Quality Bond Funds may purchase certificates of
deposit, bankers' acceptances, or other similar obligations issued by
U.S. branches of foreign banks, or foreign
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<PAGE>
branches of U.S. banks, and obligations of Canadian Provincial
Governments in accordance with each Fund's investment objective and
policies.
The investment restrictions described below are not fundamental policies of
Galaxy and may be changed by Galaxy's Board of Trustees. These non-fundamental
investment policies require that:
(A) ^ the Funds may not purchase any security if, as a result, the Fund
would then have more than 5% of its total assets invested in securities of
companies (including predecessors) that have been in continuous operation for
less than three years; and
^(B) the Funds may not invest in warrants (other than warrants acquired by a
Fund as part of a unit or attached to securities at the time of purchase) if,
as a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of a Fund's net assets or if, as a result, more than 2%
of a Fund's net assets would be invested in warrants not listed on a recognized
United States or foreign stock exchange, to the extent permitted by applicable
state securities laws.
In order to permit the sale of Fund shares in certain states, Galaxy may
make other commitments more restrictive than the investment policies and
limitations described above and in the Prospectuses.
^
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Trust Shares of the Funds are sold on a continuous basis by 440 Financial
Distributors, Inc. (the "Distributor"), and the Distributor has agreed to use
appropriate efforts to solicit all purchase orders. In addition, Trust Shares
in the Funds are offered to investors maintaining qualified accounts at bank
and trust institutions, including institutions affiliated with Fleet Financial
Group, Inc., and to participants in employer-sponsored defined contribution
plans.
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<PAGE>
^ If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, Galaxy may
make payment wholly or partly in securities or other property. Such
redemptions will only be made
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<PAGE>
in "readily marketable" securities. In such an event, a shareholder would
incur transaction costs in selling the securities or other property.
Galaxy may suspend the right of redemption or postpone the date of payment
for shares for more than seven days during any period when (a) trading in the
markets the Funds normally utilize is restricted, or an emergency, as defined
by the rules and regulations of the Securities and Exchange Commission (the
"SEC") exists making disposal of a Fund's investments or determination of its
net asset value not reasonably practicable; (b) the New York Stock Exchange is
closed (other than customary weekend and holiday closings); or (c) the SEC has
by order permitted such suspension.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
DESCRIPTION OF SHARES
Galaxy is a Massachusetts business trust. Galaxy's Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of shares and to
classify or reclassify any unissued shares into one or more additional classes
by setting or changing in any one or more respects their respective
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption. Pursuant to such authority, the Board of Trustees has authorized
the issuance of twenty-four classes of shares, each representing interests
in one of twenty-four separate investment portfolios: Money Market Fund,
Government Fund, Tax-Exempt Fund, U.S. Treasury Fund, Connecticut Municipal
Money Market Fund, Massachusetts Municipal Money Market Fund, Institutional
Treasury Money Market Fund, Equity Value Fund, Equity Growth Fund, Equity
Income Fund, International Equity Fund, Small Company
Equity Fund, Asset Allocation Fund, Growth and Income Fund, Small Cap Value
Fund, Short-Term Bond Fund, Intermediate Government Income Fund, High Quality
Bond Fund, Corporate Bond Fund, Tax-Exempt Bond Fund, New York Municipal Bond
Fund, Connecticut Municipal Bond Fund, Massachusetts Municipal Bond Fund and
Rhode Island Municipal Bond Fund. As stated in the applicable Prospectuses,
two separate series of shares (Retail A Shares and Trust Shares) of the ^
Funds (plus a third series of shares, i.e. Retail B Shares, of the Short-Term
Bond and High-Quality Bond Funds ("CDSC Funds") are offered under separate
Prospectuses to different categories of investors.
Shares have no preemptive rights and only such conversion or exchange rights
as the Board of Trustees may grant in its discretion. When issued for payment
as described in the Prospectuses, shares will be fully paid and non-assessable.
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<PAGE>
Except as noted below with respect to the Shareholder Services Plan (which is
currently applicable only to Retail A Shares of a Fund) ^, the Distribution and
Services Plan for Retail B Shares of a Fund, and differing transfer agency
fees, Trust Shares, Retail A Shares and Retail B Shares bear pro rata the same
expenses and are entitled equally to a Fund's dividends and distributions. In
the event of a liquidation or dissolution of Galaxy or an individual Fund,
shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund, and a proportionate
distribution, based upon the relative asset values of Galaxy's respective
Funds, of any general assets of Galaxy not belonging to any particular Fund,
which are available for distribution. Shareholders of a Fund are entitled to
participate in the net distributable assets of the particular Fund involved in
liquidation, based on the number of shares of the Fund that are held by each
shareholder, except that currently each Fund's Retail A Shares would be solely
responsible for the Fund's payments to Service Organizations under the
Shareholder Services Plan^ and each CDSC Fund's Retail B Shares would be solely
responsible for the Fund's payments to the Distributor and to Service
Organizations under the Distribution and Services Plan.
Holders of all outstanding shares of a particular Fund will vote together in
the aggregate and not by series on all matters, except that only Retail A
Shares and Trust Shares of a Fund will be entitled to vote on matters submitted
to a vote of shareholders pertaining to Galaxy's Shareholder Services Plan for
Retail A and Trust Shares and only Retail B Shares of a Fund will be entitled
to vote on matters submitted to a vote of shareholders pertaining to Galaxy's
Distribution and Services Plan for Retail B Shares. Further, shareholders of
all of the Funds, as well as those of any other investment portfolio now or
hereafter offered by Galaxy, will vote together in the aggregate and not
separately on a Fund-by-Fund basis, except as otherwise required by law or when
permitted by the Board of Trustees. Rule 18f-2 under the 1940 Act
provides that any matter required to be submitted to the holders
of the outstanding voting securities of an investment company such
as Galaxy shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each Fund affected by the matter. A particular Fund is deemed to be
affected by a matter unless it is clear that the interests of each Fund in the
matter are substantially identical or that the matter does not affect any
interest of the Fund. Under the Rule, the approval of an investment advisory
agreement or any change in fundamental investment policy would be effectively
acted upon with respect to a Fund only if approved by a majority of the
outstanding shares of such Fund (irrespective of series designation). However,
the Rule also provides that the ratification of the appointment of independent
public accountants, the approval of principal underwriting contracts, and the
election of trustees may be
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<PAGE>
effectively acted upon by shareholders of Galaxy voting without regard to class
or series.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held, and will vote in the aggregate, and not by
class or series, except as otherwise required by the 1940 Act or other
applicable law or when the matter to be voted upon affects only the interests
of the shareholders of a particular class or series. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate of
Galaxy's outstanding shares may elect all of the trustees, irrespective of the
votes of other shareholders.
Galaxy does not intend to hold annual shareholder meetings except as may be
required by the 1940 Act. Galaxy's Declaration of Trust provides that a
meeting of shareholders shall be called by the Board of Trustees upon a written
request of shareholders owning at least 10% of the outstanding shares of Galaxy
entitled to vote.
Galaxy's Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of a Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of the Fund involved to
be redeemed at a price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a Fund's assets
into money and, in connection therewith, to cause all outstanding shares of the
Fund involved to be redeemed at their net asset value; or (c) combine the
assets belonging to a Fund with the assets belonging to another Fund of Galaxy
and, in connection therewith, to cause all outstanding shares of any Fund to be
redeemed at their net asset value or converted into shares of another class of
Galaxy's shares at the net asset value. In the event that shares are redeemed
in cash at their net asset value, a shareholder may receive in payment for such
shares, due to changes in the market prices of the Fund's portfolio securities,
an amount that is more or less than the original investment. The exercise of
such authority by the Board of Trustees will be subject to the provisions of
the 1940 Act, and the Board of Trustees will not take any action described in
this paragraph unless the proposed action has been disclosed in writing to the
Fund's shareholders at least 30 days
prior thereto.
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<PAGE>
ADDITIONAL INFORMATION CONCERNING TAXES
IN GENERAL
The following summarizes certain additional tax considerations generally
affecting the Funds ^ and their shareholders that are not described in the
Funds' Prospectuses. No attempt is made to present a detailed explanation of
the tax treatment of the Funds or their shareholders, and the discussion here
and in the Prospectuses is not intended as a substitute for careful tax
planning. Potential investors should consult their tax advisers with specific
reference to their own tax situation.
Each Fund ^ is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and each Fund intends to qualify
as a
"regulated investment company" under the Code. By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the Federal income
taxes to which it may be subject. If for any taxable year a Fund does not
qualify for the special federal tax treatment afforded regulated investment
companies, all of the Fund's taxable income would be subject to tax at regular
corporate rates without any deduction for distributions to shareholders. In
such event, a Fund's distributions to shareholders (including amounts derived
from interest on Municipal Securities) would be taxable as ordinary income, to
the extent of the current and accumulated earnings and profits of the
particular Fund, and would be eligible for the dividends received deduction in
the case of corporate shareholders.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that each Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its tax-exempt interest income (if any) net
of certain deductions for such year (the "90% distribution requirement"). In
addition, each Fund must satisfy certain requirements with respect to the
source of its income for a taxable year. At least 90% of the gross income of
each Fund must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, and other income (including, but not limited to, gains
from options, futures, or forward contracts) derived with respect to the Fund's
business of investing in such stock, securities or currencies (the "90% gross
income test"). The Treasury Department may by regulation exclude from
qualifying income foreign currency gains which are not directly related to a
Fund's principal business of investing in stock or securities, or options and
futures with respect to stock or securities. Any income derived by a Fund from
a partnership or trust is treated for this purpose as derived with respect to
the Fund's business of investing in stock, securities or currencies, only to
the
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<PAGE>
extent that such income is attributable to items of income which would have
been qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
A Fund will not be treated for a taxable year as a regulated investment
company under the Code if 30% or more of the Fund's gross income for such year
is derived from gains realized on the sale or other disposition of the
following investments held for less than three months (the "30% test"): (1)
stock and securities (as defined in Section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Fund's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and accrued market discount) received by a Fund upon maturity or disposition of
a security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of this requirement, any other income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose. Although proposed legislation would repeal the
30% test, it is unclear if or when such legislation would become effective.
With respect to covered call options, if the call is exercised by the holder,
the premium and the price received upon exercise constitute the proceeds of
sale, and the difference between the proceeds and the cost of the securities
subject to the call is capital gain or loss. Premiums from expired call options
written by a Fund and net gains from closing purchase transactions are treated
as short-term capital gains for federal income tax purposes, and losses on
closing purchase transactions are short-term capital losses. With respect to
forward contracts, futures contracts, options on futures contracts, and other
financial instruments subject to the mark-to-market rules described below under
"Taxation of Certain Financial Instruments," the Internal Revenue Service (the
"Service") has ruled in private letter rulings issued to other registered
investment companies that a gain realized from such a contract, option or
financial instrument will be treated as being derived from a security held for
three months or more (regardless of the actual period for which the contract,
option or instrument is held) if the gain arises as a result of a constructive
sale under the mark-to- market rules, and will be treated as being derived from
a security held for less than three months only if the contract, option or
instrument is terminated (or transferred) during the taxable year (other than
by reason of marking-to-market) and less than three months time has elapsed
between the date the contract, option or instrument is acquired and the
termination date. Although a private letter ruling is binding on the Service
only with respect to the taxpayer receiving the ruling, it is
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<PAGE>
anticipated that the Service would take the same position with respect to the
Funds. Increases and decreases in the value of a Fund's forward contracts,
futures contracts, options on futures contracts and other investments that
qualify as part of a "designated hedge," as defined in Section 851(g) of the
Code, may be netted for purposes of determining whether the 30% test is met.
A Fund will designate any distribution of the excess of net long-term
capital gain over net short-term capital loss as a capital gain dividend in a
written notice mailed to shareholders within 60 days after the close of the
Fund's taxable year. Shareholders should note that, upon the sale or exchange
of Fund Shares, if the shareholder has not held such Shares for more than six
months, any loss on the sale or exchange of those Shares will be treated as
long-term capital loss to the extent of the capital gain dividends received
with respect to the Shares.
Ordinary income of individuals is taxable at a maximum nominal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate
of tax for some taxpayers may be higher. An individual's long-term capital
gains are taxable at a maximum nominal rate of 28%. For corporations, long-
term capital gains and ordinary income are both taxable at a maximum nominal
rate of 35% (an effective marginal rate of 39% applies in the case of
corporations having taxable income between $100,000 and $335,000, and an
effective marginal rate of 38% applies in the case of corporations having
taxable income between $15,000,000 and $18,333,333).
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and capital gain net income (excess of capital gains over
capital losses). Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
prior to the end of each calendar year to avoid liability for this excise tax.
The Funds will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or gross sale proceeds paid to
any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to withholding by the Internal Revenue Service for
failure to properly include on his or her return payments of taxable interest
or dividends, or (iii) has failed to certify to the Funds that he or she is not
subject to back up withholding when required to do so or that he or she is an
"exempt recipient."
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<PAGE>
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Special rules govern the federal income tax treatment of financial
instruments that may be held by the Funds. These rules may have a particular
impact on the amount of income or gain that the Funds must distribute to their
respective shareholders to comply with the 90% distribution requirement, on the
income or gain qualifying under the 90% gross income test and on their ability
to comply with the 30% test described above.
Generally, futures contracts and options on futures contracts held by the ^
Funds and certain foreign currency contracts entered into by the ^ Short-Term
Bond Fund (as described above) (collectively, the "Instruments") at the close
of their taxable year are treated for federal income tax purposes as sold for
their fair market value on the last business day of such year, a process known
as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sales will be treated as short-term capital gain or loss and 60%
of such gain or loss will be treated as long-term capital gain or loss without
regard to the period a Fund has held the Instruments ("the 40%-60% rule"). The
amount of any capital gain or loss actually realized by a Fund in a subsequent
sale or other disposition of those Instruments is adjusted to reflect any
capital gain or loss taken into account by the Fund in a prior year as a result
of the constructive sale of the Instruments. Losses with respect to futures
contracts to sell, related options and certain foreign currency contracts,
which are regarded as parts of a "mixed straddle" because their values
fluctuate inversely to the values of specific securities held by the Funds, are
subject to certain loss deferral rules, which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof that
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules,
which also are applicable, the holding period of the securities forming part of
the straddle (if they have not been held for the long-term holding period) will
be deemed not to begin prior to termination of the straddle. With respect to
certain Instruments, deductions for interest and carrying charges may not be
allowed. Notwithstanding the rules described above, with respect to futures
contracts that are part of a "mixed straddle" to sell related options, and
certain foreign currency contracts that are properly identified as such, a Fund
may make an election which will exempt (in whole or in part) those identified
futures contracts, options and foreign currency contracts from the Rules of
Section 1256 of the Code including "the 40%-60% rule" and "mark-to-market," but
gains and losses will be subject to such
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<PAGE>
short sales, wash sales and loss deferral rules and the requirement to
capitalize interest and carrying charges. Under Temporary Regulations, a Fund
would be allowed (in lieu of the foregoing) to elect either (1) to offset gains
or losses from portions which are part of a mixed straddle by separately
identifying each mixed straddle to which such treatment applies, or (2) to
establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under
either election, "the 40%-60% rule" will apply to the net gain or loss
attributable to the Instruments, but in the case of a mixed straddle account
election, not more than 50% of any net gain may be treated as long-term and no
more than 40% of any net loss may be treated as short-term.
A foreign currency contract must meet the following conditions in order to
be subject to the mark-to-market rules described above: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract
depends; (2) the contract must be entered into at arm's length at a price
determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of the date of this Statement of Additional
Information, the Treasury Department has not issued any such regulations.
Other foreign currency contracts entered into by a Fund may result in the
creation of one or more straddles for federal income tax purposes, in which
case certain loss deferral, short sales, and wash sales rules and the
requirement to capitalize interest and carrying charges may
apply.
Some of the non-U.S. dollar denominated investments that a Fund may make,
such as foreign securities, European Depository Receipts and foreign currency
contracts, may be subject to the provisions of Subpart J of the Code, which
govern the federal income tax treatment of certain transactions denominated in
terms of a currency other than the U.S. dollar or determined by reference to
the value of one or more currencies other than the U.S dollar. The types of
transactions covered by these provisions include the following: (1) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, preferred stock);
(2) the accruing of certain trade receivables and payables; and (3) the
entering into or acquisition of any forward contract, futures contract, option
and similar financial instrument. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer also is treated as a transaction subject to the
special currency rules. However, foreign currency-related regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
-20-
<PAGE>
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts,
futures contracts and options that are capital assets in the hands of the
taxpayer and which are not part of a straddle. In accordance with Treasury
regulations, certain transactions that are part of a "Section 988 hedging
transaction" (as defined in the Code and Treasury regulations) may be
integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions" are
not subject to the mark-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Funds, which is not
subject to the special currency rules (such as foreign equity investments other
than certain preferred stocks), is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.
The Funds may be subject to U.S. federal income tax on a portion of any
"excess distribution" or a gain from the disposition of passive foreign
investment companies even if it distributes the income to its shareholders.
STATE TAXATION
Depending upon the extent of Galaxy's activities in states and localities in
which its offices are maintained, in which its agents or independent
contractors are located, or in which it is otherwise deemed to be conducting
business, each Fund may be subject to the tax laws of such states or
localities. In addition, in those states and localities that have income tax
laws, the treatment of a Fund and its shareholders under such laws may differ
from their treatment under federal income tax laws. Under state or local law,
distributions of net investment income may be taxable to shareholders as
dividend income even though a substantial portion of such distributions may be
derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from such income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
TRUSTEES AND OFFICERS
The trustees and executive officers of Galaxy, their addresses, principal
occupations during the past five years, and other affiliations are as follows:
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<PAGE>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
Dwight E. Vicks, Jr. Chairman & President & Director,
Vicks Lithograph & Trustee Vicks Lithograph &
Printing Corporation Printing Corporation
Commercial Drive (book manufacturing and
P.O. Box 270 commercial printing);
Yorkville, NY 13495 Director, Utica Fire
Age 61 Insurance Company;
Trustee, Savings Bank of
Utica; Director, Monitor
Life Insurance Company;
Director, Commercial
Travelers Mutual
Insurance Company;
Trustee, The Galaxy VIP
Fund; Trustee, Galaxy
Fund II.
John T. O'Neill1 President Executive Vice President,
Hasbro, Inc. Treasurer & and CFO, Hasbro, Inc
200 Narragansett Trustee (toy and game
Park Drive manufacturer), since
Pawtucket, RI 02862 1987; Trustee, The Galaxy
Age 54 VIP Fund; Trustee, Galaxy
Fund II; Managing
Partner, KPMG Peat
Marwick (accounting
firm), 1986.
Louis DeThomasis Trustee President, Saint Mary's
Saint Mary's College College of Minnesota;
of Minnesota Director, Bright Day
Winona, MN 55987 Travel, Inc.; Trustee,
Age 54 Religious Communities
Trust; Trustee, The
Galaxy VIP Fund; Trustee,
Galaxy Fund II.
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<PAGE>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
Donald B. Miller Trustee Chairman, Horizon Media,
10725 Quail Covey Road Inc. (broadcast
Boynton Beach, FL 33436 services);
Age 69 Director/Trustee,
Lexington Funds;
President and CEO, Media
General Broadcast
Services, Inc. (1986 to
1989); Chairman,
Executive Committee,
Compton International,
Inc. (advertising
agency); Trustee,
Keuka College; Trustee,
The
Galaxy VIP Fund; Trustee,
Galaxy Fund II.
James M. Seed Trustee Chairman and President,
The Astra Ventures, The Astra Projects,
Inc. Incorporated (land
One Citizens Plaza development); President,
Providence, RI 02903 The Astra Ventures,
Age 54 Incorporated (previously,
Buffinton Box Company -
manufacturer of cardboard
boxes); Trustee, The
Galaxy VIP Fund; Trustee,
Galaxy Fund II;
Commissioner, Rhode
Island Investment
Commission.
Bradford S. Wellman1 Trustee Private Investor;
2468 Ohio Street President, Ames &
Bangor, ME 04401 Wellman, from 1978 to
Age 64 1991; President, Pingree
Associates, Inc., from
1974 until 1990;
Director, Essex County
Gas Company, until
January 1994; Director,
Maine Mutual Fire
Insurance Co.; Member,
Maine Finance Authority;
Trustee, The Galaxy VIP
Fund; Trustee, Galaxy
Fund II.
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<PAGE>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath,
Bank Building Philadelphia,
Broad & Chestnut Sts. Pennsylvania.
Philadelphia, PA 19107
Age 52
Neil Forrest Vice Vice President,
^ First Data Investor President Investment Marketing and
Services Group, Inc. and Strategic Planning,
^ 4400 Computer Drive Assistant Manufacturers and Traders
^ Westboro, MA 01581 Treasurer Trust Co. (1990-1992);
^ Age 35 ^ First Data Investor
Services Group, Inc.
^(1992 to present).
Louis Russo Assistant Vice President, ^ First
^ First Data Investor Treasurer Data Investor Services
Services Group, Inc. Group, Inc. since 1990;
^ 4400 Computer Drive Director, Funds
^ Westboro, MA 01581 Accounting, Fidelity
^ Age 43 Investments from 1988 to
1990.
_________________________
1. An interested person within the definition set forth in Section 2(a)(19)
of the 1940 Act.
Each trustee receives an annual aggregate fee of ^ $23,000 for his services
as a trustee to ^ Galaxy ^, The Galaxy VIP Fund and Galaxy Fund II, plus an
additional ^ $1,500 for each in-person Galaxy Board meeting ^ attended
and $750 for each Galaxy Fund II Board meeting attended and is
reimbursed for expenses incurred in attending meetings. Each trustee of Galaxy
and The Galaxy VIP Fund also receives $500 for each telephone Board meeting
attended. The Chairman of the Boards of Galaxy and The Galaxy VIP Fund are
entitled to an additional annual aggregate fee in the amount of $3,000, and the
President and Treasurer of Galaxy and The Galaxy VIP Fund is entitled to an
additional annual aggregate fee of $2,000 for their services in these
respective capacities. No employee of ^ First Data Investor Services Group,
Inc. ^(formerly known as The Shareholder Services Group, Inc. d/b/a/ 440
Financial) receives any compensation from Galaxy for acting as an officer. No
person who is an officer, director or employee of Fleet, or any of its
affiliates, or of
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<PAGE>
the Sub-Adviser, serves as a trustee, officer or employee of Galaxy. The
trustees and officers of Galaxy own less than 1% of its outstanding shares.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. However, Galaxy's Declaration of Trust provides that shareholders shall
not be subject to any personal liability for the acts or obligations of Galaxy,
and that every note, bond, contract, order or other undertaking made by Galaxy
shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and
not because of his or her acts or omissions outside such capacity or some other
reason. The Declaration of Trust also provides that Galaxy shall, upon ^
request, assume the defense of any claim made against any shareholder for any
act or obligation of Galaxy, and shall satisfy any judgment thereon. Thus, the
risk of shareholder liability is limited to circumstances in which Galaxy
itself would be unable to meet its obligations.
The Declaration of Trust states further that no trustee, officer or agent of
Galaxy shall be personally liable for or on account of any contract, debt,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of Galaxy; nor shall any trustee be personally liable to any person
for any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim
against the trustees or Galaxy shall look solely to the trust property for
payment.
With the exceptions stated, the Declaration of Trust provides that a trustee
is entitled to be indemnified against all liabilities and expenses reasonably
incurred by him in connection with the defense or disposition of any proceeding
in which he may be involved or with which he may be threatened by reason of his
being or having been a trustee, and that the Board of Trustees shall indemnify
representatives and employees of Galaxy to the same extent to which they
themselves are entitled to indemnification.
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<PAGE>
The following chart provides certain information about the fees received by
Galaxy's trustees in the most recently completed fiscal year.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued as from Galaxy
Aggregate Part of and Fund
Name of Compensation Fund Complex*Paid
Person/Position from Galaxy Expenses to Trustees
<S> <C> <C> <C>
Bradford S. Wellman ^ $19,500 None ^ $27,500
Dwight E. Vicks, Jr. ^ $22,900 None ^ $31,650
Donald B. Miller ^ $19,500 None ^ $27,500
Rev. Louis DeThomasis ^ $19,500 None ^ $27,500
John T. O'Neil ^ $21,750 None ^ $28,625
James M. Seed ^ $19,500 None ^ $27,500
</TABLE>
_____________
* The "Fund Complex" consists of The Galaxy Fund, The Galaxy VIP Fund and
Galaxy Fund II.
^ ADVISORY, ADMINISTRATION,
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS
Fleet serves as investment adviser to the Funds. In its advisory agreement,
Fleet has agreed to provide investment advisory services to the Funds as
described in the Prospectuses. The Investment Adviser has also agreed to pay
all expenses incurred by it in connection with its activities under the
advisory agreement other than the cost of securities (including brokerage
commissions) purchased for the Funds. See "Expenses" in the Prospectuses.
For ^ the fiscal years ended October 31, ^ 1993, October 31, 1994 and
October 31, 1995, Galaxy paid Fleet fees (net of waivers) of $1,772,737,
$2,055,130 and $1,467,085, respectively, with respect to the ^ Intermediate
Government Income Fund; $722,296, $862,228 and $783,564, respectively, with
respect to the ^ High Quality Bond Fund; and $355,130, $463,521 and $293,801,
respectively, with respect to the Short-Term Bond Fund.
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<PAGE>
For the fiscal years ended October 31, ^ 1993, October 31, 1994 and October
31, 1995, Fleet waived advisory fees of $644,334, $757,729, and $557,058,
respectively, with respect to the Intermediate Government Income Fund^;
$268,355, $316,813 and $297,640, respectively, with respect to the High Quality
Bond Fund; and $129,168, $175,814 and $130,602 ^, respectively, with respect to
the Short-Term Bond Fund.
For the fiscal year ended October 31, 1995, Fleet reimbursed advisory fees
of $60,356, $34,946 and $65,354 with respect to the Intermediate Government
Income Fund, High Quality Bond Fund and Short-Term Bond Fund, respectively.
The advisory agreement provides that the Investment Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the performance of its duties under the advisory
agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment
Adviser in the performance of its duties or from reckless disregard by it of
its duties and obligations thereunder. Unless sooner terminated, the advisory
agreement will continue in effect with respect to a particular Fund ^ from year
to year as long as such continuance is approved at least annually (i) by the
vote of a majority of trustees who are not
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<PAGE>
parties to such advisory agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such approval; and (ii) by Galaxy's Board of Trustees, or by a
vote of a majority of the outstanding shares of such Fund. The term "majority
of the outstanding shares of such Fund" means, with respect to approval of an
advisory agreement, the vote of the lesser of (i) 67% or more of the shares of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund. The advisory agreement
may be terminated by Galaxy or by Fleet on sixty days' written notice, and will
terminate immediately in the event of its assignment.
^ Fleet Trust Company, an affiliate of the Investment Adviser, is paid a fee
for sub-account and administrative services performed with respect to Trust
Shares of ^ the Funds held by defined contribution plans. Pursuant to an
agreement between Fleet Trust Company and ^ First Data, Fleet Trust Company
will be paid $21.00 per year for each defined contribution plan participant
account. As of October ^ 31, 1995, there were approximately ^____________
defined contribution plan participant sub-accounts invested in Trust Shares
of the Funds; thus it is expected that Fleet Trust Company will receive
annually approximately ^ $__________ for sub-account services. ^ First Data
bears this expense directly, and shareholders of Trust Shares of ^ the
Funds bear this expense indirectly through fees paid to ^ First Data for
transfer agency services.
^ First Data Investor Services Group, Inc. ^(formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), a wholly-
owned subsidiary of First Data Corporation, serves as Galaxy's administrator.
Under the administration agreement, ^ First Data has agreed to maintain office
facilities for Galaxy, furnish Galaxy with statistical and research data,
clerical, accounting, and bookkeeping services, certain other services such as
internal auditing services required by Galaxy, and compute the net asset value
and net income of the Funds. ^ First Data prepares the Funds' annual and semi-
annual reports to the Securities and Exchange Commission, federal and state tax
returns, and filings with state securities commissions, arranges for and bears
the cost of processing share purchase and redemption orders, maintains the
Funds' financial accounts and records, and generally assists in all aspects of
Galaxy's operations.
Prior to March 31, 1995, Galaxy's administrator and transfer agent was 440
Financial Group of Worcester, Inc., a wholly-owned subsidiary of State Mutual
Life Assurance Company of America. On March 31, 1995, ^ First Data ^ acquired
all of the assets of 440 Financial Group of Worcester, Inc.
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<PAGE>
For the fiscal years ended October 31, ^ 1993, October 31, ^ 1994 and
October 31, ^ 1995, First Data and/or its predecessors received administration
fees ^(net of fee waivers) of $245,412, $312,525 and $244,446, respectively,
with respect to the ^ Intermediate Government Income Fund; $103,731, $131,746
and $130,250, respectively, with respect to the ^ High Quality Bond Fund; and
$49,474, $71,444 and $57,153, respectively, with respect to the ^ Short-Term
Bond Fund.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. ("Chase Manhattan") serves as custodian to
the Funds pursuant to a Global Custody Agreement. Under its custody agreement,
Chase Manhattan has agreed to: (i) maintain a separate account or accounts in
the name of each Fund; (ii) hold and disburse portfolio securities on account
of each Fund; (iii) collect and make disbursements of money on behalf of each
Fund; (iv) collect and receive all income and other payments and distributions
on account of each Fund's portfolio securities; (v) respond to correspondence
from security
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<PAGE>
brokers and others relating to its duties; and (vi) make periodic reports to
the Board of Trustees concerning the Funds' operations. Chase Manhattan is
authorized to select one or more banks or trust companies to serve as sub-
custodian for the Funds, provided that Chase Manhattan shall remain responsible
for the performance of all of its duties under the custodian agreement and
shall be liable to the Funds for any loss which shall occur as a result of the
failure of a sub-custodian to exercise reasonable care with respect to the
safekeeping of the Funds' assets. In addition, Chase Manhattan may employ sub-
custodians for the ^ Short-Term Bond Fund upon prior approval by the Board of
Trustees in accordance with the regulations of the SEC, for the purpose of
providing custodial services for the foreign assets of that Fund held outside
the United States. The assets of the Funds are held under bank custodianship
in compliance with the 1940 Act.
^ First Data also serves as Galaxy's transfer agent and dividend disbursing
agent pursuant to a Transfer Agency Agreement ("Transfer Agency Agreement").
Under the Transfer Agency Agreement, ^ First Data has agreed to: (i) issue and
redeem shares of each Fund; (ii) transmit all communications by each Fund to
its shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its
duties; (iv) maintain shareholder accounts; and (v) make periodic reports to
the Board of Trustees concerning Galaxy's operations.
PORTFOLIO TRANSACTIONS
Debt securities purchased or sold by the ^ Funds are generally traded in the
over-the-counter market on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
^ The Funds may engage in short-term trading to achieve their investment
objectives. Portfolio turnover may vary greatly from year to year as well as
within a particular year. ^
In purchasing or selling securities for the Funds, Fleet ^ will seek to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one broker/dealer are
comparable, Fleet ^ may effect transactions in portfolio securities with
broker/dealers who provide research, advice or other services such as market
investment literature.
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Except as permitted by the SEC or applicable law, the Funds will not acquire
portfolio securities from, make savings deposits in, enter into repurchase or
reverse repurchase agreements with, or sell securities to, the Investment
Adviser, ^ First Data, or their affiliates, and will not give preference to
affiliates and correspondent banks of Fleet with respect to such transactions.
Galaxy is required to identify any securities of its "regular brokers or
dealers" that ^ it has acquired during its most recent fiscal year. At October
31, ^ 1995, (a) the Short-Term Bond Fund had entered into repurchase
transactions with Chase Securities, Inc. in the amount of $1,119,271 to be
repurchased on November 1, 1995 at $1,119,450; (b) the Intermediate Government
Income Fund had entered into repurchase transactions with Chase Securities,
Inc. in the amount of $14,757,580 to be repurchased on November 1, 1995 at
$14,757,937; ^ and (c) the High Quality Bond Fund had entered into repurchase
transactions with Chase Securities, Inc. in the amount of $1,377,652 to be
repurchased on November 1, 1995 at $1,377,872. Chase Securities, Inc. is
considered a "regular broker or dealer" of Galaxy. Chase Manhattan Bank, N.A.
is the parent of Chase Securities, Inc.
Investment decisions for each Fund are made independently from those for the
other Funds and for any other investment companies and accounts advised or
managed by Fleet ^. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund, another portfolio of Galaxy,
and/or another investment company or account, the transaction will be averaged
as to price, and available investments allocated as to amount, in a manner
which Fleet ^ believes to be equitable to the Fund and such other portfolio,
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained or sold by such Fund. To the extent permitted by law, Fleet
^ may aggregate the securities to be sold or purchased for a Fund with those to
be sold or purchased for its other portfolios, or other investment companies or
accounts in order to obtain best execution.
SHAREHOLDER SERVICES PLAN
As stated in the Prospectuses for each Fund ^, Galaxy may enter into
agreements ("Shareholder Services Agreements") with Institutions and other
organizations (including Fleet Bank and its affiliates) (collectively, "Service
Organizations") pursuant to which Service Organizations will be compensated by
Galaxy for providing certain administrative and support services to Customers
who are the beneficial owners of Retail A Shares and Trust Shares of a Fund^.
Such services are intended to supplement the services provided by Galaxy's
Administrator and transfer agent. In consideration for payment of up to .25%
(on an annualized basis) of the average daily net asset value of Retail A
Shares and Trust Shares covered by a Shareholder Services Agreement, Service
Organizations may provide one or more
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of the following services to Customers: aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with the
Distributor; arranging for bank wires; processing dividend payments from a
Fund; providing sub-accounting with respect to Retail A Shares and Trust Shares
or the information necessary for sub-accounting; providing periodic mailings to
Customers (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices); and providing
other similar services if permitted by applicable statutes, rules and
regulations. In consideration for a separate payment of up to .25% (on an
annualized basis) of the average daily net asset value of Retail A Shares and
Trust Shares covered by a Shareholder Services Agreement, Service Organizations
may provide one or more of these additional services to Customers: providing
Customers periodically with information as to their positions in Retail A
Shares and Trust Shares; responding to Customer inquiries about services
performed by Service Organizations; providing a service to invest the assets of
Customers in Retail A Shares and Trust Shares; and providing other similar
services if permitted by applicable statutes, rules and regulations.
While the Shareholder Services Plan (the "Plan") authorizes aggregate
payments of up to .50% of the net asset value of all Retail A Shares and Trust
Shares of the Funds^, Galaxy currently intends to enter into Shareholder
Services Agreements only with respect to Retail A Shares of the Funds.
Further, Galaxy intends to limit the consideration paid under Shareholder
Services Agreements ^ to no more than .15% of the average daily net asset value
(on an annualized basis) of the Retail ^ A Shares of the Funds.
Each Shareholder Services Agreement between Galaxy and a Service
Organization relating to the Plan described above requires that the Service
Organization agree to waive a portion of the servicing fee payable to it under
the Plan to the extent necessary to ensure that the fees required to be accrued
with respect to the shares of the Funds on any day do not exceed the income to
be accrued to such Retail A Shares on that day.
For the one-month period ended October 31, 1994 (date of implementation of
Shareholder Services Plan), payments to Service Organizations totaled ^ $3,465,
$12,348, and $4,524 with respect to the ^ Retail A Shares of the High Quality
Bond Fund, Intermediate Government Income Fund and Short-Term Bond Fund,
respectively.
For the fiscal year ended October 31, 1995, payments to Service
Organizations totaled $39,826, $122,743, and $45,148 with respect to the Retail
A Shares of the High
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Quality Bond Fund, Intermediate Government Income Fund and Short-Term Bond
Fund, respectively.
Galaxy's Shareholder Services Agreements are governed by the Plan that has
been adopted by Galaxy's Board of Trustees in connection with the offering of
Trust and Retail A Shares of each Fund ^. Pursuant to the Plan, the Board of
Trustees reviews, at least quarterly, a written report of the amounts paid
under the Shareholder Services Agreements and the purposes for which the
expenditures were made. In addition, the arrangements with Service
Organizations must be approved annually by a majority of Galaxy's Trustees,
including a majority of the Trustees who are not "interested persons" of Galaxy
as defined in the 1940 Act and who have no direct or indirect financial
interest in such arrangements (the "Disinterested Trustees").
The Board of Trustees has approved Galaxy's arrangements with Service
Organizations based on information provided by Galaxy's service contractors
that there is a reasonable likelihood that the arrangements will benefit the
Funds and their shareholders by affording Galaxy greater flexibility in
connection with the efficient servicing of the accounts of the beneficial
owners of Retail A Shares of the Funds. Any material amendment to Galaxy's
arrangements with Service Organizations must be approved by a majority of
Galaxy's Board of Trustees (including a majority of the Disinterested
Trustees). So long as Galaxy's arrangements with Service Organizations are in
effect, the selection and nomination of the members of Galaxy's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of
Galaxy will be committed to the discretion of such Disinterested Trustees.
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EXPENSES
If expenses borne by any Fund in any fiscal year exceed expense limitations
imposed by applicable state securities regulations, Fleet and ^ First Data will
reimburse Galaxy for any such excess in proportion to the fees payable to them
with respect to each portfolio to the extent required by such regulations and
up to the amount of the fees payable to them, provided, however, that to the
extent required by such state regulations, Fleet and ^ First Data have agreed
to effect such reimbursement regardless of the amount of fees payable to them.
Any such reimbursement would be made no less frequently than the payment of
fees to each organization. Such reimbursements, if any, will be estimated,
reconciled and paid on a monthly basis. The fees which the Service
Organizations may charge to customers for services provided in connection with
their investments in Galaxy are not covered by the state securities expense
limitations described above.
DISTRIBUTOR
440 Financial Distributors, Inc., a wholly-owned subsidiary of ^ First Data,
serves as Galaxy's Distributor. On March 31, 1995, ^ First Data acquired all
of the issued and outstanding stock of the Distributor. Prior to that time,
the Distributor was a wholly-owned subsidiary of 440 Financial Group of
Worcester, Inc. and an indirect subsidiary of State Mutual Life Assurance
Company of America.
Unless otherwise terminated, the Distribution Agreement among Galaxy, the
Distributor and its parent, ^ First Data, remains in effect until February 28,
^ 1997, and thereafter will continue from year to year upon annual approval by
Galaxy's Board of Trustees, or by the vote of a majority of the outstanding
shares of Galaxy and by the vote of a majority of the Board of Trustees of
Galaxy who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public accountants, with
offices at One Post Office Square, Boston, Massachusetts 02109, serve as
auditors to Galaxy. The financial highlights for the Funds included in their
Prospectuses
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and the financial statements for ^ the Funds contained in Galaxy's Annual
Reports to Shareholders and incorporated by reference into this Statement of
Additional Information for the respective fiscal periods ended October 31 of
each calendar year have been audited by Coopers & Lybrand L.L.P. for the
periods included in their report thereon which appears therein.
COUNSEL
Drinker Biddle & Reath (of which W. Bruce McConnel, III, Secretary of
Galaxy, is a partner), 1345 Chestnut Street, Suite 1100, Broad and Chestnut
Streets, Philadelphia, Pennsylvania 19107, are counsel to Galaxy and will pass
upon certain legal matters on its behalf.
PERFORMANCE AND YIELD INFORMATION
^
Yield and Performance of the ^ Funds
^ The Funds' 30-day (or one month) standard yields described in their
Prospectuses are calculated separately for each series of shares in each Fund
in accordance with the method prescribed by the SEC for mutual funds:
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a - b
YIELD = 2[( - - - - +1 )6 - 1]
cd
Where: a = dividends and interest earned by a
Fund during the period;
b = expenses accrued for the period
(net of reimbursements);
c = average daily number of shares
outstanding during the period,
entitled to receive dividends; and
d = maximum offering price per share
on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on debt obligations held by a Fund is calculated by computing
the yield to maturity of each obligation based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and
dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including
actual accrued interest) in order to determine the interest income on the
obligation for each day of the subsequent month that the obligation is held by
the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at
a discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market value of such debt obligations. Expenses accrued
for the period (variable "b" in the formula) include all recurring fees charged
by a Fund to all shareholder accounts in proportion to the length of the base
period and the Fund's mean (or median) account size. Undeclared earned income
will be subtracted from the offering price per share (variable "d" in the
formula).
Interest earned on tax-exempt obligations that are issued without original
issue discount and have a current market discount is calculated by using the
coupon rate of interest
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instead of the yield to maturity. In the case of tax-exempt obligations that
are issued with original issue discount but which have discounts based on
current market value that exceed the then-remaining portion of the original
issue discount (market discount), the yield to maturity is the imputed rate
based on the original issue discount calculation. On the other hand, in the
case of tax-exempt obligations that are issued with original issue discount but
which have discounts based on current market value that are less than the then-
remaining portion of the original issue discount (market premium), the yield to
maturity is based on the market value.
With respect to mortgage or other receivables-backed obligations that are
expected to be subject to monthly payments of principal and interest ("pay-
downs"), (i) gain or loss attributable to actual monthly pay downs are
accounted for as an increase or decrease to interest income during the period,
and (ii) each Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the weighted average date is not available or
(b) not to amortize discount or premium on the remaining security.
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Based on the foregoing calculation, (i) the standard yield for Trust Shares
of the Intermediate Government Income, High Quality Bond and Short-Term Bond
Funds for the 30-day period ended ^ October 31, 1995 were 6.15%, 5.48% and
5.22%, respectively. ^
Each Fund that advertises its "average annual total return" computes such
return separately for each series of shares by determining the average annual
compounded rate of return during specified periods that equates the initial
amount invested to the ending redeemable value of such investment according to
the following formula:
ERV l/n
T = [(-----) - 1]
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the l, 5 or 10 year (or other) periods at the end of the
applicable period (or a fractional portion thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
Each Fund that advertises its "aggregate total return" computes such returns
separately for each series of shares by determining the aggregate compounded
rates of return during specified periods that likewise equate the initial
amount invested to the ending redeemable value of such investment. The formula
for calculating aggregate total return is as follows:
ERV
Aggregate Total Return = [(-----) - l]
P
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The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
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Aggregate total ^ return for Trust Shares of the ^ Intermediate Government
Income ^ Fund for the period September 1, 1988 (inception) to ^ October 31,
1995 was 73.29%. From September 1, 1988 (inception) to ^ October 31, 1995,
average annual total ^ return for Trust Shares of the ^ Intermediate Government
Income ^ Fund was 7.97%. For the one-year and five-year periods ended October
31, 1995, the average annual total returns for Trust Shares of the ^
Intermediate Government Income ^ Fund were ^13.18% and ^8.19%, respectively.
Aggregate total ^ return for Trust Shares of the ^ High Quality Bond ^ Fund
from December 14, 1990 (inception) to ^ October 31, 1995 was 52.59%. From
December 14, 1990 (inception) to ^ October 31, 1995, average annual total ^
return for Trust Shares of the ^ High Quality Bond Fund was 8.98%. For the
one-year period ended October 31, 1995, the average annual total return for
Trust Shares of the High Quality Bond Fund was 18.66%.
Aggregate total returns for Trust Shares of the Short-Term Bond Fund from
December 30, 1991 (inception) to October 31, 1995 was 22.49%. From December 30,
1991 (inception) to October 31, 1995, average annual total returns for Trust
Shares of the Short-Term Bond Fund was 5.43%. For the one-year period ended
October 31, 1995, the average annual ^ total returns for Trust Shares of the ^
Short-Term Bond Fund was 9.55%. ^
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MISCELLANEOUS
As used in the Prospectuses, "assets belonging to a particular series of a
Fund" means the consideration received by Galaxy upon the issuance of shares in
that particular series of the Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale of such investments, any funds or payments derived from
any reinvestment of such proceeds and a portion of any general assets of Galaxy
not belonging to a particular series or Fund. In determining the net asset
value of a particular Series of a Fund, assets belonging to the particular
series of the Fund are charged with the direct liabilities in respect of that
series and with a share of the general liabilities of Galaxy, which are
allocated in proportion to the relative asset values of the respective series
and Funds at the time of allocation. Subject to the provisions of Galaxy's
Declaration of Trust, determinations by the Board of Trustees as to the direct
and allocable liabilities, and the allocable portion of any general assets with
respect to a particular series or Fund, are conclusive.
As of ^ December 22, 1995, the name, address and share ownership of the
entities or persons that held of record more than 5% of the outstanding Retail
Shares of each of Galaxy's investment portfolios were as follows: Short-Term
Bond Fund -- Womat Leasing, MSN 217, Attn: Mark Roberts, One Corporate Center,
Hartford, CT 06103-3220 (9.94%); Tax-Exempt Fund -- Hope H. Van Beuren, E. Main
RR 25 Enterprise Center, Middletown, RI 02842 (14.36%);^ Rhode Island Municipal
Bond Fund -- Norstar Trust Co., Gales & Co., Funds Control, Attn: Julie
Hogestyn, One East Avenue, Rochester, NY (44.57%); James R. McCulloch, c/o
MICROFIBRE, P.O. Box 12008, Pawtucket, RI 02860 (8.38%).
As of ^ December 22, 1995, the name, address and share ownership of the
entities or persons that held of record more than 5% of the outstanding Trust
Shares of each of Galaxy's investment portfolios were as follows: ^ Corporate
Bond Fund -- BNE Unified Retirement Trust, Attn: Ben Branch, Trustee, 21
Merchants Road, 4th Floor, Boston, MA 02109 (64%); Shawmut Bank CT N.A.
Trustee The Shawmut National Corporation Employees Thrift Plan Daily Fund; c/o
Kenneth Weissman, Director, Corporate Benefits, Shawmut National Corporation,
777 Main Street, Hartford, CT 06115-2001 (10.09%); Shawmut Bank N.A. Trustee
for The Balanced Fund Employee Benefit, c/o Doris Cote, 446 Main Street,
Worcester, MA 01608 (9.31%); High Quality Bond Fund -- Fleet Savings Plus Plan
HQ, c/o 50 Kennedy Plaza, Providence, RI 02903 (14.53%); Tax-Exempt Bond Fund
- -- NUSCO Retiree Health Veba Trust, P.O. Box 270, Hartford, CT 06141 (15.51%);
Rhode Island Municipal Bond Fund -- Vera Clark, 175 East Avenue, Westerly, RI
02891 (7.68%); Connecticut Municipal Bond Fund -- Shawmut Bank CT N.A. Agent
for Florence M. Roberts c/o Anna Marie Simonelli, 777 Main Street - MSN 762,
Hartford, CT 06115 (8.10%); Ruthan Wein, 18 Timberline Dr., Farmington,
CT 06032 (7.97%); Emma Gaeta, c/o Nancy Gaeta, 152 West 58th St., Apt. 6C, New
York, NY 10019 (7.22%); Albert M. Ross, Jr. ________ (5.22%);
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Massachusetts Municipal Bond Fund -- Joseph S. Teller, 8 Kilsyth Terrace #21,
Brighton, MA 02146 (6.22%); Philip H. Tobey, 65 __________________ (5.35%).
As of December 22, 1995, the name, address and share ownership of the
entities or persons that held of record more than 5% of the outstanding shares
of the Institutional Treasury Money Market Fund were as follows: Fleet
New York, Fleet Investment Service, Attn: Barbara Healy, One East
Avenue, Rochester, NY 14638 (94.37%); Connecticut Municipal Money
Market Fund -- Shawmut Bank, Attn: Maureen Sanborn (CT), Deposit
Balancing, 150 Windsor Street -- MSN 294, Hartford, CT 06120-2992
(58.52%); Olsen & Co., Attn: Corporate Actions of 0503, One Federal
Street, Boston, MA 02110-2003 (25.99%); Massachusetts Municipal Money Market
Fund -- Olsen & Co., Attn: Corporate Actions of 0503, One Federal Street,
Boston, MA 02110-2003 (44.90%); Shawmut Bank, Attn: Maureen Sanborn (Mass), 150
Windsor Street - MSN 294, Hartford, CT 06120-2992 (7.31%); Clement McIver,
Jr., c/o Methods Machine Tool, 65 Union Avenue, Sudbury, MA 01776-2245
(5.45%).
FINANCIAL STATEMENTS
Galaxy's Annual Reports to Shareholders with respect to the Funds for the
fiscal year ended October 31, ^ 1995 have been filed with the Securities and
Exchange Commission. The financial statements in such Annual Reports ^(the
"Financial Statements") are incorporated into this Statement of Additional
Information by reference. The Financial Statements included in the Annual
Reports for the Funds for the fiscal year ended October 31, ^ 1995 have been
audited by Galaxy's independent accountants, Coopers & Lybrand L.L.P., whose
report thereon also appears in such Annual Reports and is incorporated herein
by reference. The Financial Statements in such Annual Reports have been
incorporated herein in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Duff & Phelps
Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard &
Poor's Ratings Group, Division of McGraw Hill ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), IBCA Limited and IBCA Inc. ("IBCA") and Thomson
BankWatch ("Thomson").
CORPORATE AND TAX-EXEMPT BOND RATINGS
The four highest ratings of D&P for tax-exempt and corporate fixed-income
securities are AAA, AA, A and BBB. Securities rated AAA are of the highest
credit quality. The risk factors are considered to be negligible, being only
slightly more than for risk-free U.S. Treasury debt. Securities rated AA are
of high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions. Securities
that are rated "A" have protection factors that are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress. Securities that are rated "BBB" have below average protection factors
but are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles. The AA, A and BBB
ratings may be modified by an addition of a plus (+) or minus (-) sign to show
relative standing within these major rating categories.
The four highest ratings of Fitch for tax-exempt and corporate bonds are
AAA, AA, A and BBB. Plus (+) and minus (-) signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. AAA
bonds are considered to be investment grade and of the highest credit quality.
The obligor is judged to have an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. AA bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated
in the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-1+.
A bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings. BBB bonds are considered to
be investment grade and of satisfactory credit quality. The obligor's ability
to pay interest and repay principal is considered to be adequate. Adverse
changes in economic
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conditions and circumstances, however, are more likely to have an adverse
impact on these bonds, and therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
The four highest ratings of S&P for tax-exempt and corporate bonds are AAA,
AA, A and BBB. Bonds rated AAA bear the highest rating assigned by S&P to a
debt obligation and the AAA rating indicates in its opinion an extremely strong
capacity to pay interest and repay principal. Bonds rated AA by S&P are judged
by it to have a very strong capacity to pay interest and repay principal, and
they differ from AAA issues only in small degree. Bonds rated A are considered
to have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than bonds of a higher rated category. Bonds rated BBB
are regarded as having an adequate capacity to pay interest and repay
principal. Whereas such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than for higher rated categories. The AA, A and BBB ratings may be
modified by an addition of a plus (+) or minus (-) sign to show relative
standing within these major rating categories.
The four highest ratings of Moody's for tax-exempt and corporate bonds are
Aaa, Aa, A and Baa. Tax-exempt and corporate bonds rated Aaa are judged to be
of the "best quality." The rating of Aa is assigned to bonds which are of
"high quality by all standards." Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large or fluctuations of protective
elements may be of greater amplitude or there may be other elements which make
the long-term risks appear somewhat larger. Bonds that are rated A possess
many favorable investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present that suggest a susceptibility
to impairment sometime in the future. Bonds that are rated Baa are considered
as medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's may modify a rating of Aa, A or Baa by adding
numerical modifiers of 1, 2 or 3 to show relative standing
within these categories. The foregoing ratings are sometimes presented in
parentheses preceded with a "con" indicating the bonds are rated conditionally.
Such parenthetical rating denotes the probable credit stature upon
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<PAGE>
completion of construction or elimination of the basis of the condition.
The four highest ratings of IBCA for tax-exempt and corporate bonds are AAA,
AA, A and BBB. IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year, which is issued by bank holding
companies and their principal banking subsidiaries. Obligations rated AAA by
IBCA have the lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial, such that adverse changes
in business, economic or financial conditions are unlikely to increase
investment risk significantly. Obligations for which there is a very low
expectation of investment risk are rated AA. Obligations rated A have a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is strong, although changes in business, economic or financial
conditions may lead to increased investment risk. Obligations rated BBB
currently have a low expectation of investment risk. Capacity for timely
repayment of principal and interest is adequate, although adverse changes in
business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in higher categories. IBCA may append a
rating of plus (+) or minus (-) to a rating to denote relative status within a
major rating category.
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
The highest rating of D&P for commercial paper is Duff 1. D&P employs three
designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest rating
category. Duff 1 plus indicates highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors are considered
to be minor. Duff 1 minus indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small. Duff 2 indicates good certainty of
timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
qualify such issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected. Duff 4
indicates speculative investment characteristics.
A-3
<PAGE>
Fitch's short-term ratings apply to tax-exempt and corporate debt
obligations that are payable on demand or have original maturities of up to
three years. The four highest ratings of Fitch for short-term securities are
F-1+, F-1, F-2 and F-3.F-1+ securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment. F-1 securities possess very strong
credit quality. Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+. F-2 securities
possess good credit quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment,
but the margin of safety is not as great as the F-1+ and F-1 categories. F-3
securities possess fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these securities to be
rated below investment grade. Fitch may also use the symbol "LOC" with its
short-term ratings to indicate that the rating is based upon a letter of credit
issued by a commercial bank.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt considered short-term in the relevant market. Issues
assigned A-1 ratings, in S&P's opinion, indicate that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus (+)
designation. Issues rated A-2 by S&P indicate that capacity for timely payment
on these issues is satisfactory. However, the relative degree of safety is not
as high as for issues designated A-1. Issues rated A-3 have an adequate
capacity for timely payment. They are, however, somewhat more vulnerable to
the adverse effects of changes and circumstances than obligations carrying the
higher designations. Issues rated B are regarded as having only a speculative
capacity for timely payment.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Issuers rated Prime-1 (or related supporting
institutions) in the opinion of Moody's "have a superior capacity for repayment
of short-term promissory obligations." Principal repayment capacity will
normally be evidenced by the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well established
access to a range of financial markets and assured sources of alternate
liquidity. Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
capacity will normally be evidenced by many of
A-4
<PAGE>
the characteristics of Prime-1 rated issues, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained. Issuers
rated Prime-3 (or related supporting institutions) have an acceptable capacity
for repayment of short-term promissory obligations. Issuers rated Not Prime do
not fall within any of the Prime rating categories.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal banking subsidiaries. The designation A1 by IBCA indicates
that the obligation is supported by the highest capacity for timely repayment.
Obligations rated A2 are supported by a good capacity for timely repayment.
Obligations rated A3 are supported by a satisfactory capacity for timely
repayment. Obligations are rated B if there is an uncertainty as to the
capacity to ensure timely repayment.
Thomson commercial paper ratings assess the likelihood of an untimely or
incomplete payment of principal or interest of debt having a maturity of one
year or less, which is issued by a bank holding company or an entity within the
holding company structure. The designation TBW-1 represents the highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis. The designation TBW-2 represents the
second highest rating category and indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated TBW-1. The designation
TBW-3 represents the lowest investment grade category and indicates that while
more susceptible to adverse developments (both internal and external) than
obligations with higher ratings, the capacity to service principal and interest
in a timely fashion is considered adequate.
TAX-EXEMPT NOTE RATINGS
A S&P rating reflects the liquidity concerns and market access risks unique
to notes due in three years or less. Notes rated SP-1 are issued by issuers
that exhibit very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics are
given a plus (+) designation. Notes rated SP-2 are issued by issuers that
exhibit satisfactory capacity to pay principal and interest. Notes rated SP-3
are issued by issuers that exhibit speculative capacity to pay principal and
interest.
Moody's ratings for state and municipal notes and other short-term loans are
designated MIG and variable rate demand obligations are designated VMIG. Such
ratings recognize the
A-5
<PAGE>
differences between short-term credit risk and long-term risk. Loans bearing
the designation MIG-1 or VMIG-1 are of the best quality, enjoying strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Loans bearing
the designation MIG-2 or VMIG-2 are of high quality, with margins of protection
ample although not so large as with loans rated MIG-1 or VMIG-1. Loans bearing
the designation MIG-3 or VMIG-3 are of favorable quality with all security
elements accounted for but lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established. Loans bearing the
designation MIG-4 or VMIG-4 are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
Fitch uses its short-term ratings described above under "Corporate and Tax-
Exempt Commercial Paper Ratings" for tax-exempt notes.
A-6
<PAGE>
APPENDIX B
As stated in the applicable Prospectuses, the ^ Funds may enter into futures
transactions for hedging purposes. The following is a description of such
transactions.
I. INTEREST RATE FUTURES CONTRACTS
Use of Interest Rate Futures Contracts. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Funds may use interest rate
futures contracts as a defense, or hedge, against
anticipated interest rate changes and not for speculation. As described below,
this would include the use of futures contract sales to protect against
expected increases in interest rates and futures contract purchases to offset
the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which they
hope to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate futures
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
B-1
<PAGE>
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by a Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, the Fund immediately
is paid the difference and thus realizes a gain. If the offsetting purchase
price exceeds the sale price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by a Fund
entering into a futures contract sale. If the offsetting sale price exceeds
the purchase price, the Fund realizes a gain, and if the purchase price exceeds
the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
EXAMPLE OF FUTURES CONTRACT SALE. The Funds would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the
loss in market value that would otherwise accompany a decline in long-term
securities prices. Assume that the market value of a certain security held by a
particular Fund tends to move in concert with the futures market prices of
long-term United States Treasury bonds ("Treasury bonds"). The adviser wishes
to fix the current market value of this portfolio security until some point in
the future. Assume the portfolio security has a market value of 100, and the
adviser believes that, because of an anticipated rise in interest rates,
the value will decline to 95. The Fund might enter into futures contract
sales of Treasury bonds for an equivalent of 98. If the market value
of the portfolio security does indeed decline from 100 to 95, the
equivalent futures market price for the Treasury bonds might also decline from
98 to 93.
B-2
<PAGE>
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates, and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by
the loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE. A Fund would engage in an interest
rate futures contract purchase when it is not fully invested in long-term bonds
but wishes to defer for a time the purchase of long-term bonds in light of the
availability of advantageous interim investments, e.g., shorter term securities
whose yields are greater than those available on long-term bonds. A Fund's
basic motivation would be to maintain for a time the income advantage from
investing in the short-term securities; the Fund would be endeavoring at the
same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9 1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-
term securities that are either maturing in four months or earmarked for sale
in four months, for purchase of the long-term bond at an assumed market price
of 100. Assume these short-term securities are yielding 15%. If the market
price of the long-term bond does indeed rise from 100 to 105, the equivalent
futures market price for Treasury bonds might also rise from 98 to 103. In
that case, the 5 point increase in the price that the Fund pays for the long-
term bond would be offset
B-3
<PAGE>
by the 5 point gain realized by closing out the futures contract purchase.
The adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or
below, it is possible that the Fund would continue with its purchase program
for long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will be
reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase. In each transaction, expenses would also be
incurred.
II. MUNICIPAL BOND INDEX FUTURES CONTRACTS
A municipal bond index assigns relative values to the bonds included in the
index and the index fluctuates with changes in the market values of the bonds
so included. The Chicago Board of Trade has designed a futures contract based
on the Bond Buyer Municipal Bond Index. This Index is composed of 40 term
revenue and general obligation bonds, and its composition is updated regularly
as new bonds meeting the criteria of the Index are issued and existing bonds
mature. The Index is intended to provide an accurate indicator of trends and
changes in the municipal bond market. Each bond in the Index is independently
priced by six dealer-to-dealer municipal bond brokers daily. The 40 prices
then are averaged and multiplied by a coefficient. The coefficient is used to
maintain the continuity of the Index when its composition changes. The Chicago
Board of Trade, on which futures contracts based on this Index are traded, as
well as other U.S. commodities exchanges, are regulated by the Commodity
Futures Trading Commission. Transactions on such exchange are cleared through
a clearing corporation, which guarantees the performance of the parties to each
contract.
The New York Municipal Bond Fund, Connecticut Municipal Bond Fund,
Massachusetts Municipal Bond Fund and Rhode Island Municipal Bond Fund will
sell index futures contracts in order to offset a decrease in market value of
their respective portfolio securities that might otherwise result from a market
decline. A Fund may do so either to hedge the value of its portfolio as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of
B-4
<PAGE>
the securities to be sold. Conversely, a Fund will purchase index futures
contracts in anticipation of purchases of securities. In a substantial
majority of these transactions, a Fund will purchase such securities upon
termination of the long futures position, but a long futures position may be
terminated without a corresponding purchase of securities.
Closing out a futures contract sale prior to the settlement date may be
effected by a Fund's entering into a futures contract purchase for the same
aggregate amount of the index involved and the same delivery date. If the
price in the sale exceeds the price in the offsetting purchase, the Fund is
paid the difference and thus realizes a gain. If the offsetting purchase price
exceeds the sale price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by a
Fund's entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the purchase price
exceeds the offsetting sale price, the Fund realizes a loss.
EXAMPLE OF A MUNICIPAL BOND INDEX FUTURES CONTRACT
Consider a portfolio manager holding $1 million par value of each of the
following municipal bonds on February 2 in a particular year.
<TABLE>
<CAPTION>
Current
Price
(points
and
Maturity thirty-
seconds
Issue Coupon Issue Date Date of a
point)
<S> <C> <C> <C> <C>
Ohio HFA 9 3/8 5/05/83 5/1/13
94-2
NYS Power 9 3/4 5/24/83 1/1/17
102-0
San Diego, CA IDR 10 6/07/83 6/1/18
100-
14
Muscatine, IA Elec 10 5/8 8/24/83 1/1/08
103-
16
Mass Health & Ed 10 9/23/83 7/1/16
100-
12
</TABLE>
The current value of the portfolio is $5,003,750.
To hedge against a decline in the value of the portfolio, resulting from a
rise in interest rates, the portfolio manager can use the municipal bond index
futures contract. The current value of the Municipal Bond Index is 86-09.
Suppose the portfolio manager takes a position in the futures market opposite
to his or her cash market position by selling 50 municipal bond index futures
contracts (each contract represents $100,000 in principal value) at this price.
On March 23, the bonds in the portfolio have the following values:
Ohio HFA 81-28
B-5
<PAGE>
Ohio HFA 81-28
NYS Power 98-26
San Diego, CA IDB 98-11
Muscatine, IA Elec 99-24
Mass Health & Ed 97-18
The bond prices have fallen, and the portfolio has sustained a loss of
$130,312. This would have been the loss incurred without hedging. However,
the
Municipal Bond Index also has fallen, and its value stands at 83-27. Suppose
now
the portfolio manager closes out his or her futures position by buying back 50
municipal bond index futures contracts at this price.
The following table provides a summary of transactions and the results of
the hedge.
CASH MARKET FUTURES MARKET
February 2 $5,003,750 long posi- Sell 50 Municipal Bond
tion in municipal futures contracts at
bonds 86-09
March 23 $4,873,438 long posi- Buy 50 Municipal Bond
tion in municipal futures contracts at
bonds 83-27
___________________ _____________________
$130,312 Loss $121,875 Gain
While the gain in the futures market did not entirely offset the loss in the
cash market, the $8,437 loss is significantly lower than the loss which would
have been incurred without hedging.
The numbers reflected in this appendix do not take into account the effect
of brokerage fees or taxes.
III. MARGIN PAYMENTS
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with Galaxy's custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in security transactions
in that futures contract margin does not involve the borrowing of funds
by the customer to finance the transactions. Rather, the initial margin
is in the nature of a performance bond or good faith deposit on the
contract which is returned to the Fund upon termination of
the futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying instruments fluctuates
making the long and short
B-6
<PAGE>
positions in the futures contract more or less valuable, a process known as
marking-to-the-market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less
valuable and the Fund would be required to make a variation margin payment
to the broker. At any time prior to expiration of the futures contract, the
adviser may elect to close the position by taking an opposite position,
subject to the availability of a secondary market, which
will operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or gain.
IV. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by the ^ Funds
as hedging devices. One risk arises because of the imperfect correlation
between movements in the price of the futures and movements in the price of the
instruments that are the subject of the hedge. The price of the futures may
move more than or less than the price of the instruments being hedged. If the
price of the futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the instruments being hedged has moved in an unfavorable direction, a Fund
would be in a better position than if it had not hedged at all. If the
price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the
futures. If the price of the futures moves more than the price of the hedged
instruments, the Funds involved will experience either a loss or gain on the
futures, which will not be completely offset by movements in the price of
the instruments which are the subject of the hedge. To compensate for the
imperfect correlation of movements in the price of instruments being
hedged and movements in the price of futures contracts, a Fund may
buy or sell futures contracts in a greater dollar amount than
the dollar amount of instruments being hedged if the volatility over
a particular time period of the prices of such instruments has been greater
than the volatility over such time period of the futures, or if otherwise
deemed to be appropriate by the investment adviser. Conversely, a Fund may buy
or sell fewer futures contracts if the volatility over a particular time period
of the prices of the instruments being hedged is less than the volatility over
such time period of the futures contract being used, or if otherwise deemed to
be appropriate by the Investment Adviser. It is also possible that,
B-7
<PAGE>
where a Fund had sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of instruments held in the
Fund may decline. If this occurred, the Fund would lose money on the
futures and also experience a decline in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by a reduction
in the price of the instruments that were to be purchased.
In instances involving the purchase of futures contracts by a Fund, an amount
of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with Galaxy's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions that could distort the normal relationship
between the cash and futures markets. Second, with respect to financial
futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather
than making or taking delivery. To the extent participants decide to make or
take delivery, liquidity in the futures market could be reduced thus producing
distortions. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements
in the securities market. Therefore, increased participation by speculators
in the futures market may also cause temporary price distortions. Due
to the possibility of price distortion in the futures market, and because
of the imperfect correlation between the movements in the cash market
and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the adviser may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of trade
which provides a secondary market for such futures. Although the ^ Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be
B-8
<PAGE>
active secondary markets, there is no assurance that a liquid secondary market
on any exchange or board of trade will exist for any particular contract or at
any particular time. In such event, it may not be possible to close a futures
investment position, and in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures positions.
The trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Successful use of futures by the ^ Funds is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline
in the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Funds may have to sell securities at a time
when it may be disadvantageous to do so.
B-9
<PAGE>
THE GALAXY FUND
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
^
(1) Included in Part A:
^(i) Financial Highlights for the Trust Shares of the
Registrant's Short-Term Bond Fund for the period December
30, 1991 (commencement of operations)^ through October 31,
^ 1992 and the fiscal years ended October 31, 1993 through
October 31, 1995, Intermediate Government Income Fund
(formerly Intermediate Bond Fund) for the period September
1, 1988 (commencement of operations) through October 31,
1988 and for the fiscal years ended October 31, 1989
through October 31, 1995,
and High Quality Bond Fund for the period
December 4, 1990 (commencement of operations) through
October 31, 1991 and for
the fiscal years ended October 31, 1992
through October 31, 1995.
(2) Included in Part B:
^ Financial Statements included in the Registrant's Annual
Report to Shareholders for the Taxable Bond Funds, as
previously filed with the Commission, for the fiscal year
ended October 31, 1995 ^ are incorporated herein by
reference ^.
(b) Exhibits:
(1) (a) Declaration of Trust dated March 31, 1986 is incorporated
herein by reference to Exhibit (1)(a) to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on April 14, 1986.
(b) Amendment No. 1 to the Declaration of Trust dated as of
April 26, 1988 is incorporated herein by reference to
Exhibit
(1)(b) to Post-Effective Amendment No. 12 to the
<PAGE>
Registrant's Registration Statement on Form N-1A, as
filed with the Commission on December 30, 1991.
(c) Certificate pertaining to Classification of
Shares dated May 5, 1986 pertaining
to Class A and Class B Shares is
incorporated herein by reference to Exhibit (1)(b) to
Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on June 11, 1986.
(d) Certificate of Classification of Shares dated December 9,
1987 pertaining to Class C, Class D and Class E Shares is
incorporated herein by reference to Exhibit(1)(c) to
Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on January 15, 1988.
(e) Certificate of Classification of Shares dated November 8,
1989 pertaining to Class C -Special Series 1 and Class D -
Special Series 1 Shares is incorporated herein by reference
to Exhibit (1)(d) to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on February 20, 1990.
(f) Certificate of Classification of Shares dated August
16, 1990 pertaining to Class G -
Class F shares; Class G - Series 1 shares;
Series 2 shares; Class H - Series 1 shares; Class H
-Series 2 shares; Class I - Series 1 shares; Class I -
Series 2 shares; Class
J - Series 1 shares and Class J - Series 2 shares is
incorporated herein by reference to Exhibit (1)(e)
to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on August 20, 1990.
(g) Certificate of Classification of Shares dated December 10,
1991 pertaining to Class K -Series 1 shares; Class K -
Series 2 shares; Class L shares;
- Series 1 shares; Class L - Series 2
Class M - Series 1 shares; Class M -Series 2 shares; Class
N - Series 1 shares; Class N - Series 2 shares; Class O
- Series 1 shares and Class O - Series 2 shares is
incorporated herein by reference to Exhibit (1)(g) to
Post-Effective Amendment No. 12 to
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<PAGE>
the Registrant's Registration Statement on Form N-1A, as
filed with the Commission December 30, 1991.
(h) Certificate of Classification of Shares dated February 22,
1993 pertaining to Class P -Series 1 shares; Class P -
Series 2 shares;
Class Q - Series 1 shares; Class Q - Series 2 shares;
Class R - Series 1 shares; Class R -Series 2 shares;
Class S - Series 1 shares and Class S - Series 2 shares, is
incorporated by reference to Exhibit (1)(h) to Post
Effective Amendment No. 20
to the Registrant's Registration Statement
on Form N-1A, as filed with the Commission on February 28,
1995.
(i) Certificate of Classification of Shares dated December 7,
1994 pertaining to Class T -Series 1 shares and Class T -
Series 2 shares is incorporated herein by reference to
Exhibit (1)(i) to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on February 28, 1995.
(j) Form of Certificate of Classification of Shares pertaining
to Class U - Series 1 shares and Class U - Series 2 shares,
Class V shares, Class W shares, and Class X - Series 1
shares and Class X - Series 2 shares is incorporated herein
by reference to Exhibit (1)(j) to Post Effective Amendment
No. 22 to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on August 17, 1995.
(k) Form of Certificate of Classification of Shares pertaining
to Class C-Special Series 2, Class H-Series 3, Class J-
Series 3, Class K-Series 3, Class L-Series 3, Class M-
Series 3, Class N-Series 3 and Class U-Series 3 Shares is
incorporated herein by reference to Exhibit (1)(k) to Post-
Effective Amendment No. 23 to the Registrant's Registration
Statement on Form N-1A, as filed with the Commission on
September 29, 1995.
(2) Code of Regulations is incorporated herein by reference to
Exhibit (2) to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on April 14, 1986.
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<PAGE>
(3) None.
(4) None.
(5) (a) Advisory Agreement between the Registrant and Fleet
Investment Advisors Inc. with respect to the Money Market,
Government, U.S. Treasury, Tax-Exempt, Institutional
Treasury Money Market, Short-Term Bond, Intermediate Bond,
Corporate Bond, High Quality Bond, Tax-Exempt Bond, New York
Municipal Bond, Connecticut Municipal Bond, Massachusetts
Municipal Bond, Rhode Island Municipal Bond, Equity Value,
Equity Growth, Equity Income, International Equity, Small
Company Equity and Asset Allocation Funds dated May 19, 1994
is incorporated herein by reference to Exhibit (5)(a) to
Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on July 15, 1994.
(b) Form of Addendum No. 1 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with respect
to the Connecticut Municipal Money Market, Massachusetts
Municipal Money Market, Growth and Income and Small Cap
Value Funds is incorporated
herein by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on August 17, 1995.
(c) Sub-Advisory Agreement between Fleet/Norstar Investment
Advisors Inc. and Wellington Management Company with respect
to the International Equity Fund dated February 1, 1991 is
incorporated herein by reference to Exhibit (5)(g) to Post-
Effective Amendment No. 8 to the Registrant's Registration
Statement on Form N-1A, as filed with the Commission on
February 28, 1991.
(6) (a) Distribution Agreement among the Registrant, The Shareholder
Services Group, Inc. d/b/a 440 Financial and 440 Financial
Distributors, Inc. dated March 31, 1995 is incorporated
herein by reference to Exhibit (6)(a) to Post-Effective
Amendment No.
21 to the Registrant's Registration Statement on Form
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<PAGE>
N-1A, as filed with the Commission on June 12, 1995.
(b) Form of Amendment No. 1 to Distribution Agreement among the
Registrant, The Shareholders Services Group, Inc. d/b/a 440
Financial and 440 Financial Distributors, Inc. with respect
to the Connecticut Municipal Money Market, Massachusetts
Municipal Money Market, Growth and Income and Small Cap
Value Funds is incorporated
herein by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on August 17, 1995.
(c) Form of Amendment No. 2 to Distribution Agreement among the
Registrant, The Shareholder Services Group, Inc. d/b/a 440
Financial and 440 Financial Distributors, Inc. is
incorporated herein by reference to Exhibit (6)(c) to
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on September 29, 1995.
(7) None.
(8) (a) Global Custody Agreement between the Registrant and The
Chase Manhattan Bank,
N.A. dated as of November 1, 1991 is
incorporated herein by reference to Exhibit (8)(a) to
Post-Effective Amendment No. 11 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on December 3, 1991.
(b) Consent to Assignment of Global Custody Agreement between
the Registrant, The Chase Manhattan Bank, N.A. and 440
Financial Group of Worcester, Inc. to The Shareholder
Services Group, Inc. d/b/a 440 Financial dated March 31,
1995 is incorporated herein by reference
to Exhibit (8)(b) to Post-Effective Amendment
No. 22 to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on August 17, 1995.
(9) (a) Administration Agreement between the Registrant and The
Shareholder Services
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<PAGE>
Group, Inc. d/b/a 440 Financial dated March 31, 1995 is
incorporated herein by reference to Exhibit (9)(a) to
Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on June 12, 1995.
(b) Form of Amendment No. 1 to Administration Agreement between
the Registrant and The Shareholder Services Group, Inc.
d/b/a 440 Financial with respect to the Connecticut
Municipal Money Market, Massachusetts Municipal Money
Market, Growth and Income and Small Cap Value Funds is
incorporated herein by reference to Exhibit (9)(b) to Post
Effective Amendment No. 22
to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on August 17, 1995.
(c) Transfer Agency Agreement between the Registrant and The
Shareholder Services Group, Inc. d/b/a 440 Financial dated
as of March 31, 1995 is incorporated herein by reference to
Exhibit (9)(b) to Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on June 12, 1995.
(d) Form of Amendment No. 1 to Transfer Agency Agreement between
the Registrant and The Shareholder Services Group, Inc.
d/b/a 440 Financial is incorporated herein by reference to
Exhibit (9)(d) to Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on September 29, 1995.
(e) Fee Letter Agreement dated as of March 31, 1995 between the
Registrant and The Shareholder Services Group d/b/a 440
Financial is incorporated herein by reference to Exhibit
(9)(e) to Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on September 29, 1995.
(f) Shareholder Services Plan and Related Forms of Servicing
Agreements are incorporated herein by reference to Exhibit
(9)(g) to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form
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<PAGE>
N-1A, as filed with the Commission on July 15, 1994.
*(10) Opinion of counsel that shares are validly issued, fully paid and
non-assessable.
(11) (a) Consent of Coopers & Lybrand L.L.P.
(b) Consent of Drinker Biddle & Reath.
^
(12) None.
(13) (a) Purchase Agreement between the Registrant and Shearson Lehman
Brothers Inc. dated August 10, 1986 is incorporated herein by
reference to Exhibit (13) to Post-Effective Amendment No. 1
to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on June 18, 1987.
(b) Purchase Agreement between the Registrant and Shearson Lehman
Brothers Inc. dated October 11, 1990 with respect to the
Treasury, Equity Growth, Equity Income, International Equity
and High Quality Bond Funds is incorporated herein by
reference to Exhibit (13)(b) to Post-Effective Amendment No.
7 to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on October 18, 1990.
(c) Purchase Agreement between the Registrant and SMA Equities,
Inc. dated December 30, 1991 with respect to the Small
Company Equity Fund, Short-Term Bond Fund, Tax-Exempt Bond
Fund, Asset Allocation Fund, and New York Municipal Bond Fund
is incorporated herein by reference to Exhibit (13)(c) to
Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on December 30, 1991.
(d) Purchase Agreement between the Registrant and Allmerica
Investments, Inc. dated February 22, 1993 with respect to
the Connecticut Municipal Bond, Massachusetts Municipal Bond,
_____________
* Filed pursuant to Rule 24f-2 as part of Registrant's Rule 24f-2 Notice.
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<PAGE>
Rhode Island Municipal Bond and Institutional Treasury Money
Market Funds is incorporated herein by reference to Exhibit
(13)(d) to Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on August 31, 1993.
(e) Purchase Agreement between the Registrant and 440 Financial
Distributors, Inc. dated May 19, 1994 with respect to the
Corporate Bond Fund is incorporated herein by reference to
Exhibit (13)(e) to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on February 28, 1995.
(f) Form of Purchase Agreement between the Registrant and 440
Financial Distributors, Inc. with respect to the Connecticut
Municipal Money Market, Massachusetts Municipal Money Market,
Growth and Income and Small Cap Value Funds is
incorporated herein by reference to Exhibit (13)(j) to
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on August 17, 1995.
(g) Form of Purchase Agreement between the Registrant and 440
Financial Distributors, Inc. with respect to Retail B Shares
of the Short-Term Bond, High Quality Bond, Tax-Exempt Bond,
Equity Value, Equity Growth, Small Company Equity, Asset
Allocation and Growth and Income Funds is incorporated herein
by reference to Exhibit (13)(g) to Post-Effective Amendment
No. 23 to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on September 29, 1995.
(14) Individual Retirement Account Custodial Agreement and Accompanying
Disclosure Statement with Adoption Agreement and New Account
Application is incorporated herein by reference to Exhibit 14 to
Post-Effective Amendment No. 12 to the Registrant's Registration
Statement on Form N-1A, as filed with the Commission on December
30, 1991.
(15) Distribution and Services Plan for Retail B Shares and Form of
Servicing Agreement is incorporated
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<PAGE>
herein by reference to Exhibit (15) to Post-Effective Amendment
No. 23 to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on September 29, 1995.
(16) (a) Schedules for computation of performance quotations for the
Money Market and Government Funds provided in the
Registration Statement in response to Item 22 of
Form N-1A are incorporated herein by reference to Exhibit
(16) (a) to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on
Form N-1A, as filed with the Commission on January 4, 1989.
(b) Schedules for computation of performance quotations for the
Intermediate Bond and Equity Value Funds provided in the
Registration Statement in response to Item 22 of Form N-1A are
incorporated herein by reference to Exhibit (16)(b) to
Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on October 18, 1990.
(c) Schedule for computation of performance quotations for the
Tax-Exempt Fund provided in the Registration Statement in
response to Item 22 of Form N-1A are incorporated herein by
reference to Exhibit (16)(c) to Post-Effective Amendment No. 8
to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on February 28, 1991.
(d) Schedule for computation of performance quotations - Equity
Growth Fund is incorporated herein by reference to Exhibit
(16)(d) to the Registrant's Registration Statement on Form
N-1A filed, as filed with the Commission on June 23, 1992.
(e) Schedule for computation of performance quotations - Equity
Income Fund is incorporated herein by reference to Exhibit
(16)(e) to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on June 23, 1992.
(f) Schedule for computation of performance quotations - High
Quality Bond Fund is incorporated herein by reference to
Exhibit (16)(f) to the Registrant's Registration Statement on
Form N-1A, as filed with the Commission on June 23, 1992.
(g) Schedule for computation of performance quotations -
International Equity Fund is incorporated herein by reference
to Exhibit (16)(g) to the Registrant's Registration
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<PAGE>
Statement on Form N-1A, as filed with the Commission
on June 23, 1992.
(h) Schedule for computation of performance quotations - Small
Company Equity Fund is incorporated herein by reference to
Exhibit (16)(h) to the Registrant's Registration Statement on
Form N-1A, as filed with the Commission on June 23, 1992.
(i) Schedule for computation of performance quotations - Asset
Allocation Fund is incorporated herein by reference to Exhibit
(16)(i) to the Registrant's Registration Statement on Form
N-1A, as filed with the Commission on June 23, 1992.
(j) Schedule for computation of performance quotations -
Short-Term Bond Fund is incorporated herein by reference to
Exhibit (16)(j) to the Registrant's Registration Statement on
Form N-1A, as filed with the Commission on June 23, 1992.
(k) Schedule for computation of performance quotations -
Tax-Exempt Bond Fund is incorporated herein by reference to
Exhibit (16)(k) to the Registrant's Registration Statement on
Form N-1A, as filed with the Commission on June 23, 1992.
(l) Schedule for computation of performance quotations - New York
Municipal Bond Fund is incorporated herein by reference to
Exhibit (16)(l) to the Registrant's Registration Statement on
Form N-1A, as filed with the Commission on June 23, 1992.
(m) Schedule for computation of performance quotations -
Connecticut Municipal Bond Fund is incorporated herein by
reference to Exhibit (16)(m) to Post-Effective Amendment No.
16 to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on August 31, 1993.
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<PAGE>
(n) Schedule for computation of performance quotations -
Massachusetts Municipal Bond Fund is incorporated herein by
reference to Exhibit (16)(n) to Post-Effective Amendment No.
16 to the Registrant's Registration Statement on Form N-1A, as
filed with the Commission on August 31, 1993.
(o) Schedule for computation of performance quotations -
Institutional Treasury Money Market Fund is incorporated
herein by reference to Exhibit (16)(o) to Post-Effective
Amendment No. 16 to the Registrant's Registration Statement
on Form N-1A, as filed with the Commission on August 31, 1993.
(p) Schedule for computation of performance quotations - Rhode
Island Municipal Bond Fund is incorporated herein by reference
to Exhibit (16)(p) to Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form N-1A, as filed
with the Commission on June 12, 1995.
(q) Schedule for computation of performance quotations - Corporate
Bond Fund is incorporated herein by reference to Exhibit
(16)(q) to Post-Effective Amendment No. 21 to the Registrant's
Registration Statement on Form N-1A, as filed with the
Commission on June 12, 1995.
(18) Plan Pursuant to Rule 18f-3 for Operation of a Multi-Class System
is incorporated herein by reference to Exhibit (18) to Post-
Effective Amendment No. 24 to the Registrant's Registration
Statement on Form N-1A, as filed with the Commission on October 10,
1995.
(27) (a) Financial Data Schedule as of October 31,
1995 for the Short-Term Bond Fund.
(b) Financial Data Schedule as of October 31,
1995 for the Intermediate Government Income
Fund.
(c) Financial Data Schedule as of October 31,
1995 for the High Quality Bond Fund.
Item 25. Persons Controlled By or Under Common Control with
Registrant
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<PAGE>
Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities
The following is as of ^ December 22, 1995:
Title of Class Number of Record Holders
Class A Shares 71,422^
Class A - Special Series 1 Shares 5,062^
Class B Shares 20,641^
Class B - Special Series 1 Shares 4,104^
Class C Shares 1,553^
Class C - Special Series 1 Shares 14,428^
Class D Shares 2,867^
Class D - Special Series 1 Shares 8,567^
Class E Shares 3,497^
Class E - Special Series 1 Shares 1,773^
Class F Shares 14,418^
Class F - Special Series 1 Shares 1,800^
Class G - Series 1 Shares 1,996^
Class G - Series 2 Shares 7,398^
Class H - Series 1 Shares 3,058^
Class H - Series 2 Shares 15,565^
Class I - Series 1 Shares 1,514^
Class I - Series 2 Shares 10,535^
Class J - Series 1 Shares 1,718^
Class J - Series 2 Shares 2,769^
Class K - Series 1 Shares 1,466^
Class K - Series 2 Shares 10,129^
Class L - Series 1 Shares 745^
Class L - Series 2 Shares 3,093^
Class M - Series 1 Shares 628^
Class M - Series 2 Shares 1,648^
Class N - Series 1 Shares 387^
Class N - Series 2 Shares 9,466^
Class O - Series 1 Shares 245^
Class O - Series 2 Shares 1,940^
Class P - Series 1 Shares 75^
Class P - Series 2 Shares 1,307^
Class Q - Series 1 Shares 137^
Class Q - Series 2 Shares 1,351^
Class R - Series 1 Shares 53^
Class R - Series 2 Shares 192^
Class S - 1 Shares 550^
Class T - Series 1 Shares 342^
Class T - Series 2 Shares 0^
Class U - Series 1 Shares 527^
Class U - Series 2 Shares 7,831^
Class V - Shares 1,152^
Class W - Shares 812^
Class X - Series 1 Shares 415^
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<PAGE>
Class X - Series 2 Shares 5,386^
Item 27. Indemnification
Indemnification of the Registrant's principal underwriter, custodian
and transfer agent against certain losses is provided for, respectively in
Section 1.15 of the Distribution Agreement incorporated herein by reference as
Exhibit (6)(a), in Section 12 of the Global Custody Agreement incorporated
herein by reference as Exhibit (8)(a) and in Sections 15 and 17 of the Transfer
Agency Agreement, incorporated herein by reference as Exhibit 9(c). The
Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In
addition, Section 9.3 of the Registrant's Declaration of Trust dated March 31,
1986, incorporated herein by reference to Exhibit (1)(a) hereto, provides as
follows:
9.3 Indemnification of Trustees, Representatives and Employees. The
Trust shall indemnify each of its Trustees against all liabilities
and expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
he may be involved or with which he may be threatened, while as a
Trustee or thereafter, by reason of his being or having been such a
Trustee except with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties, provided that
as to any matter disposed of
by a compromise payment by such person, pursuant to
a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless the Trust
shall have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of
willful misfeasance, gross negligence or reckless disregard of duty,
or the matter of bad faith had been adjudicated, it would in the
opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully
entitled, provided that no person may satisfy any right of indemnity
or reimbursement hereunder except out of the property of the Trust.
The Trustees may make advance payments in connection with the
indemnification under this Section 9.3, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust
in the event it is
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<PAGE>
subsequently determined that he is not entitled to such
indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3. Insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. (a) Business and Other Connections of Investment Adviser
Fleet Investment Advisors Inc. ("Fleet") is an investment adviser
registered under the Investment Advisers Act of 1940 (the
"Advisers Act").
The list required by this Item 28 of officers and directors of
Fleet, together with information as to any business profession,
vocation or employment of substantial nature engaged in by such
officers and directors during the past two years is incorporated
herein by reference to Schedules A and D of Form ADV filed by
Fleet pursuant to the Advisers Act (SEC File No. 801-20312).
(b) Business and Other Connections of Sub-Adviser
Wellington Management Company ("Wellington Management") is an
investment adviser registered under the Investment Advisers Act
of 1940 (the "Advisers Act").
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<PAGE>
The list required by this Item 28 of the partners of Wellington
Management, together with information as to any business
profession, vocation or employment of substantial nature engaged
in by such partners during the past two years, is incorporated
herein by reference to Schedules A and D of Form ADV filed by
Wellington Management pursuant to the Advisers Act (SEC File No.
801-15908).
Item 29. Principal Underwriter
(a) In addition to The Galaxy Fund, 440 Financial Distributors, Inc.
(the "Distributor") currently acts as distributor for The Galaxy
VIP Fund, Galaxy Fund II, The Kent Funds and Armada Funds
(formerly known as NCC Funds). The Distributor is registered with
the Securities and Exchange Commission as a broker-dealer and is a
member of the National Association of Securities Dealers. The
Distributor is a wholly-owned subsidiary of First Data
Corporation, 53 State Street, Mail Stop BOS 425, Boston, MA
02109.
(b) The information required by this Item 29 (b) with respect to each
director, officer, or partner of 440 Financial Distributors, Inc.
is incorporated by reference to Schedule A of Form BD filed by 440
Financial Distributors, Inc. with the Securities and Exchange
Commission pursuant to the Securities Act of 1934 (File No.
8-45467).
(c) The Distributor receives no compensation from the Registrant for
distribution of its shares other than payments for distribution
assistance pursuant to Registrant's Distribution and Services Plan
for Retail B Shares. The Distributor is an affiliated person of
^ First Data Investor Services Group, Inc. ^(formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial), the
Registrant's administrator, which receives administration, fund
accounting and transfer agency fees as described in parts A and B.
Item 30. Location of Accounts and Records
(1) Fleet Investment Advisors Inc., 50 Kennedy Plaza, 2nd Floor,
Providence, Rhode Island 02903 (records relating to its functions
as investment adviser to all of the Registrant's Funds).
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<PAGE>
(2) Wellington Management Company, 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
sub-investment adviser to the International Equity Fund).
(3) 440 Financial Distributors, Inc., ^ 290 Donald Lynch Boulevard,
Marlboro, Massachusetts ^ 01752 (records relating to its functions
as distributor).
(4) ^ First Data Investor Services Group, Inc. ^ (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) 53 State
Street, Mail Stop BOS 425, Boston, MA 02109 (records relating to
its functions as administrator and transfer agent).
(5) Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107 (Registrant's
Declaration of Trust, Code of Regulations and Minute Books).
(6) The Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New
York, New York 10036 (records relating to its functions as
custodian).
Item 31. Management Services
Inapplicable.
Item 32. Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest available Annual
Reports to Shareholders which includes Management's Discussion of the
Registrant's performance, upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Registrant has duly caused this
Post-Effective Amendment No. ^ 26 to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pawtucket, State of Rhode
Island, on the ^ 29th day of ^ December, 1995.
THE GALAXY FUND
Registrant
/s/ John T. O'Neill
John T. O'Neill
President
John T. O'Neill
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. ^ 26 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ John T. O'Neill Trustee, President ^ December 29, 1995
John T. O'Neill and Treasurer
*/s/ Dwight E. Vicks, Jr. Chairman of the Board ^ December 29, 1995
Dwight E. Vicks, Jr. of Trustees
*/s/ Donald B. Miller Trustee ^ December 29, 1995
Donald B. Miller
*/s/ Louis DeThomasis Trustee ^ December 29, 1995
Louis DeThomasis
*/s/ Bradford S. Wellman Trustee ^ December 29, 1995
Bradford S. Wellman
*/s/ James M. Seed Trustee ^ December 29, 1995
James M. Seed
<PAGE>
*By:/s/ John T. O'Neill
John T. O'Neill
Attorney-In-Fact
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be done,
as fully and to all intents and purposes as he might of could do in person,
hereby ratifying and confirming all that said attorneys, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: November 30, 1989 /s/ John T. O'Neill
_______________
John T. O'Neill
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be
done, as fully and to all intents and purposes as he might of could do
in person, hereby ratifying and confirming
all that said attorneys, or either of them, may lawfully do or cause to be done
by virtue hereof.
Dated: November 30, 1989 /s/ Dwight E. Vicks, Jr.
____________________
Dwight E. Vicks, Jr.
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be done,
as fully and to all intents and purposes as he might of could do in person,
hereby ratifying and confirming all that said attorneys, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: November 30, 1989 /s/ Donald B. Miller
________________
Donald B. Miller
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be done,
as fully and to all intents and purposes as he might of could do in person,
hereby ratifying and confirming all that said attorneys, or either of them, may
lawfully do or cause to be done by
virtue hereof.
Dated: November 30, 1989 /s/ Brother Louis DeThomasis
________________________
Brother Louis DeThomasis
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be done,
as fully and to all intents and purposes as he might of could do in person,
hereby ratifying and confirming all that said attorneys, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: November 30, 1989 /s/ Bradford S. Wellman
___________________
Bradford S. Wellman
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John T.
O'Neill and W. Bruce McConnel, III, and either of them his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in his capacity as trustee or
officer, or both, to execute any and all amendments to the Trust's Registration
Statement on Form N-1A pursuant to the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and all
instruments necessary or incidental in connection therewith pursuant to said
Acts and any rules, regulations, or requirements of the Securities and Exchange
Commission in respect thereof, and to file the same with the Securities and
Exchange Commission, and either of said attorneys shall have full power and
authority, to do and perform in the name and on behalf of the undersigned in
any and all capacities, every act whatsoever requisite or necessary to be done,
as fully and to all intents and purposes as he might of could do in person,
hereby ratifying and confirming all that said attorneys, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: November 30, 1989 /s/ James M. Seed
_____________
James M. Seed
<PAGE>
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, George Boyd, do hereby certify as follows:
(1) That I am the duly elected Assistant Secretary of The Galaxy Fund (the
"Trust");
(2) That in such capacity I have examined the records of actions taken by
the Board of Trustees of the Trust by written Unanimous Consent dated April 21,
1994 and at a meeting held on December 1, 1994;
(3) That the following resolutions were duly adopted by written Unanimous
Consent of the Board of Trustees of the Trust on April 21, 1994:
1. Creation of Two Series of Class T Shares
(Corporate Intermediate Bond Fund).
RESOLVED, that pursuant to Section 5.1 of the Trust's Declaration of Trust,
an unlimited number of authorized and unissued shares of beneficial interest in
the Trust be, and hereby is, classified into a new class of shares denominated
as Class T shares, consisting of two separate series of shares of beneficial
interest designated as Class T - Series 1 shares and Class T - Series 2 shares,
both series representing interests in the Corporate Intermediate Bond Fund of
the Trust;
FURTHER RESOLVED, that all consideration received by the Trust for the
issue or sale of Class T -Series 1 shares shall be invested and reinvested with
the consideration received by the Trust for the issue and sale of Class T -
Series 2 shares and any other shares of beneficial interest in the Trust
hereafter designated as Class T shares (irrespective of whether said shares
have been designated as part of a series of said class and, if so designated,
irrespective of the particular series designation), together with all income,
earnings, profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and any general
assets of the Trust allocated to Class T shares (irrespective of series
designation) by the Board of Trustees in accordance with the Trust's
Declaration of Trust, and each Class T - Series 1 share and Class T - Series 2
share shall
<PAGE>
share in proportion to their respective net asset values with each such other
share in such consideration and other assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of such
proceeds in whatever form;
FURTHER RESOLVED, that each Class T - Series 1 share and Class T - Series 2
share shall have upon its issuance, all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded shares of
beneficial interest in the Trust now or hereinafter designated as Class T
shares (irrespective of series designation);
FURTHER RESOLVED, that each Class T - Series 1 share and each Class T -
Series 2 share shall be charged in proportion to their respective net asset
values with each other share of beneficial interest in the Trust now or
hereafter designated as a Class T share (irrespective of whether said share has
been designated as part of a series of said class and, if so designated,
irrespective of the particular series designation) with the expenses and
liabilities of the Trust in respect of Class T shares (irrespective of series
designation) and in respect of any general expenses and liabilities of the
Trust allocated to Class T shares by the Board of Trustees in accordance with
the Trust's Declaration of Trust; provided, however, that to the extent
permitted by rule or order of the Securities and Exchange Commission and as the
Board of Trustees may from time to time determine:
(a) only Class T - Series 1 shares shall bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of the
Trust pursuant to which an organization or other person agrees to provide
services exclusively with respect to shares of Class T - Series 1, as well as
any other expenses and liabilities directly attributable to Class T -Series 1
shares which the Board of Trustees determines should be borne solely by shares
of such Series;
(b) Class T - Series 1 shares shall not bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of the
Trust pursuant to which an
-2-
<PAGE>
organization or other person agrees to provide services with respect to Class T
shares other than shares of its Series 1, as well as any other expenses and
liabilities directly attributable to shares of Class T other than Class T -
Series 1 shares which the Board of Trustees determines should be borne
exclusively by such other shares;
(c) on any matter that pertains to the agreements, arrangements, expenses or
liabilities described in clause (a) above (or to any plan or other document
adopted by the Trust relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of the Trust, only
Class T - Series 1 shares shall be entitled to vote, except that: (i) if said
matter affects shares of beneficial interest in the Trust other than Class T
- -Series 1 shares, such other affected shares in the Trust shall also be
entitled to vote and, in such case, Class T - Series 1 shares shall be voted in
the aggregate together with such other affected shares and not by class or
series, except where otherwise required by law or permitted by the Board of
Trustees of the Trust; and (ii) if said matter does not affect Class T - Series
1 shares, said shares shall not be entitled to vote (except where otherwise
required by law or permitted by the Board of Trustees) even though the matter
is submitted to a vote of the holders of shares of beneficial interest in the
Trust other than Class T - Series 1 shares;
(d) on any matter that pertains to the agreements, arrangements, expenses or
liabilities described in clause (b) above (or to any plan or other document
adopted by the Trust relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of the Trust,
Class T - Series 1 shares shall not be entitled to vote, except where otherwise
required by law or permitted by the Board of Trustees of the Trust, and except
that if said matter affects Class T - Series 1 shares, such shares shall be
entitled to vote and, in such case, Class T - Series 1 shares shall be voted in
the aggregate together with all other shares of beneficial interest in the
Trust voting on the matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees.
-3-
<PAGE>
(4) That the following resolution was duly adopted at a regular meeting
of the Board of Trustees of the Trust held on December 1, 1994:
1. CHANGE OF NAME OF CORPORATE INTERMEDIATE BOND FUND.
RESOLVED, that the Board hereby ratifies the change of name of the Galaxy's
Corporate Intermediate Bond Fund investment portfolio of Galaxy to "Corporate
Bond Fund" effective as of May 19, 1994.
(5) That the foregoing resolutions remain in full force and effect on the
date hereof.
/s/ George Boyd
George Boyd
Dated: December 7, 1994
Commonwealth of Massachusetts:
: ss
County of Worcester :
Subscribed and sworn to
before me this 7th day
of December, 1994
Notary Public
My Commission Expires:
-4-
<PAGE>
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby ceritfy as follows:
(1) That I am the duly elected Secretary of The Galaxy Fund ("Galaxy");
(2) That in such capacity I have examined the record of actions taken by the
Board of Trustees of Galaxy at a Special Meeting of the Board held on June 12,
1995 (the "Meeting");
(3) That the following resolutions were duly adopted at the Meeting by the
Board of Trustees of Galaxy:
1. CREATION OF TWO SERIES OF CLASS U SHARES (GROWTH AND INCOME FUND).
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of Trust, an
unlimited number of authorized and unissued shares of beneficial interest in
Galaxy be, and hereby is, classified into a new class of shares denominated as
Class U shares, consisting of two separate series of shares of beneficial
interest designated as Class U -Series 1 shares and Class U - Series 2 shares,
both series representing interests in the Growth and Income Fund;
FURTHER RESOLVED, that all consideration received by Galaxy for the issue or
sale of Class U - Series 1 shares shall be invested and reinvested with the
consideration received by Galaxy for the issue and sale of Class U -Series 2
shares and any other shares of beneficial interest in Galaxy hereafter
designated as Class U shares (irrespective of whether said shares have been
designated as part of a series of said class and, if so designated,
irrespective of the particular series designation), together with all income,
earnings, profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and any general
assets of Galaxy allocated to Class U shares (irrespective of series
designation) by the Board of Trustees in accordance with Galaxy's Declaration
of Trust, and each Class U - Series 1 share and Class U - Series 2 share shall
share in proportion to their respective net asset values with each such other
share in such consideration and other assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from
<PAGE>
the sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form;
FURTHER RESOLVED, that each Class U - Series 1 share and Class U - Series 2
share shall have, upon its issuance, all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded shares of
beneficial interest in Galaxy now or hereinafter designated as Class U shares
(irrespective of series designation); and
FURTHER RESOLVED, that each Class U - Series 1 share and each Class U -
Series 2 share shall be charged in proportion to their respective net asset
values with each other share of beneficial interest in Galaxy now or hereafter
designated as a Class U share (irrespective of whether said share has been
designated as part of a series of said class and, if so designated,
irrespective of the particular series designation) with the expenses and
liabilities of Galaxy in respect of Class U shares (irrespective of series
designation) and in respect of any general expenses and liabilities of Galaxy
allocated to Class U shares by the Board of Trustees in accordance with
Galaxy's Declaration of Trust; provided, however, that to the extent permitted
by rule or order of the Securities and Exchange Commission and as the Board of
Trustees may from time to time determine:
(a) only Class U - Series 2 shares shall bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of
Galaxy pursuant to which an organization or other person agrees to provide
services exclusively with respect to shares of Class U - Series 2, as well as
any other expenses and liabilities directly attributable to Class U - Series 2
shares which the Board of Trustees determines should be borne solely by shares
of such Series;
(b) Class U - Series 2 shares shall not bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of
Galaxy pursuant to which an organization or other person agrees to provide
services with respect to Class U shares other than shares of its Series 2, as
well as any other expenses and liabilities directly attributable to shares of
Class U other than Class U -Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other shares;
-2-
<PAGE>
(c) on any matter that pertains to the agreements, arrangements, expenses
or liabilities described in clause (a) above (or to any plan or other document
adopted by Galaxy relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of Galaxy, only
Class U - Series 2 shares shall be entitled to vote, except that: (i) if said
matter affects shares of beneficial interest in Galaxy other than Class U
- -Series 2 shares, such other affected shares in Galaxy shall also be entitled
to vote and, in such case, Class U - Series 2 shares shall be voted in the
aggregate together with such other affected shares and not by class or series,
except where otherwise required by law or permitted by the Board of Trustees of
Galaxy; and (ii) if said matter does not affect Class U -Series 2 shares, said
shares shall not be entitled to vote (except where otherwise required by law or
permitted by the Board of Trustees) even though the matter is submitted to a
vote of the holders of shares of beneficial interest in Galaxy other than Class
U -Series 2 shares;
(d) on any matter that pertains to the agreements, arrangements, expenses
or liabilities described in clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of Galaxy, Class U
- - Series 2 shares shall not be entitled to vote, except where otherwise
required by law or permitted by the Board of Trustees of Galaxy, and except
that if said matter affects Class U - Series 2 shares, such shares shall be
entitled to vote and, in such case, Class U -Series 2 shares shall be voted in
the aggregate together with all other shares of beneficial interest in Galaxy
voting on the matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees.
2. CREATION OF CLASS V SHARES (CONNECTICUT MUNICIPAL MONEY MARKET FUND).
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of Trust, an
unlimited number of authorized and unissued shares of beneficial interest in
Galaxy be, and hereby is, classified and designated as Class V shares
representing interests in the Connecticut Municipal Money Market Fund; and
FURTHER RESOLVED, that each Class V share created pursuant to the foregoing
resolution shall have all of the
-3-
<PAGE>
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption that are set forth in Galaxy's Declaration of Trust with respect to
any class of shares of Galaxy.
3. CREATION OF CLASS W SHARES (MASSACHUSETTS MUNICIPAL MONEY MARKET FUND).
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of Trust, an
unlimited number of authorized and unissued shares of beneficial interest in
Galaxy be, and hereby is, classified and designated as Class W shares
representing interests in the Massachusetts Municipal Money Market Fund; and
FURTHER RESOLVED, that each Class W share created pursuant to the foregoing
resolution shall have all of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption that are set forth in Galaxy's Declaration
of Trust with respect to any class of shares of Galaxy.
4. CREATION OF TWO SERIES OF CLASS X SHARES (SMALL CAP VALUE FUND).
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of Trust, an
unlimited number of authorized and unissued shares of beneficial interest in
Galaxy be, and hereby are, classified into a new class of shares denominated as
Class X shares, consisting of two separate series of shares of beneficial
interest designated as Class X - Series 1 shares and Class X - Series 2 shares,
both series representing interests in the Small Cap Value Fund;
FURTHER RESOLVED, that all consideration received by Galaxy for the issue or
sale of Class X - Series 1 shares shall be invested and reinvested with the
consideration received by Galaxy for the issue and sale of Class X -Series 2
shares and any other shares of beneficial interest in Galaxy hereafter
designated as Class X shares (irrespective of whether said shares have been
designated as part of a series of said class and, if so designated,
irrespective of the particular series designation), together with all income,
earnings, profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and any general
assets of Galaxy allocated to Class X shares (irrespective of series
designation) by the Board of
-4-
<PAGE>
Trustees in accordance with Galaxy's Declaration of Trust, and each Class X -
Series 1 share and Class X - Series 2 share shall share in proportion to their
respective net asset values with each such other share in such consideration
and other assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds in whatever form;
FURTHER RESOLVED, that each Class X - Series 1 share and Class X - Series 2
share shall have, upon its issuance, all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded shares of
beneficial interest in Galaxy now or hereinafter designated as Class X shares
(irrespective of series designation); and
FURTHER RESOLVED, that each Class X - Series 1 share and each Class X -
Series 2 share shall be charged in proportion to their respective net asset
values with each other share of beneficial interest in Galaxy now or hereafter
designated as a Class X share (irrespective of whether said share has been
designated as part of a series of said class and, if so designated,
irrespective of the particular series designation) with the expenses and
liabilities of Galaxy in respect of Class X shares (irrespective of series
designation) and in respect of any general expenses and liabilities of Galaxy
allocated to Class X shares by the Board of Trustees in accordance with
Galaxy's Declaration of Trust; provided, however, that to the extent permitted
by rule or order of the Securities and Exchange Commission and as the Board of
Trustees may from time to time determine:
(a) only Class X - Series 2 shares shall bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of
Galaxy pursuant to which an organization or other person agrees to provide
services exclusively with respect to shares of Class X - Series 2, as well as
any other expenses and liabilities directly attributable to Class X - Series 2
shares which the Board of Trustees determines should be borne solely by shares
of such Series;
(b) Class X - Series 2 shares shall not bear the expenses and liabilities
relating to any agreements or arrangements entered into by or on behalf of
Galaxy pursuant to which an organization or other person agrees to provide
services with respect to Class X
-5-
<PAGE>
shares other than shares of its Series 2, as well as any other expenses and
liabilities directly attributable to shares of Class X other than Class X
- -Series 2 shares which the Board of Trustees determines should be borne
exclusively by such other shares;
(c) on any matter that pertains to the agreements, arrangements, expenses
or liabilities described in clause (a) above (or to any plan or other document
adopted by Galaxy relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of Galaxy, only
Class X - Series 2 shares shall be entitled to vote, except that: (i) if said
matter affects shares of beneficial interest in Galaxy other than Class X
- -Series 2 shares, such other affected shares in Galaxy shall also be entitled
to vote and, in such case, Class X - Series 2 shares shall be voted in the
aggregate together with such other affected shares and not by class or series,
except where otherwise required by law or permitted by the Board of Trustees of
Galaxy; and (ii) if said matter does not affect Class X - Series 2 shares, said
shares shall not be entitled to vote (except where otherwise required by law or
permitted by the Board of Trustees) even though the matter is submitted to a
vote of the holders of shares of beneficial interest in Galaxy other than Class
X -Series 2 shares;
(d) on any matter that pertains to the agreements, arrangements, expenses
or liabilities described in clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders of Galaxy, Class X
- - Series 2 shares shall not be entitled to vote, except where otherwise
required by law or permitted by the Board of Trustees of Galaxy, and except
that if said matter affects Class X - Series 2 shares, such shares shall be
entitled to vote and, in such case, Class X - Series 2 shares shall be voted in
the aggregate together with all other shares of beneficial interest in Galaxy
voting on the matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees.
-6-
<PAGE>
The foregoing resolutions remain in full force and effect as of the date
hereof.
W. Bruce McConnel, III
Secretary
Dated: _________ __, 1995
Subscribed and sworn to before
me this ____ day of ________, 1995
______________________________________
Notary Public or Commissioner of Deeds
My Commission Expires:
-7-
<PAGE>
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby ceritfy as follows:
(1) That I am the duly elected Secretary of The Galaxy Fund ("Galaxy");
(2) That in such capacity I have examined the record of actions taken by the
Board of Trustees of Galaxy at a Regular Meeting of the Board held on September
7, 1995 (the "Meeting");
(3) That the following resolutions were duly adopted at the Meeting by the
Board of Trustees of Galaxy:
1. CLASSIFICATION OF SHARES.
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of Trust, an
unlimited number of authorized, unissued and unclassified shares of beneficial
interest of Galaxy be, and hereby are, classified into each of 8 additional
separate series of shares which shall be designated, respectively, Class C-
Special Series 2, Class H-Series 3, Class J-Series 3, Class K-Series 3, Class
L-Series 3, Class M-Series 3, Class N-Series 3 and Class U-Series 3;
FURTHER RESOLVED, that (a) Class C-Special Series 2 shares of beneficial
interest shall represent interests in the Equity Value Fund, (b) Class H-Series
3 shares of beneficial interest shall represent interests in the Equity Growth
Fund, (c) Class J-Series 3 shares of beneficial interest shall represent
interests in the High Quality Bond Fund, (d) Class K-Series 3 shares of
beneficial interest shall represent interests in the Small Company Equity Fund,
(e) Class L-Series 3 shares of beneficial interest shall represent interests in
the Short-Term Bond Fund, (f) Class M-Series 3 shares of beneficial interest
shall represent interests in the Tax-Exempt Bond Fund, (g) Class N-Series 3
shares of beneficial interest shall represent interests in the Asset Allocation
Fund, and (h)EClass U-Series 3 shares of beneficial interest shall represent
interests in the Growth and Income Fund;
FURTHER RESOLVED, that each share of Class C-Special Series 2, Class H-
Series 3, Class J-Series 3, Class K-Series 3, Class L-Series 3, Class M-Series
3, Class N-Series 3 and Class U-Series 3 newly classified hereby shall have all
of the following preferences, conversion and other rights,
<PAGE>
voting powers, restrictions, limitations, qualifications and terms and
conditions of redemption:
(1) Assets Belong to a Class. All consideration received by Galaxy
for the issue or sale of shares of Class C-Special Series 2, Class H-Series 3,
Class J-Series 3, Class K-Series 3, Class L-Series 3, Class M-Series 3, Class
N-Series 3 and Class U-Series 3 shall be invested and reinvested with the
consideration received by Galaxy for the issue and sale of all other shares now
or hereafter classified as shares of Class C, Class H, Class J, Class K, Class
L, Class M, Class N and Class U, respectively (irrespective of whether said
shares have been classified as part of a series of said Class and if so
classified as part of a series, irrespective of the particular series
classification), together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds derived from the
sale, exchange, or liquidation of such investment, any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, and any general assets of Galaxy allocated to Class C, Class H, Class J,
Class K, Class L, Class M, Class N and Class U (including the Class C, Class H,
Class J, Class K, Class L, Class M, Class N and Class U shares formerly
classified, Class C-Special Series 2, Class H-Series 3, Class J-Series 3, Class
K-Series 3, Class L-Series 3, Class M-Series 3, Class N-Series 3 and Class U-
Series 3 shares herein classified or such other shares with respect to such
Class C, Class H, Class J, Class K, Class L, Class M, Class N and Class U) by
the Board of Trustees in accordance with Galaxy's Declaration of Trust. All
income, earnings, profits, and proceeds, including any profits derived from the
sale, exchange or liquidation of such shares of Class C, Class H, Class J,
Class K, Class L, Class M, Class N and Class U, and any assets
derived from any reinvestment of such proceeds in whatever form shall be
allocated to the Class C-Special Series 2 shares, Class H-Series 3 shares,
Class J-Series 3 shares, Class K-Series 3 shares, Class L-Series 3 shares,
Class M-Series 3 shares, Class N-Series 3 shares and Class U-Series 3 shares in
the proportion that the net asset value of such Special Series 2 shares or
Series 3 shares, as the case may be, of such Class bears to the total net asset
value of all shares of such Class C, Class H, Class J, Class K, Class L, Class
M, Class N and Class U (irrespective of whether said shares have been
classified as part of a series of said Class and, if so classified as part of a
series, irrespective of the particular series classification).
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<PAGE>
(2) Liabilities Belonging to a Class. All the liabilities
(including expenses) of Galaxy in respect of Class C, Class H, Class J, Class
K, Class L, Class M, Class N and Class U shall be allocated to the Class C -
Special Series 2 shares, Class H-Series 3 shares, Class J-Series 3 shares,
Class K-Series 3 shares, Class L-Series 3 shares, Class M-Series 3 shares,
Class N-Series 3 shares and Class U-Series 3 shares hereby classified of such
Class C, Class H, Class J, Class K, Class L, Class M, Class N and Class U in
the proportion that the net asset value of such Special Series 2 shares or
Series 3 shares, as the case may be, of such Class bears to the total net asset
value of all shares of such Class C, Class H, Class J, Class K, Class L, Class
M, Class N and Class U (irrespective of whether said shares have been
classified as a part of a series of said Class
and, if so classified as a part of a series, irrespective of the particular
series classification), except that to the extent that may be from time to time
determined by the Board of Trustees to allocate the following expenses to such
Class C -Special Series 2 shares, Class H-Series 3 shares, Class J-Series 3
shares, Class K-Series 3 shares, Class L-Series 3 shares, Class M-Series 3
shares, Class N-Series 3 shares and Class U - Series 3 shares (or any other
series of shares of such Class):
(a) only the Special Series 2 shares of Class C and the Series 3
shares of Class H, Class J, Class K, Class M, Class N and Class U shall bear:
(i) the expenses and liabilities of payments to institutions under any
agreements entered into by or on behalf of Galaxy which provide for services by
the institutions exclusively for their customers who own of record or
beneficially such Special Series 2 shares or Series 3 shares, as the case may
be; and (ii) such other expenses and liabilities as the Board of Trustees may
from time to time determine are directly attributable to such shares and which
therefore should be borne solely by the Special Series 2 shares of Class C and
the Series 3 shares of Class H, Class J, Class K, Class M, Class N and Class U;
and
(b) no Special Series 2 shares of ClassEC or Series 3 shares of
Class H, Class J, Class K, Class L, Class M, Class N and Class U shall bear (i)
the expenses and liabilities of payments to institutions under any agreements
entered into by or on behalf of Galaxy which provide for services by the
institutions
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<PAGE>
exclusively for their customers who own of record or beneficially shares of
Class C other than Special Series 2 shares of such Class C or shares of Class
H, Class J, Class K, Class L, Class M, Class N and Class U other than Series 3
shares of such Class H, Class J, Class K, Class L, Class M, Class N and Class
U; and (ii) such other expenses and liabilities as the Board of Trustees may
from time to time determine are directly attributable to shares of Class C
other than the Special Series 2 shares of such Class C or shares of Class H,
Class J, Class K, Class L, Class M, Class N and Class U other than Series 3
shares of such Class H, Class J, Class K, Class L, Class M, Class N and Class U
and which therefore should be borne solely by such other shares of Class C,
Class H, Class J, Class K, Class L, Class M, Class N and Class U and not the
Special Series 2 shares of such Class C or Series 3 shares of such Class H,
Class J, Class K, Class L, Class M, Class N and Class U.
(3) Preferences, Conversion and Other Rights, Voting Powers, Restrictions,
Limitations, Qualifications, and Terms and Conditions of Redemption. Except as
provided hereby, each Special Series 2 share of Class C and each Series 3 share
of Class H, Class J, Class K, Class L, Class M, Class N and Class U shall have
the same preferences, conversion, and other rights, voting powers,
restrictions, fications, and terms and conditions of redemption applicable to
all other shares as set forth in Galaxy's Declaration of Trust and shall also
have the same preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and conditions of
redemption as each other share formerly, now or hereafter classified as a share
of Class C, Class H, Class J, Class K, Class L, Class M, Class N and Class U
(irrespective of whether said share has been classified as a part of a series
of said Class and, if so classified as a part of a series, irrespective of the
particular series classification) except that:
(a) On any matter that pertains to the agreements or expenses and
liabilities described under Section (2), clause (a) above (or to any plan or
other document adopted by Galaxy relating to said agreements, expenses, or
liabilities) and is submitted to a vote of shareholders of Galaxy, only the
Special Series 2 shares of ClassEC and the Series 3
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<PAGE>
shares of Class H, Class J, Class K, Class L, Class M, Class N and Class U
(excluding the other shares classified as a series of such Class other than
Special Series 2 or Series 3, as the case may be) shall be entitled to vote,
except that:
(i) if said matter affects shares in Galaxy other than the
Special Series 2 shares of Class C and the Series 3 shares of Class H, Class J,
Class K, Class L, Class M, Class N and Class U, such other affected shares in
Galaxy shall also be entitled to vote, and in such case, such Special Series 2
shares of such Class C and such Series 3 shares of such Class H, Class J, Class
K, Class L, Class M, Class N and Class U shall be voted in the aggregate
together with such other affected shares and not by class or series except
where otherwise required by law or permitted by the Board of Trustees of
Galaxy; and
(ii) if said matter does not affect the Special Series 2
shares of Class C and Series 3 shares of Class H, Class J, Class K, Class L,
Class M, Class N and Class U, such shares shall not be entitled to vote (except
where required by law or permitted by the Board of Trustees) even though the
matter is submitted to a vote of the holders of shares in Galaxy other than
said Special Series 2 shares of such Class C and such Series 3 shares of Class
H, Class J, Class K, Class L, Class M, Class N and Class U.
(b) With respect to each such series of shares, the first sentence of
Section 5.1B(9) shall not apply, and the following shall apply instead:
To the extent of the assets of the Trust legally available for
such redemptions, a Shareholder of the Trust shall have the right to require
the Trust to redeem his full and fractional Shares of any class out of assets
belonging to the classes with the same alphabetical designation as such class
at a redemption price equal to the net asset value per Share for such Shares
being redeemed next determined after receipt of a request to redeem in proper
form as determined by the Trustees, less such deferred sales charge,
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<PAGE>
redemption fee or other charge, if any, as may be fixed by the Trustees,
subject to the right of the Trustees to suspend the right of redemption of
Shares or postpone the date of payment of such redemption price in accordance
with the provisions of applicable law.
(c) Class C-Special Series 2, Class H-Series 3, Class J-Series
3, Class K-Series 3, Class L-Series 3, Class M-Series 3, Class N-Series 3 and
Class U-Series 3 shares shall be convertible into Class C-Special Series 1,
Class H-Series 2, Class J-Series 2, Class K-Series 2, Class L-Series 2, Class
M-Series 2, Class N-Series 2 and Class U-Series 2 shares, respectively, on the
basis of the relative net asset values of the shares converted and the shares
into which such shares are converted, and otherwise after such time or times,
and upon such conditions and pursuant to such procedures, as shall be
determined by the Trustees from time to time in connection with the sale and
issuance of such shares.
The foregoing resolutions remain in full force and effect as of the
date hereof.
W. Bruce McConnel, III
Secretary
Dated: _________ __, 1995
Subscribed and sworn to before
me this ____ day of ________, 1995
______________________________________
Notary Public or Commissioner of Deeds
My Commission Expires:
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<PAGE>
THE GALAXY FUND
ADVISORY AGREEMENT
AGREEMENT made as of May 19, 1994 between THE GALAXY FUND, a Massachusetts
business trust, located in Worcester, Massachusetts ("Galaxy"), and FLEET
INVESTMENT ADVISORS INC., a New York Corporation, located in Rochester, New
York (the "Adviser").
WHEREAS, Galaxy is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Galaxy desires to retain the Adviser as investment adviser to the
Money Market Fund, Government Fund, Tax-Exempt Fund, U.S. Treasury Fund,
Institutional Treasury Money Market Fund, Short-Term Bond Fund, Intermediate
Bond Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt Bond Fund,
New York Municipal Bond Fund, Connecticut Municipal Bond Fund, Massachusetts
Municipal Bond Fund, Rhode Island Municipal Bond Fund, Equity Value Fund,
Equity Growth Fund, Equity Income Fund, International Equity Fund, Small
Company Equity Fund and Asset Allocation Fund (individually, a "Fund," and
collectively, the "Funds");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Adviser acknowledges that it has received
copies of each of the following as certified by Galaxy:
(a) Galaxy's Declaration of Trust, as filed with the State Secretary of
the Commonwealth of Massachusetts on March 31, 1986 and all amendments thereto
(such Declaration of Trust, as presently in effect and as it shall from time to
time be amended, is herein called the "Declaration of Trust");
(b) Galaxy's Code of Regulations and any amendments thereto (such Code
of Regulations, as presently in effect and as it shall from time to time be
amended, is herein called the "Code of Regulations");
(c) Resolutions of Galaxy's Board of Trustees authorizing the
appointment of the Adviser and approving this Agreement;
(d) Galaxy's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange
<PAGE>
Commission ("SEC") on April 14, 1986 and all amendments thereto;
(e) Galaxy's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended (the "1933 Act") (Registration No. 33-4806) and under
the 1940 Act as filed with the SEC on April 14, 1986 and all amendments
thereto; and
(f) Galaxy's most recent prospectuses with respect to the Funds (such
prospectuses, as presently in effect and all amendments and supplements
thereto, herein called "Prospectuses").
Galaxy will furnish the Adviser from time to time with execution copies of
all amendments of, or supplements to, the foregoing.
2. Services. Galaxy hereby appoints the Adviser to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. Intending to be legally bound, the Adviser accepts such appointment
and agrees to furnish the services required herein to the Funds for the
compensation hereinafter provided.
Subject to the supervision of Galaxy's Board of Trustees, the Adviser will
provide with respect to the Funds a continuous investment program for each
Fund, including investment research and management with respect to all
securities and investments and cash equivalents in such Fund. The Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by each Fund and will arrange for the purchase and
sale of securities and other investments of each Fund. The Adviser will
review, monitor and report to the Board of Trustees on the performance and
investment procedures of any sub-adviser approved pursuant to Section 3; assist
and consult with any sub-adviser in connection with a Fund's continuous
investment program; approve lists of foreign countries which may be recommended
by any sub-adviser for investment by the International Equity Fund; and provide
the Board of Trustees and any sub-adviser with such information concerning
relevant economic and political developments as the Adviser shall deem
appropriate or as shall be requested by the Board of Trustees. The Adviser will
provide the services under this Agreement in accordance with each Fund's
investment objective, policies and restrictions as
stated in the Prospectuses and resolutions of Galaxy's Board of Trustees
applicable to such Fund.
3. Sub-Adviser. It is understood that the Adviser may from time to time
employ or associate with itself such person or persons as the Adviser believes
to be fitted to assist it in the performance of this Agreement (herein a "Sub-
Adviser"); provided,
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<PAGE>
however, that the compensation of such person or persons shall be paid by the
Adviser and that the Adviser shall be as fully responsible to Galaxy for the
acts and omissions of any such person as it is for its own acts and omissions;
and provided, however, that the retention of any Sub-Adviser shall be approved
as may be required by the 1940 Act.
4. Covenants by Adviser. The Adviser agrees with respect to the
services provided to each Fund that it:
(a) will conform with all Rules and Regulations of the SEC applicable to
it as an investment adviser and will in addition conduct its activities under
this agreement in accordance with those regulations of the Board of Governors
of the Federal Reserve System pertaining to the investment advisory activities
of bank holding companies which are applicable to the Adviser;
(b) will use the same skill and care in providing such services as it
uses in providing services to other investment companies;
(c) will place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer. In placing
orders with brokers and dealers, the Adviser will attempt to obtain the best
net price and the most favorable execution of its orders. Consistent with this
obligation, when the execution and price offered by two or more brokers or
dealers are comparable, the Adviser may, in its discretion, purchase and sell
portfolio securities from and to brokers and dealers who provide Galaxy with
research advice and other services. Except as permitted by the SEC, portfolio
securities will not be purchased from or sold to the Adviser, the Funds'
distributor (the "Distributor"), or any affiliated person of Galaxy, the
Adviser, or the Distributor, provided, however, that subject to the provisions
of this paragraph and to the extent permitted by law, the Adviser may purchase
or sell portfolio securities through the Distributor or an affiliate of the
Distributor or the Adviser acting as broker;
(d) will maintain all books and records with respect to the securities
transactions for the Funds, keep Galaxy's books of account with respect to the
Funds and furnish Galaxy's Board of Trustees such periodic and special reports
as the Board may request with respect to the Funds;
(e) will treat confidentially and as proprietary information of Galaxy
all records and other information relative to the Funds and prior, present or
potential shareholders, and will not use such records and information for any
purpose other than performance of its
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<PAGE>
responsibilities and duties hereunder (except after prior notification to and
approval in writing by Galaxy, which approval shall not be unreasonably
withheld and may not be withheld and will be deemed granted where the Adviser
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by Galaxy).
5. Services Not Exclusive. The services furnished by the Adviser
hereunder are deemed not to be exclusive, and nothing in this Agreement shall
(i) prevent the Adviser or any affiliated person (as defined in the 1940 Act)
of the Adviser from acting as investment adviser or manager for any other
person or persons, including other management investment companies with
investment objectives and policies the same as or similar to those of any Fund
or (ii) limit or restrict the Adviser or any such affiliated person from
buying, selling or trading any securities or other investments (including any
securities or other investments which any Fund is eligible to buy) for its or
their own accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Adviser agrees that it will not undertake
any activities which, in its judgment, will adversely affect the performance of
its obligations to the Funds under this Agreement.
6. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the Funds are the property of Galaxy and further agrees to
surrender promptly to Galaxy any of such records upon Galaxy's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act.
7. Expenses. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions,
if any) purchased for the Funds.
8. Compensation. For the services provided and the expenses assumed
with respect to the Funds pursuant to this Agreement, Galaxy will pay the
Adviser from the assets belonging to the Fund involved and the Adviser will
accept as full compensation therefor fees, computed daily and paid monthly, at
an annual rate of .40% of the net assets of the Money Market, Government and
Tax-Exempt Funds; .40% of the first $750,000,000 of net assets of the U.S.
Treasury Fund plus .35% of net assets of such Fund in excess of $750,000,000;
.20% of the net assets of the International Treasury Money Market Fund; .75% of
the net assets of the Short-Term Bond, Intermediate Bond, High Quality
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<PAGE>
Bond, Corporate Bond, Tax-Exempt Bond, New York Municipal Bond, Connecticut
Municipal Bond, Massachusetts Municipal Bond, Rhode Island Municipal Bond,
Equity Value, Equity Growth, Equity Income, Small Company Equity and Asset
Allocation Funds; and 1.15% of the first $50 million of the International
Equity Fund's average daily net assets, plus .95% of the next $50 million of
such assets, plus .85% of net assets in excess of $100 million.
If in any fiscal year the aggregate expenses of any Fund (as defined
under the securities regulations of any state having jurisdiction over each
Fund) exceed the expense limitations of any such state, the Adviser will
reimburse Galaxy for such excess expenses to the extent described in any
written undertaking provided by the Adviser to such state.
9. Limitation of Liability. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by Galaxy, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of its
duties or from reckless disregard of its obligations and duties under this
Agreement.
10. Duration and Termination. This Agreement shall become effective
with respect to each Fund on the day such Fund first commences the public
offering of its shares and, unless sooner terminated, shall continue in effect
until August 10, 1995. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to a particular Fund for successive twelve
month periods ending on August 10, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of
Galaxy's Board of Trustees who are not parties to this Agreement, or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by Galaxy's Board of Trustees or by the
vote of a majority of the outstanding voting securities of such Fund.
Notwithstanding the foregoing, this Agreement may be terminated as to any Fund
at any time, without the payment of any penalty, by Galaxy's Board of Trustees
or by vote of a majority of the outstanding voting securities of such Fund, or
by the Adviser, on 60 days' written notice (which notice may be waived by the
party entitled to receive the same). This Agreement will immediately terminate
in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning as such terms in the 1940
Act.)
11. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or
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<PAGE>
termination is sought. No amendment of this Agreement shall be effective with
respect to a particular Fund until approved by the vote of a majority of the
outstanding voting securities of that Fund.
12. Miscellaneous. The Adviser expressly agrees that notwithstanding
the termination of or failure to continue this Agreement with respect to a
particular Fund, the Adviser shall continue to be legally bound to provide the
services required herein for the other Funds for the period and on the terms
set forth in this Agreement.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by New
York law.
13. Names. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and the principal office of Galaxy. The obligations of "The
Galaxy Fund" entered into the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, shareholders, or representatives
of Galaxy personally, but bind only the property of Galaxy, and all persons
dealing with any class of shares of Galaxy must look solely to the property of
Galaxy belonging to such class for the enforcement of any claims against
Galaxy.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE GALAXY FUND
By /s/John T. O'Neill
President
FLEET INVESTMENT ADVISORS INC.
By /s/James A Knauf, Jr.
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<PAGE>
ADDENDUM NO. 1 TO ADVISORY AGREEMENT
This Addendum No. 1, dated as of the 1st day of December, 1995, is entered
into between THE GALAXY FUND, a Massachusetts business trust, located in
Worcester, Massachusetts ("Galaxy"), and FLEET INVESTMENT ADVISORS INC., a New
York corporation, located in Providence, Rhode Island (the "Adviser").
WHEREAS, Galaxy and the Adviser have entered into an Advisory Agreement
dated as of MayE19, 1994 (the "Advisory Agreement"), pursuant to which Galaxy
appointed the Adviser to act as investment adviser to Galaxy for its Money
Market Fund, Government Fund, Tax-Exempt Fund, U.S. Treasury Fund,
Institutional Treasury Money Market Fund, Short-Term Bond Fund, Intermediate
Bond Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt Bond Fund,
New York Municipal Bond Fund, Connecticut Municipal Bond Fund, Massachusetts
Municipal Bond Fund, Rhode Island Municipal Bond Fund, Equity Value Fund,
Equity Growth Fund, Equity Income Fund, International Equity Fund, Small
Company Equity Fund and Asset Allocation Fund (each a "Fund");
WHEREAS, Galaxy has notified the Adviser that it has established a Growth
and Income Fund, Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund and Small Cap Value Fund and that it desires to
retain the Adviser to act as the investment adviser therefor, and the Adviser
has notified Galaxy that it is willing to serve as investment adviser for the
Growth and Income Fund, Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund and Small Cap Value Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. Galaxy hereby appoints the Adviser to act as investment
adviser to Galaxy for the Growth and Income Fund, Connecticut Municipal Money
Market Fund, Massachusetts Municipal Money Market Fund and Small Cap Value Fund
for the period and on the terms set forth in the Advisory Agreement. The
Adviser hereby accepts such appointment and agrees to render the services set
forth in the Advisory Agreement for the compensation herein provided.
2. COMPENSATION. For the services provided and the expenses assumed
pursuant to the Advisory Agreement with respect to the Growth and Income Fund,
Connecticut Municipal Money Market Fund, Massachusetts Municipal Money Market
Fund and Small Cap Value Fund, Galaxy will pay the Adviser and the Adviser will
accept as full compensation therefor fees, computed daily and paid monthly,
based on the net assets of the Growth and Income Fund, Connecticut Municipal
Money Market Fund, Massachusetts Municipal Money Market Fund and Small Cap
Value Fund considered
<PAGE>
separately on a per-Fund basis at the following annual rates: .40% of the first
$750,000,000 of net assets of each of the Connecticut Municipal Money Market
Fund and Massachusetts Municipal Money Market Fund plus .35% of the net assets
of each such Fund in excess of $750,000,000; and .75% of the net assets of each
of the Growth and Income Fund and Small Cap Value Fund.
If in any fiscal year the aggregate expenses of any Fund (as defined under
the securities regulations of any state having jurisdiction over such Fund)
exceed the expense limitations of any such state, the Adviser will reimburse
Galaxy for such excess expenses to the extent described in any written
undertaking provided by the Adviser to such state.
3. CAPITALIZED TERMS. From and after the date hereof, the term "Fund" as
used in the Advisory Agreement shall be deemed to include the Growth and Income
Fund, Connecticut Municipal Money Market Fund, Massachusetts Municipal Money
Market Fund and Small Cap Value Fund. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Advisory
Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE GALAXY FUND
By:
Title: President
FLEET INVESTMENT ADVISORS INC.
By:
Title: Chairman
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<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 31st day of March, 1995 by and among THE
GALAXY FUND, a Massachusetts business trust ("Galaxy"), The Shareholder
Services Group, Inc., d/b/a 440 Financial, a Massachusetts corporation ("440
Financial"), and 440 Financial Distributors, Inc., a Massachusetts corporation
(the "Distributor") and a wholly-owned subsidiary of 440 Financial.
W I T N E S S E T H
WHEREAS, Galaxy is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940; and
WHEREAS, Galaxy is currently offering units of beneficial interest, par value
$.001 (the "Shares"), representing interests in the following investment
portfolios: Money Market Fund, Government Fund, Equity Value Fund,
Intermediate Bond Fund, Tax-Exempt Fund, U.S. Treasury Fund, International
Equity Fund, Equity Growth Fund, Equity Income Fund, High Quality Bond Fund,
Short-Term Bond Fund, Tax-Exempt Bond Fund, Asset Allocation Fund, Small
Company Equity Fund, New York Municipal Bond Fund, Connecticut Municipal Bond
Fund, Massachusetts Municipal Bond Fund, Rhode Island Municipal Bond Fund,
Institutional Treasury Money Market Fund and Corporate Bond Fund (individually
a "Fund" and collectively the "Funds"); and
WHEREAS, a sales charge may be imposed on the sale of certain Shares of one
or more of the Funds ("Load Shares"); and
WHEREAS, the Distributor currently serves as distributor for the Funds
pursuant to a Distribution Agreement dated as of FebruaryE28, 1994; and
WHEREAS, all of the issued and outstanding stock of the Distributor is this
day being acquired by 440 Financial (the "Acquisition"); and
WHEREAS, Galaxy desires to retain the Distributor as distributor for the
Funds to provide for the sale and distribution of the Shares following the
Acquisition, and 440 Financial and the Distributor are prepared to provide such
services through the Distributor;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein and intending to be legally bound hereby the parties hereto agree
as follows:
<PAGE>
1. Service as Distributor.
1.1 The Distributor will act as Galaxy's disclosed agent for the
distribution of the Shares covered by the registration statement and prospectus
then in effect under the Securities Act of 1933 (the "1933 Act"). The
Distributor will have no liability for payment for the purchase of Shares sold
pursuant to this Agreement or with respect to redemptions or repurchases of
Shares.
1.2 The Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. Galaxy understands
that the Distributor is the distributor, and may in the future be the
distributor, of the shares of other investment companies' portfolios
("Portfolios") including Portfolios having investment objectives similar to
those of the Funds. Galaxy further understands that investors and potential
investors in the Funds may invest in shares of such other Portfolios. Galaxy
agrees that the Distributor's duties to such Portfolios shall not be deemed in
conflict with its duties to Galaxy under this paragraph 1.2.
1.3 The Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable which are primarily intended to result in
the sale of the Shares, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current shareholders, and the printing
and mailing of sales literature.
1.4 All activities by the Distributor and its agents and employees as
distributor of the Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940 by the Securities and
Exchange Commission or any securities association registered under the
Securities Exchange Act of 1934.
1.5 The Distributor will provide one or more persons, during normal business
hours, to respond to telephone questions with respect to the Funds.
1.6 The Distributor will transmit any orders received by it for purchase or
redemption of the Shares to Galaxy's transfer agent and custodian.
1.7 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind,
Galaxy's officers may decline to accept any orders for, or make any sales of,
the Shares until such time as those officers deem it advisable to accept such
orders and to make such sales.
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<PAGE>
1.8 The Distributor may enter into selling agreements with selected dealers
or other institutions with respect to the offering of the Shares to the public.
Each such selling agreement will provide (i) that all payments for purchases of
Shares will be sent directly from the dealer or such other institution to the
Funds' transfer agent and (ii) that, if payment is not made with respect to
purchases of Shares at the customary or required time for settlement of the
transaction, the Distributor will have the right to cancel the sale of the
Shares ordered by the dealer or such other institution, in which case the
dealer or such other institution will be responsible for any loss suffered by
any Fund or the Distributor resulting from such cancellation. The Distributor
may also act as disclosed agent for a Fund and sell Shares of that Fund to
individual investors, such transactions to be specifically approved by an
officer of that Fund.
1.9 The Distributor will send a confirmation to each purchaser of Shares
under this Agreement. Such confirmations will comply with all applicable
Federal and state laws and rules and regulations of authorized regulatory
bodies and will clearly state that the Distributor is acting as agent in the
transaction and that all remittances, registration instructions and
certifications for redemption should be sent directly to the Funds' transfer
agent. Such confirmations will also set forth the mailing address and delivery
address of the Funds' transfer agent.
1.10 All Load Shares offered for sale by the Distributor shall be offered
for sale to the public at a price per share (the "offering price") equal to (a)
their net asset value (determined in the manner set forth in Galaxy's
Declaration of Trust and the then current prospectus) plus, except with respect
to certain classes of persons set forth in the then current prospectus, (b) a
sales charge which shall be the percentage of the offering price of such Load
Shares as set forth in the then current prospectus. The offering price, if not
an exact multiple of one cent, shall be adjusted to the nearest cent.
Concessions by the Distributor to dealers and other institutions shall be set
forth in either the selling agreements between the Distributor and such dealers
and institutions as from time to time amended, or if such concessions are
described in the then current prospectus, shall be as so set forth. No dealer
or other institution who enters into a selling agreement with the Distributor
shall be authorized to act as agent for Galaxy in connection with the offering
or sale of the Load Shares to the public or otherwise.
1.11 If any Load Shares sold by Galaxy are redeemed or repurchased by Galaxy
or by the Distributor as disclosed agent or
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are tendered for redemption within seven business days after the date
of confirmation of the original purchase of said Load Shares, the
Distributor shall forfeit the sales charge received by the Distributor
in respect of such shares, provided that the portion, if any, of such
amount re-allowed by the Distributor to dealers or other institutions shall be
repayable to Galaxy only to the extent recovered by the Distributor from the
dealer or other institution involved. The Distributor shall include in each
selling agreement with such dealers and other institutions a corresponding
provision for the forfeiture by them of their concession with respect to the
Load Shares sold by them or their principals and redeemed or repurchased by
Galaxy or by the Distributor as disclosed agent (or tendered for redemption)
within seven business days after the date of confirmation of such initial
purchases.
1.12 Galaxy agrees at its own expense to execute any and all documents and
to furnish any and all information and otherwise to take all actions that may
be reasonably necessary in connection with the qualification of the Shares for
sale in such states as the Distributor may designate.
1.13 Galaxy shall furnish from time to time, for use in connection with the
sale of the Shares, such written information with respect to the Funds and the
Shares as the Distributor may reasonably request; and Galaxy warrants that the
statements contained in any such information shall fairly show or represent
what they purport to show or represent. Galaxy shall also furnish the
Distributor upon request with: (a) unaudited semi-annual statements of the
Funds' books and accounts, (b) quarterly earnings statements of the Funds, (c)
a monthly itemized list of the securities in the Funds, (d) monthly balance
sheets as soon as practicable after the end of each month, and (e) from time to
time such additional information regarding the Funds' financial condition as
the Distributor may reasonably request.
1.14 Galaxy represents to the Distributor that all registration statements
and prospectuses filed by Galaxy with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, with respect to the Shares have
been prepared in conformity with the requirements of said Act and the rules and
regulations of the Securities and Exchange Commission thereunder. As used in
this agreement the terms "registration statement" and "prospectus" shall mean
any registration statement and prospectus filed with the Securities and
Exchange Commission and any amendments and supplements thereto, including
statements of additional information incorporated therein by reference, which
at any time shall have been filed with the Securities and Exchange Commission.
Galaxy represents and warrants to the Distributor that any registration
statement and prospectus, when such registration statement becomes effective,
will contain all statements required to be stated therein in conformity with
said
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<PAGE>
Act and the rules and regulations of the Securities and Exchange Commission;
that all statements of fact contained in any such registration statement
and prospectus will be true and correct when such registration
statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes
effective will include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. Galaxy may,
but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus, as, in the light of future developments, may, in the opinion of
Galaxy's counsel, be necessary or advisable. Galaxy shall promptly notify the
Distributor of any advice given to it by Galaxy's counsel regarding the
necessity or advisability so to amend or supplement such registration statement
or prospectus. If Galaxy shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by Galaxy of a
written request from the Distributor to do so, the Distributor may, at its
option, terminate this agreement. Galaxy shall not file any amendment to any
registration statement or supplement to any prospectus without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit Galaxy's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as Galaxy may deem
advisable, such right being in all respects absolute and unconditional.
1.15 Galaxy authorizes the Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
Galaxy agrees to indemnify, defend and hold the Distributor, its several
officers and directors, and any institution who controls the Distributor within
the meaning of Section 15 of the 1933 Act, as amended, free and harmless from
and against any and all claims, demands, liabilities and expenses (including
the cost of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the Distributor, its
officers and directors, or any such controlling person, may incur under the
1933 Act, as amended, or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any prospectus or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in either any registration statement or any prospectus or
necessary to make the statements in either thereof not misleading; provided,
however, that Galaxy's agreement to indemnify the Distributor, its officers or
directors, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of
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<PAGE>
any statements or representations contained in any registration
statement or in any prospectus that were furnished in writing to Galaxy
or its counsel by the Distributor and used in the answers to the
registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission or alleged omission to
state a material fact in connection with the giving of such information
required to be stated in such answers or necessary to make the answers not
misleading; and further provided that Galaxy's agreement to indemnify the
Distributor and Galaxy's representations and warranties hereinbefore set forth
in paragraph 1.14 shall not be deemed to cover any liability to Galaxy or its
shareholders to which the Distributor would otherwise be subject by reason of
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of the Distributor's reckless disregarding of its obligations and
duties under this agreement. Galaxy's agreement to indemnify the Distributor,
its officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon Galaxy's being notified of any action brought
against the Distributor, its officers or directors, or any such controlling
person, such notification to be given by letter or by telegram addressed to
Galaxy at its principal office in Worcester, Massachusetts and sent to Galaxy
by the person against whom such action is brought, within 10 days after the
summons or other first legal process shall have been served. The failure so to
notify Galaxy of any such action shall not relieve Galaxy from any liability
which Galaxy may have to the person against whom such action is brought by
reason of any such untrue, or allegedly untrue, statement or omission, or
alleged omission, otherwise than on account of Galaxy's indemnity agreement
contained in this paragraph 1.15. Galaxy will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of good standing
chosen by Galaxy and approved by the Distributor, which approval shall not
unreasonably be withheld. In the event Galaxy elects to assume the defense of
any such suit and retain counsel of good standing approved by the Distributor,
the defendant or defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but in case Galaxy does not
elect to assume the defense of any such suit, or in case the Distributor
reasonably does not approve of counsel chosen by Galaxy, Galaxy will reimburse
the Distributor, its officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by the Distributor or them.
Galaxy's indemnification agreement contained in this paragraph 1.15 and
Galaxy's representations and warranties in this agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Distributor, its officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity
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<PAGE>
will inure exclusively to the Distributor's benefit, to the benefit
of its several officers and directors, and their respective estates,
and to the benefit of the controlling persons and their successors.
Galaxy agrees promptly to notify the Distributor of the commencement
of any litigation or proceedings against Galaxy or any of its
officers or trustees in connection with the issue and sale of any Shares.
1.16 440 Financial and the Distributor agree to indemnify, defend and hold
Galaxy, its several officers and trustees, and any person who controls Galaxy
within the meaning of Section 15 of the 1933 Act, as amended, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Galaxy, its officers or trustees or any such controlling person, may incur
under the 1933 Act, as amended, or under common law or otherwise, but only to
the extent that such liability or expense incurred by Galaxy, its officers or
trustees, or such controlling person resulting from such claims or demands,
shall arise out of or be based upon any untrue, or alleged untrue, statement of
a material fact contained in information furnished in writing by the
Distributor to Galaxy or its counsel and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information
furnished in writing by the Distributor to Galaxy or its counsel required to be
stated in such answers or necessary to make such information not misleading.
The agreement of 440 Financial and the Distributor to indemnify Galaxy, its
officers and trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon 440 Financial's and the Distributor's being notified
of any action brought against Galaxy, its officers or trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to 440 Financial and the Distributor at their principal offices in
Worcester, Massachusetts and sent to 440 Financial and the Distributor by the
person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served. 440
Financial and the Distributor shall have the right of first control of the
defense of such action, with counsel of their own choosing, satisfactory to
Galaxy, if such action is based solely upon such alleged misstatement or
omission on the Distributor's part, and in any other event Galaxy, its officers
or trustees or such controlling person shall each have the right to participate
in the defense or preparation of the defense of any such action. The failure so
to notify 440 Financial and the Distributor of any such action shall not
relieve 440 Financial and the Distributor from any liability which 440
Financial and the Distributor may have to Galaxy, its officers or trustees, or
to such controlling
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<PAGE>
person by reason of any such untrue or alleged untrue statement, or omission or
alleged omission, otherwise than on account of 440 Financial's and the
Distributor's indemnity agreement contained in this paragraph 1.16.
1.17 No Shares shall be offered by either the Distributor or Galaxy under
any of the provisions of this agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by Galaxy if and so long as effectiveness
of the registration statement then in effect or any necessary amendments
thereto shall be suspended under any of the provisions of the 1933 Act, as
amended, or if and so long as a current prospectus as required by Section
10(a)(2) of the 1933 Act, as amended, is not on file with the Securities and
Exchange Commission; provided, however, that nothing contained in this
paragraph 1.17 shall in any way restrict or have any application to or bearing
upon Galaxy's obligation to repurchase Shares from any shareholder in
accordance with the provisions of Galaxy's prospectus or Declaration of Trust.
1.18 Galaxy agrees to advise the Distributor as soon as reasonably practical
by a notice in writing delivered to the Distributor:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation by
service of process on Galaxy of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Securities and Exchange Commission with respect
to any amendment to any registration statement or prospectus which may from
time to time be filed with the Securities and Exchange Commission.
For purposes of this section, informal requests by or acts of the Staff of
the Securities and Exchange Commission shall not be deemed actions of or
requests by the Securities and Exchange Commission.
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<PAGE>
1.19 The Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of Galaxy all records and other
information relative to Galaxy and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by Galaxy, which approval shall
not be unreasonably withheld and may not be withheld where the Distributor may
be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by Galaxy.
1.20 This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
1.21 The names "The Galaxy Fund" and "Trustees of The Galaxy Fund" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of Shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
1.22 440 Financial and the Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by Galaxy in connection
with the performance by the Distributor of its services hereunder, except for a
loss resulting from willful misfeasance, bad faith or negligence on the part of
the Distributor in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
2. Term.
This agreement shall become effective on the date of the consummation of the
Acquisition and, unless sooner terminated as provided herein, shall continue
until February 28, 1996 and thereafter shall continue automatically for
successive annual periods ending on February 28 of each year, provided such
continuance is specifically approved at least annually by (i) Galaxy's Board of
Trustees or (ii) by a vote of a majority (as defined in the Investment Company
Act of 1940) of the outstanding voting securities of Galaxy, provided that in
either event the
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<PAGE>
continuance is also approved by a majority of Galaxy's trustees
who are not parties to this agreement and who are not interested persons (as
defined in the Investment Company Act of 1940) of any party to this agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. This agreement is terminable without penalty, on sixty days' notice,
by Galaxy's Board of Trustees, by vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of Galaxy,
or by the Distributor. This agreement will also terminate automatically in the
event of its assignment (as defined in the Investment Company Act of 1940).
3. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE GALAXY FUND
By:/s/ Walter M. Laliberte
Attest:/s/ W. Bruce McConnel, III Vice President
Secretary
THE SHAREHOLDER SERVICES
GROUP, INC., d/b/a
440 FINANCIAL
By:___________________________
Attest:_______________________
440 FINANCIAL DISTRIBUTORS, INC.
By:______________________________
Attest:________________________
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<PAGE>
THE GALAXY FUND
DISTRIBUTION AGREEMENT
Amendment No. 1
440 Financial Distributors, Inc. December 1, 1995
First Data Investor Services
Group, Inc.
440 Lincoln Street
Worcester, Massachusetts 01653
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Distribution
Agreement among the Trust, 440 Financial Distributors, Inc. (the "Distributor")
and First Data Investor Services Group, Inc. (formerly known as The Shareholder
Services Group, Inc. d/b/a 440 Financial) dated as of March 31, 1995 (the
"Agreement") is herewith amended to provide that the Distributor shall be the
distributor for the Growth and Income, Connecticut Municipal Money Market,
Massachusetts Municipal Money Market and Small Cap Value Funds on the terms and
conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By:
John T. O'Neill, President
Accepted:
440 FINANCIAL DISTRIBUTORS, INC.
By:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
<PAGE>
AMENDMENT NO. 2 TO DISTRIBUTION AGREEMENT
This Amendment No. 2, dated as of the __ day of _________, 1995, is entered
into by THE GALAXY FUND, a Massachusetts business trust ("Galaxy"), THE
SHAREHOLDER SERVICES GROUP, INC. d/b/a 440 FINANCIAL, a Massachusetts
corporation ("440 Financial"), and 440 FINANCIAL DISTRIBUTORS, INC., a
Massachusetts corporation (the "Distributor") and a wholly-owned subsidiary of
440 Financial
WHEREAS, Galaxy, 440 Financial and the Distributor have entered into a
Distribution Agreement dated as of March 31, 1995 (the "Distribution
Agreement");
WHEREAS, Galaxy, 440 Financial and the Distributor wish to amend the
Distribution Agreement to set forth certain additional responsibilities of the
Distributor relating to the offering, issuance, sale and redemption of Retail B
Shares in certain of the investment portfolios of Galaxy;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
hereby agree as follows:
1. Paragraph 1.3 of the Distribution Agreement is hereby amended and
restated in its entirety to read as follows:
"1.3 The Distributor shall, at its own expense, finance
appropriate activities which it deems reasonable which
are primarily intended to result in the sale of the Shares,
including, but not limited, advertising, compensation of
underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current shareholders,
and the printing and mailing of sales literature; provided,
however, that each Fund will bear the expenses incurred and
other payments made in accordance with the provisions of
this Agreement and any plan now or hereafter adopted with
respect to any one or more series of Shares of such Fund
pursuant to Rule 12b-1 under the 1940 Act (collectively,
the "Plans")."
2. Paragraph 1.23 is added to the Distribution Agreement to read as
follows:
"The Distributor agrees to be responsible for implementing
and operating the Plans in accordance with the terms
thereof."
3. Paragraph 1.24 is added to the Distribution Agreement to read as
follows:
"With respect to such series of Shares, if any, that are
<PAGE>
sold with a contingent deferred sales charge ("CDSC"), the
Distributor shall impose a CDSC in connection with the
redemption of the Shares of such series, not to exceed a
specified percentage of the original purchase price of the
Shares, as from time to time set forth in the applicable
Prospectuses. The Distributor may retain (or receive from
Galaxy, as the case may be) all of any CDSC. The
Distributor may pay to broker-dealers or other persons
through whom such Shares are sold a commission or other
payment to the extent consistent with the current
Prospectuses and applicable rules and regulations."
4. Miscellaneous. Except to the extent supplemented hereby, the
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the date and year first above written.
THE GALAXY FUND
Attest:_____________________ By:_______________________
Secretary Vice President
THE SHAREHOLDER SERVICES
GROUP, INC. d/b/a
440 FINANCIAL
Attest:______________________ By:_________________________
440 FINANCIAL DISTRIBUTORS,
INC.
Attest:______________________ By:__________________________
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<PAGE>
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 31st day of March, 1995 between THE GALAXY
FUND, a Massachusetts business trust ("Galaxy"), and The Shareholder Services
Group, Inc., d/b/a 440 Financial, a Massachusetts corporation ("440
Financial").
W I T N E S S E T H
WHEREAS, Galaxy is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, Galaxy desires to employ the capital held in the following of its
investment portfolios, Money Market Fund, Government Fund, Equity Value Fund,
Intermediate Bond Fund, Tax-Exempt Fund, U.S. Treasury Fund, Equity Growth
Fund, Equity Income Fund, International Equity Fund, High Quality Bond Fund,
Short-Term Bond Fund, Tax-Exempt Bond Fund, Asset Allocation Fund, Small
Company Equity Fund, New York Municipal Bond Fund, Connecticut Municipal Bond
Fund, Massachusetts Municipal Bond Fund, Rhode Island Municipal Bond Fund,
Institutional Treasury Money Market Fund and Corporate Bond Fund (individually
a "Fund" and collectively the "Funds"), by investing and reinvesting the same
in investments of the type and in accordance with the limitations specified in
its Declaration of Trust and in its Prospectus with respect to each Fund as
from time to time in effect; and
WHEREAS, Galaxy has submitted or will submit to 440 Financial copies of
Galaxy's Declaration of Trust and the prospectus for each Fund and resolutions
of Galaxy's Board of Trustees with respect to each Fund; and
WHEREAS, 440 Financial Group of Worcester, Inc. ("440 Group") currently
serves as administrator for the Funds pursuant to an Administration Agreement
dated as of February 28, 1994, as amended; and
WHEREAS, all of the assets of 440 Group, including but not limited to all
rights in and to the name "440 Financial," are this day being acquired by 440
Financial (the "Acquisition"); and
WHEREAS, Galaxy desires to appoint 440 Financial as administrator of each
Fund following the Acquisition and 440 Financial is prepared to provide such
administrative services;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein and intending to be legally bound hereby the parties hereto agree
as follows:
<PAGE>
1. Services as Administrator
440 Financial hereby accepts its appointment as administrator for the Funds,
and agrees to provide services hereunder subject to the direction and control
of Galaxy's Board of Trustees.
With respect to each Fund, 440 Financial agrees to: compute the net asset
value of Galaxy's Funds and the net income available for dividends in
accordance with Galaxy's current Prospectuses, the Statement of Additional
Information and the resolutions of the Board of Trustees; furnish statistical
and research data, clerical, accounting and bookkeeping services, and
stationery and office supplies; provide internal auditing and legal services
and internal executive and administrative services; prepare those portions of
Galaxy's semi-annual reports to the Securities and Exchange Commission on Form
N-SAR that pertain to each Fund, and coordinate and file such reports; compile
data for and prepare for execution by Galaxy those portions of Galaxy's Federal
and state tax returns and required tax filings that pertain to each Fund and
file such returns and filings when completed (other than those filings required
to be made by Galaxy's custodian and transfer agent); prepare compliance
filings pursuant to state securities laws with the advice of Galaxy's counsel;
prepare those portions of Galaxy's Annual and Semi-Annual Reports to
shareholders that pertain to each Fund, and coordinate and file such reports;
compile data for, prepare, and file timely notices to the Securities and
Exchange Commission required with respect to the registration of each Fund's
shares pursuant to Rule 24f-2 under the 1940 Act;
arrange for and bear the cost of processing purchase and redemption orders with
respect to each Fund's shares; keep and maintain the Funds' financial accounts
and records; monitor Galaxy's arrangements with respect to services provided by
certain institutional shareholders (herein called "Service Organizations") to
their customers, who are the beneficial owners of any class of Galaxy's shares
of beneficial interest (including any series or sub-class thereof), pursuant to
agreements between Galaxy and such Service Organizations (herein called
"Servicing Agreements"), including, among other things, reviewing the
qualifications of Service Organizations wishing to enter into Servicing
Agreements with Galaxy, assisting in the execution and delivery of the
Servicing Agreements, reporting to the Board of Trustees with respect to the
amounts paid or payable by Galaxy from time to time under the Servicing
Agreements and the nature of the services provided by Service Organizations and
maintaining appropriate records in connection with the foregoing duties; and
generally assist in all aspects of the Funds' operations.
440 Financial also agrees to maintain office facilities for Galaxy (which may
be at the offices of 440 Financial or a corporate affiliate and which shall be
in such location as Galaxy
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<PAGE>
may reasonably determine) and to supervise all administrative aspects of the
Funds' operations except those performed by the Funds' investment adviser under
its Advisory Agreement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, 440
Financial hereby agrees that all records which it maintains for Galaxy are the
property of Galaxy, and further agrees to surrender promptly to Galaxy any of
such records upon Galaxy's request. 440 Financial further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
In computing the net asset value of each Fund, 440 Financial may utilize one
or more independent pricing services approved from time to time by the Board of
Trustees of Galaxy to obtain securities prices. Each Fund will pay its share
of the cost of such services based upon its actual use of the services.
2. Fees; Expenses; Expense Reimbursement
In consideration of services provided and expenses assumed with respect to
the Funds, Galaxy will pay 440 Financial a monthly fee as agreed to by Galaxy
and 440 Financial from time to time.
440 Financial will from time to time employ or associate with itself such
person or persons as 440 Financial may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
officers and employees who are employed by both 440 Financial and Galaxy. The
compensation of such person or persons shall be paid by 440 Financial and no
obligation will be incurred on behalf of Galaxy in such respect.
440 Financial will bear all expenses in connection with the performance of
its services under this Agreement. Other expenses to be incurred in the
operation of the Funds including taxes, interest, brokerage fees and
commissions, if any, fees of trustees who are not officers, directors,
stockholders or employees of 440 Financial, or of the Funds' investment adviser
or distributor, Securities and Exchange Commission fees and state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of corporate
existence, typesetting and printing of prospectuses for regulatory purposes and
for distribution to current shareholders of the Funds, costs of shareholders'
reports and corporate meetings and any extraordinary expenses will be borne by
the Funds, provided, however, that the Funds will not bear, directly or
indirectly,
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<PAGE>
the cost of any activity which is primarily intended to result in the
distribution of Fund shares.
If in any fiscal year the aggregate expenses of a Fund (as defined under the
securities regulations of any state having jurisdiction over such Fund) exceed
the expense limitations of any such state, 440 Financial will reimburse such
Fund for .20% of such excess expense. The expense reimbursement obligation of
440 Financial is limited to the amount of its fees hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, 440 Financial
shall reimburse a Fund for such excess expense regardless of the amount of fees
paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Fund so requires. Such
expense reimbursement, if any, will be estimated, reconciled, and paid on a
monthly basis.
3. Proprietary and Confidential Information
440 Financial agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of Galaxy all records and other
information relative to Galaxy and prior, present or potential shareholders,
and not to use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by Galaxy, which approval shall not be
unreasonably withheld and may not be withheld and will be deemed granted where
440 Financial may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by Galaxy.
4. Limitation of Liability
440 Financial shall not be liable for any error of judgment or mistake of law
or for any loss suffered by Galaxy in connection with the matters to which this
Agreement relates, except for a loss resulting from willful misfeasance, bad
faith or negligence on the part of 440 Financial in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement. Any person, even though also an officer, partner, employee, or
agent of 440 Financial, who may be or become an officer, trustee, employee or
agent of Galaxy, shall be deemed, when rendering services to Galaxy or acting
on any business of Galaxy (other than services or business in connection with
440 Financial's duties as administrator hereunder), to be rendering such
services to or acting solely for Galaxy and not as an officer, partner,
employee, or agent or one under the control or direction of 440 Financial even
though paid by it.
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<PAGE>
5. Term
This Agreement shall become effective on the date of the consummation of the
Acquisition and, unless sooner terminated as provided herein, shall continue
until February 28, 1996 and thereafter shall continue automatically for
successive annual periods ending on February 28 of each year, provided, such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of Galaxy's Board of Trustees who are not interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by Galaxy's Board of Trustees
or by the vote of a majority of the outstanding voting securities of the
affected Fund. Notwithstanding the foregoing, this Agreement may be terminated
as to any Fund at any time without the payment of any penalty, by Galaxy by the
vote of Galaxy's Board of Trustees, or by the vote of a majority of the
outstanding voting securities of the Fund, or by 440 Financial, on sixty days'
written notice. (As used in this Agreement, the terms "majority of the
outstanding voting securities" and "interested person" shall have the same
meaning as such terms in the 1940 Act.) This Agreement shall be governed by
the laws of the Commonwealth of Massachusetts.
6. Names.
The names "The Galaxy Fund" and "Trustees of The Galaxy Fund" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
7. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE GALAXY FUND
By:/s/ WalterM. Laliberte
Attest:/s/ W. Bruce McConnel, III Vice President
Secretary
THE SHAREHOLDER SERVICES
GROUP, INC., d/b/a
440 FINANCIAL
By:___________________________
Attest:_______________________
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<PAGE>
THE GALAXY FUND
ADMINISTRATION AGREEMENT
Amendment No. 1
First Data Investor Services Group, Inc.December 1, 1995
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Administration
Agreement between the Trust and First Data Investor Services Group, Inc.
(formerly known as The Shareholder Services Group, Inc. d/b/a 440 Financial)
("First Data") dated as of March 31, 1995 (the "Agreement") is herewith amended
to provide that First Data shall be the administrator for the Growth and
Income, Connecticut Municipal Money Market, Massachusetts Municipal Money
Market and Small Cap Value Funds on the terms and conditions contained in the
Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By:
John T. O'Neill, President
Accepted:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
<PAGE>
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 31st day of March, 1995 between THE GALAXY
FUND, a Massachusetts business trust (the "Fund"), and THE SHAREHOLDER SERVICES
GROUP, INC., d/b/a 440EFINANCIAL, a Massachusetts corporation (the "Transfer
Agent").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"), is offering units of beneficial interest, par value $.001, and is
currently classifying such units into twenty classes and may add further
classes or series in the future (such units, of all series and classes, are
herein called the "Shares"); and
WHEREAS, 440 Financial Group of Worcester, Inc. ("440 Group") currently
serves as transfer agent, registrar and dividend disbursing agent for the Fund
pursuant to a Transfer Agency Agreement dated as of NovemberE1, 1991; and
WHEREAS, all of the assets of 440 Group, including but not limited to all
rights in and to the name "440 Financial," are this day being acquired by the
Transfer Agent (the "Acquisition"); and
WHEREAS, the Fund desires to retain the Transfer Agent to serve as transfer
agent, registrar and dividend disbursing agent under a Transfer Agency
Agreement following the Acquisition and the Transfer Agent is willing to
furnish such services for the existing classes and series of Shares and for
such additional classes or series of Shares as the Fund may issue;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Transfer Agent to serve as
transfer agent, registrar and dividend disbursing agent for the Fund with
respect to the Shares for the period and on the terms set forth in this
Agreement. The Fund may from time to time issue separate series or classes or
classify and reclassify Shares of each series or class. The Transfer Agent
shall identify to each such series or class property belonging to such series
or class and in such reports, confirmations and notices to the Fund called for
under this Agreement shall identify the series or class to which such
<PAGE>
report, confirmation or notice pertains. The Transfer Agent accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 16 of this Agreement.
2. Delivery of Documents. The Transfer Agent acknowledges that it has
received copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for the Fund and approving this Agreement;
(b) The Fund's Declaration of Trust filed with the Secretary of the
Commonwealth of Massachusetts on March 31, 1986 and all amendments thereto
(such Declaration of Trust, as currently in effect and as it shall from time to
time be amended, is herein called the "Declaration of Trust");
(c) The Fund's Code of Regulations and all amendments thereto (such Code
of Regulations, as currently in effect and as it shall from time to time be
amended, is herein called the "Code");
(d) The Distribution Agreement between the Transfer Agent, 440EFinancial
Distributors, Inc. (the "Distributor") and the Fund dated as of even date
herewith (the "Distribution Agreement");
(e) The following agreements: the Administration Agreement between the
Transfer Agent and the Fund dated as of even date herewith (the "Administration
Agreement"); the Advisory Agreement, as amended, between Fleet Investment
Advisors Inc. ("Fleet") and the Fund with respect to the Fund or any class or
series thereof and the Sub-Advisory Agreement between Fleet and Wellington
Management Company ("Wellington Management") with respect to the International
Equity Fund (such advisory agreement, as amended, and sub-advisory agreement
are herein referred to collectively as the "Advisory Agreements"); the Global
Custody Agreement, as amended, between Chase Manhattan Bank N.A. (the
"Custodian") and the Fund dated as of November 1, 1991 (as amended, the
"Custody Agreement"); and each Servicing Agreement between a Service
Organization (as defined in the Prospectus (as hereinafter defined)) and the
Fund (such servicing agreements are herein referred to collectively as the
"Service Agreements");
(f) The Fund's Notification of Registration filed pursuant to Section 8(a)
of the 1940 Act on Form N-8A with the Securities and Exchange Commission (the
"SEC") on September 10, 1982;
(g) The Fund's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended (the "1933 Act") as filed with
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<PAGE>
the SEC on April 14, 1986 (File No. 33-4806) relating to the Shares, and all
amendments thereto;
(h) The Fund's most recent prospectus or prospectuses and statement or
statements of additional information (such prospectus or prospectuses and
statement or statements of additional information, as currently in effect, and
all amendments and supplements thereto, are herein collectively called the
"Prospectus"); and
(i) Before entering into a transaction regulated by the Commodity Futures
Trading Commission ("CFTC"), the Fund shall provide a copy of either (i) a
filed notice of eligibility to claim the exclusion from the definition of
"commodity pool operator" contained in Section 2(a)(1)(A) of the Commodity
Exchange Act (the "CEA") that is provided in Rule 4.5 under the CEA, together
with all supplements as are required by the CFTC, or (ii) a letter which has
been granted the Fund by the CFTC which states that the Fund will not be
treated as a "pool" as defined in Section 4.10(d) of the CFTC's General
Regulations, or (iii) a letter which has been granted the Fund by the CFTC
which states that the CFTC will not take any enforcement action if the Fund
does not register as a "commodity pool operator."
The Fund will furnish the Transfer Agent from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Persons." As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Oral and Written Instructions on
behalf of the Fund and listed on the Certificate annexed hereto as Appendix A
or such other Certificate listing persons duly authorized to give Oral and
Written Instructions on behalf of the Fund as may be received by the Transfer
Agent from time to time.
(b) "Oral Instructions." As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Transfer Agent
from an Authorized Person or from a person reasonably believed by the Transfer
Agent
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<PAGE>
to be an Authorized Person. The Fund agrees to deliver to the Transfer Agent,
at the time and in the manner specified in Paragraph 4(b) of this Agreement,
Written Instructions confirming Oral Instructions.
(c) "Written Instructions." As used in this Agreement, the term "Written
Instructions" means written instructions delivered by mail, tested telegram,
cable, telex or facsimile sending device, and received by the Transfer Agent,
signed by an Authorized Person.
(d) "Shareholder." As used in this Agreement, the term "Shareholder"
means each holder of at least one Share.
4. Instructions Consistent with Declaration of Trust and Code.
(a) Unless otherwise provided in this Agreement, the Transfer Agent shall
act only upon Oral and Written Instructions. Although the Transfer Agent may
take cognizance of the provisions of the Declaration of Trust and the Code of
the Fund, the Transfer Agent may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with any provisions of such
Declaration of Trust or the Code or any vote, resolution or proceeding of the
Shareholders, or of the Board of Trustees, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by the Transfer
Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer
Agent Written Instructions confirming Oral Instructions in such manner that the
Written Instructions are received by the Transfer Agent (whether by hand
delivery, telex, facsimile sending device or otherwise) by the close of
business of the same day that such Oral Instructions are given to the Transfer
Agent. The Fund agrees that the fact that such confirming Written Instructions
are not received by the Transfer Agent shall in no way affect the validity of
the transactions or enforceability of the transactions authorized by the Fund
by giving Oral Instructions. The Fund agrees that the Transfer Agent shall
incur no liability to the Fund in acting upon Oral Instructions given to the
Transfer Agent hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
5. Issuance, Redemption and Exchange of Shares.
(a) Issuance of Shares. Upon receipt of a purchase order from a Service
Organization or prospective Shareholder
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<PAGE>
for the purchase of Shares of a particular series or class and sufficient
information to enable the Transfer Agent to establish a Shareholder account,
and after confirmation of receipt or crediting of federal funds for the order
from the Custodian, the Transfer Agent shall issue and credit the account of
the Shareholder with Shares of the appropriate series or class in the manner
described in the Prospectus.
(b) Redemption of Shares. Upon receipt of a redemption order from the
Fund's Distributor, a Service Organization or a Shareholder, the Transfer Agent
shall redeem the number and class or series of Shares indicated thereon from
the redeeming Shareholder's account and receive from the Custodian and disburse
to the redeeming Shareholder the redemption proceeds therefor, or arrange for
direct payment of redemption proceeds to such Shareholder by the Custodian, in
accordance with such procedures and controls as are mutually agreed from time
to time by and among the Fund, the Transfer Agent and the Custodian.
(c) Exchange of Shares. Upon receipt of an exchange order from a Service
Organization or a Shareholder and in accordance with the Prospectus and such
procedures and controls as are mutually agreed upon from time to time by and
among the Fund, the Transfer Agent and the Custodian, the Transfer Agent shall
arrange for the exchange of Shares of a class or series of the Fund having an
exchange privilege for Shares of other classes or series of the Fund.
6. Authorized Shares. The Fund is authorized to issue an unlimited number
of Shares, par value $.001 per Share. The Fund agrees to notify the Transfer
Agent promptly of any change in or termination of the Fund's declaration under
Rule 24f-2 of the 1940 Act.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent
with appropriate evidence of action taken by the Fund's Board of Trustees
authorizing the declaration and payment of dividends and distributions to the
Fund's Shareholders. After deducting any amount required to be withheld by any
applicable laws, rules and regulations, the Transfer Agent shall, as agent for
each Shareholder and in accordance with the provisions of the Declaration of
Trust and Prospectus, receive from the Custodian and pay such Shareholder such
dividends and/or distributions in cash or, with respect to any Shareholder who
has properly elected to have his dividends and/or distributions reinvested in
Shares of a portfolio, reinvest such dividends and/or distributions in
additional full and fractional Shares. In lieu of receiving from the Custodian
and paying to Shareholders cash dividends and/or distributions, the Transfer
Agent may arrange for the direct payment of cash dividends and distributions to
Shareholders by the Custodian, in accordance
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<PAGE>
with such procedures and controls as are mutually agreed upon from time to time
by and among the Fund, the Transfer Agent and the Custodian.
The Transfer Agent shall prepare and file with the Internal Revenue Service
and/or other appropriate taxing authorities, and address and mail to
Shareholders or their authorized representatives, such returns and information
relating to dividends and distributions paid by the Fund as are required to be
so prepared, filed and mailed by applicable laws, rules and regulations, or
such substitute form of notice as may from time to time be permitted or
required by the Internal Revenue Service and/or other appropriate taxing
authorities. On behalf of the Fund, the Transfer Agent shall pay on a timely
basis to the appropriate federal authorities any taxes required by applicable
federal tax laws to be withheld by the Fund on dividends and distributions paid
by the Fund.
8. Communications with Shareholders.
(a) Communications to Shareholders. The Transfer Agent will address and
mail all communications by the Fund to Shareholders or their authorized
representatives, including reports to Shareholders, dividend and distribution
notices and proxy material for its meetings of Shareholders. The Transfer Agent
will receive and tabulate the proxy cards for the meetings of Shareholders.
(b) Correspondence. The Transfer Agent will answer such correspondence
from Shareholders, securities brokers and others relating to its duties
hereunder and such other correspondence as may from time to time be mutually
agreed upon between the Transfer Agent and the Fund.
9. Records.
(a) The Transfer Agent shall keep accounts for each Shareholder showing
the following information:
(i) name, address and United States tax identification or Social
Security number;
(ii) number and class or series of Shares held and number of Shares for
which certificates, if any, have been issued, including certificate numbers and
denominations;
(iii) historical information regarding the account of each Shareholder,
including dividends and distributions paid and the date and price for all
transactions in a Shareholder's account;
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<PAGE>
(iv) any stop or restraining order placed against a Shareholder's
account;
(v) any correspondence relating to the current maintenance of a
Shareholder's account;
(vi) information with respect to withholdings effected; and
(vii) any information required in order for the Transfer Agent to perform
any calculations contemplated or required by this Agreement.
(b) The Transfer Agent shall keep subaccounts for each Shareholder
requesting such service in connection with Shares held by such Shareholder for
separate accounts, containing the same information for each subaccount as
required by Subparagraph (a) above.
(c) The books and records pertaining to the Fund which are in the possession
of the Transfer Agent shall be the Property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Transfer Agent's normal business hours, and
such books and records shall be surrendered to the Fund promptly upon request.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Transfer Agent to the Fund or the Fund's authorized
representative at the Fund's expense.
10. Ongoing Functions. The Transfer Agent will perform the following
functions on an ongoing basis for each class or series of the Fund:
(a) furnish state-by-state registration reports to the Fund;
(b) calculate Account Executive load or compensation payment, as applicable,
and provide such information to the Fund, if any;
(c) calculate dealer commissions for the Fund, as applicable, if any;
(d) provide toll-free lines for direct Shareholder use, plus customer
liaison staff with on-line inquiry capacity;
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<PAGE>
(e) mail duplicate confirmations to dealers of their clients' activity,
whether executed through the dealer or directly with the Transfer Agent, if
any;
(f) provide detail for underwriter or broker confirmations and other
participating dealer Shareholder accounting, in accordance with such procedures
as may be agreed upon between the Fund and the Transfer Agent;
(g) provide Shareholder lists and statistical information concerning
accounts to the Fund; and
(h) provide timely notification of Fund activity, and such other information
as may be agreed upon from time to time between the Transfer Agent and the
Custodian, to the Fund or the Custodian.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with
the Fund's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their opinion as such may be required from time to time by
the Fund.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Transfer Agent may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the Fund.
13. Equipment Failures. In the event of equipment failures beyond the
Transfer Agent's control, the Transfer Agent shall, at no additional expense to
the Fund, take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto. The Transfer Agent shall enter into
and shall maintain in effect with appropriate parties one or more agreements
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
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<PAGE>
14. Right to Receive Advice.
(a) Advice of Fund. If the Transfer Agent shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from
the Fund directions or advice.
(b) Advice of Counsel. If the Transfer Agent shall be in doubt as to any
question of law involved in any action to be taken or omitted by the Transfer
Agent, it may request advice at its own cost from counsel of its own choosing
(who may be counsel for Fleet, Wellington Management, the Custodian, the
Distributor, a Service Organization, the Fund or the Transfer Agent, at the
option of the Transfer Agent).
(c) Conflicting Advice. In case of conflict between directions or advice
received by the Transfer Agent pursuant to subparagraph (a) of this paragraph
and advice received by the Transfer Agent pursuant to subparagraph (b) of this
paragraph, the Transfer Agent shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of the Transfer Agent. The Transfer Agent shall be protected
in any action or inaction which it takes in reliance on any directions or
advice received pursuant to subparagraphs (a) or (b) of this paragraph which
the Transfer Agent, after receipt of any such directions or advice, reasonably
and in good faith believes to be consistent with such directions or advice.
However, nothing in this paragraph shall be construed as imposing upon the
Transfer Agent any obligation (i) to seek such directions or advice, or (ii) to
act in accordance with such directions or advice when received, unless, under
the terms of another provision of this Agreement, the same is a condition to
the Transfer Agent's properly taking or omitting to take such action. Nothing
in this subparagraph shall excuse the Transfer Agent when an action or omission
on the part of the Transfer Agent constitutes willful misfeasance, bad faith,
negligence or reckless disregard by the Transfer Agent of its duties under this
Agreement.
15. Compliance with Governmental Rules and Regulations. The Fund assumes
full responsibility for insuring that the contents of the Prospectus comply
with all applicable requirements of the 1933 Act, the 1940 Act, the CEA and any
laws, rules and regulations of governmental authorities having jurisdiction.
16. Compensation. As sole compensation for the services rendered by the
Transfer Agent during the term of this Agreement, the Fund will pay to the
Transfer Agent such monthly fees as the
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<PAGE>
parties may agree from time to time in writing, for each series or class of the
Fund.
17. Indemnification. The Fund agrees to indemnify and hold the Transfer
Agent harmless from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the Securities Exchange Act of 1934, the 1940 Act, the CEA and any state
and foreign securities and blue sky laws, all as or as to be amended from time
to time) and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which
the Transfer Agent takes or does or omits to take or do at the request or on
the direction of or in reliance on the advice of the Fund, provided that the
Transfer Agent shall not be indemnified against any liability to the Fund or to
its Shareholders (or any expenses incident to such liability) arising out of
the Transfer Agent's negligent failure to perform its duties under this
Agreement.
18. Responsibility of the Transfer Agent. The Transfer Agent shall be under
no duty to take any action on behalf of the Fund except as specifically set
forth herein or as may be specifically agreed to by the Transfer Agent in
writing. In the performance of its duties hereunder, the Transfer Agent shall
be obligated to exercise care and diligence and to act in good faith and to use
its best efforts within reasonable limits to ensure the accuracy of all
services performed under this Agreement. The Transfer Agent shall be
responsible for the negligent failure in the performance of its duties under
this Agreement, but to the extent that duties, obligations and responsibilities
are not expressly set forth in this Agreement, the Transfer Agent shall not be
liable for any act or omission which does not constitute willful misfeasance,
bad faith or negligence on its part or reckless disregard of such duties,
obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, the Transfer Agent in
connection with its duties under this Agreement shall not be under any duty or
obligation to inquire into and shall not be liable for or in respect of (a) the
validity or invalidity or authority or lack thereof of any advice, direction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, if any, and which the Transfer Agent reasonably believes to be
genuine, or (b) delays or errors or loss of data occurring by reason of
circumstances beyond the Transfer Agent's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown (except as provided in paragraph 13),
flood or catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
19. Registration as Transfer Agent. The Transfer Agent represents that it
has and is currently registered as a transfer
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<PAGE>
agent with the SEC and has complied with the regulations of the SEC applicable
to registered transfer agents. The Transfer Agent agrees that it will continue
to be registered as a transfer agent with the appropriate federal agency for
the duration of this Agreement. Should the Transfer Agent fail to be
registered with the appropriate federal agency as a transfer agent at any time
during this Agreement, the Fund may (notwithstanding Paragraph 20 hereof), on
written notice to the Transfer Agent, immediately terminate this Agreement.
20. Duration and Termination. This Agreement shall become effective on the
date of the consummation of the Acquisition and shall continue until
termination by the Transfer Agent or the Fund on sixty (60) days' written
notice.
21. Notices. All notices and other communications (collectively referred to
as a "Notice" or "Notices" in this paragraph) hereunder shall be in writing or
by confirming telegram, cable, telex or facsimile sending device. Notices
shall be addressed (a) if to the Transfer Agent, at the Transfer Agent's
address, 440 Lincoln Street, Worcester, Massachusetts 01605; (b) if to the
Fund, at the address of the Fund; or (c) if to neither of the foregoing, at
such other address as to which the sender shall have been notified by any such
Notice or other communication. If the location of the sender of a Notice and
the address of the addressee thereof are, at the time of sending, more than 100
miles apart, the Notice may be sent by first-class mail, in which case it shall
be deemed to have been given three days after it is sent, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. If the location of the sender of a
Notice and the address of the addressee thereof are, at the time of sending,
not more than 100 miles apart, the Notice may be sent by first-class mail, in
which case it shall be deemed to have been given two days after it is sent, or
if sent by messenger, it shall be deemed to have been given on the day it is
delivered, or if sent by confirming telegram, cable, telex or facsimile sending
device, it shall be deemed to have been given immediately. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending
of a Notice hereunder shall be paid by the sender.
22. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
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<PAGE>
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25. Releases. The names "The Galaxy Fund" and "Trustees of the Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986, which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust. The Transfer Agent agrees to release all Shareholders,
Trustees, officers, employees and agents of the Fund from personal liability in
connection with the Trust Property or the duties, obligations and
responsibilities of the Fund under this Agreement.
26. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their construction
or effect. This Agreement shall be deemed to be a contract made in
Massachusetts and governed by Massachusetts law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
[SEAL] THE GALAXY FUND
Attest: /s/ W. Bruce McConnel,III By:/s/ Walter M. Laliberte
Secretary Vice President
[SEAL]
[SEAL] THE SHAREHOLDER SERVICES
GROUP, INC., d/b/a
440 FINANCIAL
Attest: _______________________ By:___________________________
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37031
<PAGE>
AMENDMENT NO. 1 TO TRANSFER AGENCY AGREEMENT
This Amendment No. 1, dated as of the ____ day of __________, 1995, is
entered into by THE GALAXY FUND, a Massachusetts business trust (the "Fund"),
and THE SHAREHOLDER SERVICES GROUP, INC. d/b/a 440 FINANCIAL, a Massachusetts
corporation (the "Transfer Agent").
WHEREAS, the Fund and the Transfer Agent have entered into a Transfer
Agency Agreement dated as of March 31, 1995 (the "Transfer Agency Agreement"),
pursuant to which the Fund appointed the Transfer Agent to act as transfer
agent, registrar and dividend disbursing agent for the Fund;
WHEREAS, the Fund and the Transfer Agent wish to amend the Transfer
Agency Agreement to set forth certain additional responsibilities of the
Transfer Agent relating to the offering, issuance, sale and redemption of
Retail B Shares in certain of the investment portfolios of the Fund;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
1. Paragraph (j) (relating to the delivery of documents) is added to
Section 2 of the Transfer Agency Agreement to read as follows:
"(j) The Fund's Distribution and Services Plan relating to Retail B
Shares of certain of the Fund's investment portfolios, and the related form of
Administrative Servicing Agreement;"
2. Paragraph (b) of Section 5 of the Transfer Agency Agreement
(relating to the issuance, redemption and exchange of shares) is amended and
restated in its entirety to read as follows:
"(b) Redemption of Shares. Upon receipt of a redemption order from
the Fund's Distributor, a Service Organization or a Shareholder, the Transfer
Agent shall redeem the number and series of Shares so indicated thereon from
the redeeming Shareholder's account and receive from the Custodian and
disburse: (i) the amount of any contingent deferred sales charges payable to
the Fund's distributor with respect to Retail B Shares, and (ii) the balance of
the redemption proceeds to the person entitled to such proceeds, in accordance
with such procedures and controls as are mutually agreed to from time to time
by the Fund, the Transfer Agent and the Custodian."
3. Paragraph (a)(iii) of Section 9 of the Transfer Agency Agreement
(relating to the maintenance of records) is amended and restated in its
entirety to read as follows:
<PAGE>
(a)(iii) historical information regarding the account of each
Shareholder, including: (i) information relating to dividends and distributions
paid, (ii) the date and price for all transactions relating to a Shareholder's
account, and (iii) information necessary to calculate, in accordance with the
Fund's registration statement, the appropriate contingent deferred sales charge
("CDSC") payable with respect to Retail B Shares;"
4. Paragraph (b) of Section 10 of the Transfer Agency Agreement
(relating to the ongoing functions of the Transfer Agent) is amended and
restated in its entirety to read as follows:
"(b) calculate front-end sales charges payable in connection with the
purchase of Retail A Shares and contingent deferred sales charges payable in
connection with the redemption of Retail B Shares and provide for the payment
of all such sales charges to the Fund's distributor (subject to the applicable
limitations of the National Association of Securities Dealers, Inc. on asset-
based sales charges);"
5. Miscellaneous. Except to the extent supplemented hereby, the
Transfer Agency Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the date and year first above written.
[Seal]
THE GALAXY FUND
Attest: ____________________ By: ________________________
Secretary Vice President
[Seal]
THE SHAREHOLDER SERVICES
GROUP, INC. d/b/a 440
FINANCIAL
Attest:_____________________ By: _________________________
Title: ______________________
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<PAGE>
THE GALAXY FUND
SHAREHOLDER SERVICES PLAN
Section l. Upon the recommendation of The Shareholder Services Group, Inc.
d/b/a 440 Financial ("440 Financial"), the administrator of The Galaxy Fund
(the "Trust"), any officer of the Trust is authorized to execute and deliver,
in the name and on behalf of the Trust, written agreements in substantially the
form attached hereto or in any other form duly approved by the Board of
Trustees ("Servicing Agreements") with securities dealers, financial
institutions and other industry professionals that are shareholders or dealers
of record or which have a servicing relationship ("Service Organizations") with
the beneficial owners of the Shares of the Money Market, Government, Tax-
Exempt, U.S. Treasury, Small Company Equity, Equity Value, Equity Growth,
Equity Income, International Equity, Asset Allocation, Short-Term Bond,
Intermediate Bond, High Quality Bond, Corporate Bond, Tax-Exempt Bond, New York
Municipal Bond, Connecticut Municipal Bond, Massachusetts Municipal Bond and
Rhode Island Municipal Bond Funds of the Trust (the "Funds"). Pursuant to said
Agreements, Service Organizations shall provide administrative support services
as set forth therein to their customers who beneficially own Shares (as
described in the Trust's prospectuses) of the Funds in consideration of fees,
computed and paid in the manner set forth in the Servicing Agreements, at the
annual rate of up to .50% in the aggregate of the net asset value of the Shares
beneficially owned by such customers. Any bank, trust company, thrift
institution or broker-dealer is eligible to become a Service Organization and
to receive fees under this Plan, including Fleet Financial Group and its
affiliates. All expenses incurred by the Trust with respect to Shares of a
particular Fund in connection with Servicing Agreements and the implementation
of this Plan shall be borne entirely by the holders of the applicable series of
Shares of the Fund. Each Servicing Agreement will provide for a fee waiver by
a Service Organization to the extent that the net investment income of a series
of shares of a particular Fund earned in the applicable period is less than the
fee due from such series for such period.
Section 2. 440 Financial shall monitor the arrangements pertaining to the
Trust's Servicing Agreements with Service Organizations in accordance with the
terms of the Administration Agreement between 440 Financial and the Trust. 440
Financial shall not, however, be obliged by this Plan to recommend, and the
Trust shall not be obliged to execute, any Servicing Agreement with any
qualifying Service Organization.
<PAGE>
Section 3. So long as this Plan is in effect, 440 Financial shall provide to
the Trust's Board of Trustees, and the trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue until May 19,
1995 and thereafter shall continue automatically for successive annual periods
provided such continuance is approved at least annually by a majority of the
Board of Trustees, including a majority of the trustees who are not "interested
persons," of the Trust and who have no direct or indirect financial interest in
the operation of this Plan or in any Agreement related to this Plan (the
"Disinterested Trustees").
Section 5. This Plan may be amended at any time with respect to any Fund by
the Board of Trustees, provided that any material amendments of the terms of
this Plan shall become effective only upon the approvals set forth in Section
4.
Section 6. This Plan is terminable at any time with respect to any Fund by
vote of a majority of the Disinterested Trustees.
Section 7. While this Plan is in effect, the selection and nomination of the
trustees of the Trust who are not "interested persons (as defined in the Act)
of the Trust shall be committed to the discretion of the Trust's non-interested
trustees.
Section 8. This Plan has been adopted by the Trust as of October 11, 1989
and amended and restated as of September 6, 1990, September 12, 1991, December
5, 1991, February 22, 1993, May 19, 1994 and February 23, 1995.
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Small Company Equity, Equity Value, Equity Growth, Equity Income,
International Equity, Asset Allocation, Short-Term Bond, Intermediate Bond,
High Quality Bond, Corporate Bond, Tax-Exempt Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond and Rhode Island
Municipal Bond Funds - Retail Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers ("Customers")
who
may from time to time beneficially own shares of the Small Company Equity,
Equity
Value, Equity Growth, Equity Income, International Equity, Asset Allocation,
Short-Term Bond, Intermediate Bond, High Quality Bond, Corporate Bond, Tax-
Exempt Bond, New York Municipal Bond, Connecticut Municipal Bond, Massachusetts
Municipal Bond and Rhode Island Municipal Bond Funds, designated as such Funds'
Class K - Series 2 shares, Class C -Special Series 1 shares, Class H - Series 2
shares, Class I -Series 2 shares, Class G -Series 2 shares, Class N - Series 2
shares, Class L - Series 2 shares, Class D - Special Series 1 shares, Class J -
Series 2 shares, Class T - Series 2 shares, Class M -Series 2 shares, Class O -
Series 2 shares, Class P - Series 2 shares, Class Q -Series 2 shares and Class
R
- - Series 2 shares, respectively, offered by The Galaxy Fund (the "Trust") to
investors maintaining with us certain qualified accounts as described in the
applicable prospectuses pertaining to such shares (such shares, which
constitute a separate series of shares of the Small Company Equity, Equity
Value, Equity Growth, Equity Income, International Equity, Asset Allocation,
Short-Term Bond, Intermediate Bond, High Quality Bond, Corporate Bond, Tax-
Exempt Bond, New York Municipal Bond, Connecticut Municipal Bond, Massachusetts
Municipal Bond and Rhode Island Municipal Bond Funds (collectively, the
"Funds"), are hereinafter referred to as "Retail Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section l. You agree to provide the following administrative support
services to Customers who may from time to time beneficially own Retail Shares:
(i) processing dividend payments from us on behalf of Customers; (ii) arranging
for bank wires; (iii) providing subaccounting with respect to Retail Shares
beneficially owned by Customers or the information to the Retail shareholders
necessary for subaccounting; (iv) if required
<PAGE>
by law, forwarding shareholder communications from the Retail shareholders
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (v)
aggregating and processing purchase, exchange and redemption requests from
Customers and placing net purchase, exchange and redemption orders with our
distributor or transfer agent; and (vi) providing such other similar services
as we may reasonably request to the extent you are permitted to do so under
applicable statutes, rules and regulations.
Section 2. You agree to provide the following services to Customers who may
from time to time beneficially own Retail Shares; (i) providing information
periodically to Customers showing their positions in Retail Shares; (ii)
responding to Customer inquiries relating to the services performed by you;
(iii) providing Customers with a service that invests the assets of their
accounts in Retail Shares; and (iv) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under
applicable statutes, rules and regulations.
Section 3. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as an agent for, upon the order of, and for the account of,
your Customers.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning Shares offered by the Trust
except those contained in the Trust's then current prospectuses and statement
of additional information pertaining to such Shares, copies of which will be
supplied to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or
<PAGE>
by you or your officers, employees or agents regarding your responsibilities
hereunder for the purchase, redemption, transfer or registration of Retail
Shares by or on behalf of Customers. You and your employees will, upon request,
be available during normal business hours to consult with the Trust or its
designees concerning the performance of your responsibilities under this
Agreement.
Section 7. In consideration of the services and facilities provided by you
pursuant to Section 1 hereof, the Trust will pay to you, and you will accept as
full payment therefor, a fee at the annual rate of (a) .25% of the average
daily net asset value of the Retail Shares of the Small Company Equity Fund,
Equity Value Fund, Equity Growth Fund, Equity Income Fund, International Equity
Fund and Asset Allocation Fund (collectively, "Equity Funds") beneficially
owned as of the end of each fiscal quarter by your Customers for whom you are
the dealer of record or holder of record or with whom you have a servicing
relationship, which fee will be computed at that time; and (b) .15% of the
average daily net asset value of the Retail Shares of the Short-Term Bond Fund,
Intermediate Bond Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt
Bond Fund, New York Municipal Bond Fund, Connecticut Municipal Bond Fund,
Massachusetts Municipal Bond Fund and Rhode Island Municipal Bond Fund
(collectively, "Bond Funds") beneficially owned as of the end of each month by
your Customers for whom you are the dealer of record or holder of record or
with whom you have a servicing relationship, which fee will be computed at that
time. In consideration of the additional services provided by you pursuant to
Section 2 hereof, the Trust will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of (a) .25% of the average daily net
asset value of the Retail Shares of the Equity Funds; and (b) .15% of the
average daily net asset value of the Retail Shares of the Bond Funds. Fees for
the Equity Funds will be payable quarterly and for the Bond Funds, monthly.
For purposes of determining the fees payable under this Section 7, the average
daily net asset value of your Customers' Retail Shares will be computed in the
manner specified in the Trust's Registration Statement (as the same is in
effect from time to time) in connection with the computation of the net asset
value of Retail Shares for purposes of purchases and
redemptions. The fee rates stated above may be prospectively increased or
decreased by the Trust, in its sole discretion, at any time upon notice to you.
Further, the Trust may, in its discretion and without notice, suspend or
withdraw the sale of Retail Shares including the sale of such Retail Shares to
you for the account of any Customer or Customers. All fees payable by the
Trust under this Agreement with respect to the Retail Shares of a particular
Fund shall be payable entirely out of the net investment income allocable to
such Retail Shares, and no shares of the Fund involved, other than the Retail
Shares, and no other Class of beneficial interest of the Trust (or a separate
series of shares of any such Class)
-3-
<PAGE>
shall be responsible for such fees. In addition, by your written acceptance of
this Agreement, you agree to and do waive such portion of the fee payable under
this Section 7 as is necessary to assure that the amount of such fee which is
required to be accrued on any day with respect to your Customers' Retail Shares
does not exceed the income to be accrued to your Customers' Retail Shares on
that day.
Section 8. Any person authorized to direct the disposition of the monies
paid or payable by the Trust pursuant to this Agreement will provide to the
Board of Trustees of the Trust, and the Board will review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish the Trust or its
designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
Section 9. The Trust may enter into other similar Servicing Agreements with
any other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by
you hereunder be primarily intended to result in the sale of any Retail Shares;
(ii) the compensation payable to you hereunder, together with any other
compensation payable to you by Customers in connection with the investment of
their assets in the Retail Shares of the Funds, will be disclosed by you to
your Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in Retail
Shares or establish or maintain Customer accounts for the primary purpose of
investing in Retail Shares; (iv) in the event an issue pertaining to this
Agreement or our Shareholder Services Plan related hereto is submitted for
shareholder approval, you will vote any Retail Shares held for your own account
in the same proportion as the vote of the Retail Shares held for your
Customers' accounts; and (v) you will not engage in activities pursuant to this
Agreement which constitute acting as a broker or dealer under state law unless
you have obtained the licenses required by such law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement
-4-
<PAGE>
will continue until May 19, 1995, and thereafter will continue automatically
for successive annual periods provided such continuance is specifically
approved at least annually by the Trust in the manner described in Section 14
hereof. This Agreement is terminable with respect to Retail Shares of any of
the Funds, without penalty, at any time by the Trust (which termination may be
by a vote of a majority of the Disinterested Trustees as defined in Section 14
hereof) or by you upon notice to the Trust.
Section 12. All notices and other communications between the parties to this
Agreement will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address stated herein, or
to such other address as either party shall so provide the other.
Section 13. This Agreement will be construed in accordance with the laws of
the Commonwealth of Massachusetts and is nonassignable by the parties hereto.
Section 14. This Agreement has been approved by vote of a majority of (i)
the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons (as defined in the Investment Company Act of 1940) of the
Trust and who have no direct or indirect financial interest in the operation of
the Shareholder Services Plan adopted by the Trust regarding the provision of
support services to the beneficial owners of Retail Shares or in any agreement
related thereto (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on such approval.
Section 15. The names of "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally but bind only the Trust property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust property belonging to such class for the enforcement of any claims
against the Trust.
If you agree to be legally bound by the provisions of this Agreement, please
sign a copy of this letter where indicated
-5-
<PAGE>
below and promptly return it to the Trust, c/o Neil Forrest, The Shareholder
Services Group, Inc. d/b/a 440 Financial, 440 Lincoln Street, Worcester, MA
01653-1959.
Very truly yours,
THE GALAXY FUND
By:__________________________
Date: ________________ (Authorized Officer)
Accepted and Agreed to:
[Name of Service Organization]
By:___________________________
Date: _________________ (Authorized Officer)
37028
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<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Small Company Equity, Equity Value, Equity Growth, Equity Income,
International Equity, Asset Allocation, Short-Term Bond, Intermediate Bond,
High Quality Bond, Corporate Bond, Tax-Exempt Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond and Rhode Island
Municipal Bond Funds - Trust Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers ("Customers")
who may from time to time beneficially own shares of the Small Company Equity,
Equity Value, Equity Growth, Equity Income, International Equity, Asset
Allocation, Short-Term Bond, Intermediate Bond, High Quality Bond, Corporate
Bond, Tax-Exempt Bond, New York Municipal Bond, Connecticut Municipal Bond,
Massachusetts Municipal Bond and Rhode Island Municipal Bond Funds, designated
as such Funds (Class K - Series 1 shares, Class C shares, Class H -Series 1
shares, Class I -Series 1 shares, Class G - Series 1 shares, Class N - Series 1
shares, Class L -Series 1 shares, Class D shares, Class J - Series 1 shares,
Class T - Series 2 shares, Class M - Series 1 shares, Class O - Series 1
shares, Class P -Series 1 shares, Class Q - Series 1 shares and Class R Series
1 shares, respectively, offered by The Galaxy Fund (the "Trust") to investors
maintaining with us certain qualified accounts as described in the applicable
prospectuses pertaining to such shares (such shares, which constitute a
separate series of shares of the Small Company Equity, Equity Value, Equity
Growth, Equity Income, International Equity,
Asset Allocation, Short-Term Bond, Intermediate Bond, High Quality Bond,
Corporate Bond, Tax-Exempt Bond, New York Municipal Bond, Connecticut Municipal
Bond, Massachusetts Municipal Bond and Rhode Island Municipal Bond Funds
(collectively, the "Funds"), are hereinafter referred to as "Trust Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide the following administrative support
services to Customers who may from time to time beneficially own Trust Shares:
(i) processing dividend payments from us on behalf of Customers; (ii) arranging
for bank wires; (iii) providing subaccounting with respect to Trust Shares
beneficially owned by Customers or the information to the Trust
<PAGE>
shareholders necessary for subaccounting; (iv) if required by law, forwarding
shareholder communications from the Trust shareholders (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (v) aggregating and processing
purchase, exchange and redemption requests from Customers and placing net
purchase, exchange and redemption orders with our distributor or transfer
agent; and (vi) providing such other similar services as we may reasonably
request to the extent you are permitted to do so under applicable statutes,
rules and regulations.
Section 2. You agree to provide the following services to Customers who may
from time to time beneficially own Trust Shares; (i) providing information
periodically to Customers showing their positions in Trust Shares; (ii)
responding to Customer inquiries relating to the services performed by you;
(iii) providing Customers with a service that invests the assets of their
accounts in Trust Shares; and (iv) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under
applicable statutes, rules and regulations.
Section 3. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as an agent for, upon the order of, and for the account of,
your Customers.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning the Trust or Trust Shares
except those contained in the Trust's then current prospectuses and statement
of additional information pertaining to Trust Shares, copies of which will be
supplied to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree
-2-
<PAGE>
to and do release, indemnify and hold the Trust harmless from and against any
and all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder for the purchase, redemption,
transfer or registration of Trust Shares by or on behalf of Customers. You and
your employees will, upon request, be available during normal business hours to
consult with the Trust or its designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
pursuant to Section 1 hereof, the Trust will pay to you, and you will accept as
full payment therefor, a fee at the annual rate of (a) .25% of the average
daily net asset value of the Trust Shares of the Small Company Equity Fund,
Equity Value Fund, Equity Growth Fund, Equity Income Fund, International Equity
Fund and Asset Allocation Fund (collectively, "Equity Funds") beneficially
owned as of the end of each fiscal quarter by your Customers for whom you are
the dealer of record or holder of record or with whom you have a servicing
relationship, which fee will be computed at that time; and (b) .15% of the
average daily net asset value of the Trust Shares of the Short-Term Bond Fund,
Intermediate Bond Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt
Bond Fund, New York Municipal Bond Fund, Connecticut Municipal Bond Fund,
Massachusetts Municipal Bond Fund and Rhode Island Municipal Bond Fund
(collectively, "Bond Funds") beneficially owned as of the end of each month by
your Customers for whom you are the dealer of record or holder of record or
with whom you have a servicing relationship, which fee will be computed at that
time. In consideration of the additional services provided by you pursuant to
Section 2 hereof, the Trust will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of (a) .25% of the average daily net
asset value of the Trust Shares of the Equity Funds; and (b) .15% of the
average daily net asset value of the Trust Shares of the Bond Funds. Fees for
the Equity Funds will be payable quarterly and for the Bond Funds, monthly.
For purposes of determining the fees payable under this Section 7, the average
daily net asset value of your Customers' Trust Shares will be computed in the
manner specified in the Trust's Registration Statement (as the same is in
effect from time to time) in connection with the computation of the net asset
value of Trust Shares for purposes of purchases and
redemptions. The fee rates stated above may be prospectively increased or
decreased by the Trust, in its sole discretion, at any time upon notice to you.
Further, the Trust may, in its discretion and without notice, suspend or
withdraw the sale of Trust Shares including the sale of such Trust Shares to
you for the account of any Customer or Customers. All fees payable by the
Trust under this Agreement with respect to the Trust Shares of a particular
Fund shall be payable entirely out of the net investment income allocable to
-3-
<PAGE>
such Trust Shares, and no shares of the Fund involved, other than the Trust
Shares, and no other Class of beneficial interest of the Trust (or a separate
series of shares of any such Class) shall be responsible for such fees. In
addition, by your written acceptance of this Agreement, you agree to and do
waive such portion of the fee payable under this Section 7 as is necessary to
assure that the amount of such fee which is required to be accrued on any day
with respect to your Customers' Trust Shares does not exceed the income to be
accrued to your Customers' Trust Shares on that day.
Section 8. Any person authorized to direct the disposition of the monies
paid or payable by the Trust pursuant to this Agreement will provide to the
Board of Trustees of the Trust, and the Board will review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish the Trust or its
designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
Section 9. The Trust may enter into other similar Servicing Agreements with
any other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by
you hereunder be primarily intended to result in the sale of any Trust Shares;
(ii) the compensation payable to you hereunder, together with any other
compensation payable to you by Customers in connection with the investment of
their assets in the Trust Shares of the Funds, will be disclosed by you to your
Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in Trust
Shares or establish or maintain Customer accounts for the primary purpose of
investing in Trust Shares; (iv) in the event an issue pertaining to this
Agreement or our Shareholder Services Plan related hereto is submitted for
shareholder approval, you will vote any Trust Shares held for your own account
in the same proportion as the vote of the Trust Shares held for your Customers'
accounts; and (v) you will not engage in activities pursuant to this Agreement
which constitute acting as a broker or dealer under state law unless you have
obtained the licenses required by such law.
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<PAGE>
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 19, 1995 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 13 hereof. This Agreement is terminable with
respect to Trust Shares of any of the Funds, without penalty, at any time by
the Trust (which the Funds, without penalty, at any time by the Trust (which
termination may be by a vote of a majority of the Disinterested Trustees as
defined in Section 13 hereof) or by you upon notice to the Trust.
Section 12. All notices and other communications between the parties to this
Agreement will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address stated herein, or
to such other address as either party shall so provide the other.
Section 13. This Agreement will be construed in accordance with the laws of
the Commonwealth of Massachusetts and is nonassignable by the parties hereto.
Section 14. This Agreement has been approved by vote of a majority of (i)
the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Trust and who have no direct or indirect financial interest in the operation of
the Trust Shareholder Services Plan adopted by the Trust regarding the
provisions of support services to the beneficial owners of Shares or in any
agreement related thereto ("Disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on such approval.
Section 15. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust property belonging to such class for the enforcement of any claims
against the trust.
-5-
<PAGE>
If you agree to be legally bound by the provisions of this Agreement, pleas
sign a copy of this letter where indicated below and promptly return it to the
Trust, c/o Neil Forrest, The Shareholder Services Group, Inc. d/b/a 440
Financial, 440 Lincoln Street, Worcester, MA 01653-1959.
Very truly yours,
THE GALAXY FUND
By:______________________
Date:___________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:__________________ By:______________________
(Authorized Officer)
37029
-6-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Money Market, Government, Tax-Exempt and U.S. Treasury Funds)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers ("Customers")
who may from time to time beneficially own shares of the Money Market,
Government, Tax-Exempt and U.S. Treasury Funds designated as such Funds' Class
A shares, Class B shares, Class E shares and Class F shares, respectively,
offered by The Galaxy Fund (the "Trust") (hereinafter referred to as "Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide the following administrative support
services to Customers who may from time to time beneficially own Shares: (i)
processing dividend payments from us on behalf of Customers; (ii) providing
information periodically to Customers showing their positions in Shares; (iii)
arranging for bank wires; (iv) responding to Customer inquiries relating to the
services performed by you; (v) providing subaccounting with respect to Shares
beneficially owned by Customers or the information to us necessary for
subaccounting; (vi) if required by law, forwarding shareholder communications
from us (such as proxies, shareholder reports, annual and semiannual financial
statements and dividend, distribution and tax notices) to Customers; (vii)
forwarding to Customers proxy statements and proxies containing any proposals
regarding this Agreement or the Shareholder Services Plan related hereto;
(viii) aggregating and processing purchase, exchange and redemption requests
from Customers and placing net purchase, exchange and redemption orders with
our distributor or transfer agent; (ix) providing Customers with a service that
invests the assets of their accounts in Shares; and (x) providing such other
similar services as we may reasonably request to the extent you are permitted
to do so under applicable statutes, rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform
<PAGE>
only those activities which are consistent with your statutory and regulatory
obligations. You will act solely as an agent for, upon the order of, and for
the account of, your Customers.
Section 3. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
Section 4. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning the Trust or Shares except
those contained in the Trust's then current prospectuses and statement of
additional information pertaining to the Shares, copies of which will be
supplied to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
Section 5. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of Shares by or on behalf of Customers.
You and your employees will, upon request, be available during normal business
hours to consult with the Trust or its designees concerning the performance of
your responsibilities under this Agreement.
Section 6. In consideration of the services and facilities provided by you
hereunder, the Trust will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of .25% of the average daily net asset value
of the Trust Shares of the Money Market Fund, Government Fund, Tax-Exempt Fund
and U.S. Treasury Fund beneficially owned as of the end of each month by your
Customers for whom you are the dealer of record or holder of record or with
whom you have a servicing relationship, which fee will be computed at that
time. Fees for the Money Market Fund, Government Fund, Tax-Exempt Fund and
U.S. Treasury Fund, will be payable monthly. For purposes of determining the
fees payable under this Section 6, the average daily net asset value of your
Customer's Shares will be computed in the manner specified in the Trust's
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes
Of purchases and redemptions. The fee rates stated above may be prospectively
increased or decreased by the Trust, in its sole discretion, at
-2-
<PAGE>
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of Shares including the sale of
such Shares to you for the account of any Customer or Customers. All fees
payable by the Trust under this Agreement with respect to the Shares of a
particular Fund shall be payable entirely out of the net investment income
allocable to such Shares, and no shares of the Fund involved, other than the
Shares, and no other Class of beneficial interest of the Trust (or a separate
series of shares of any such Class) shall be responsible for such fees. In
addition, by your written acceptance of this Agreement, you agree to and do
waive such portion of the fee payable under this Section 6 as is necessary to
assure that the amount of such fee which is required to be accrued on any day
with respect to your Customers' Shares does not exceed the income to be accrued
to your Customer's Shares on that day.
Section 7. Any person authorized to direct the disposition of the monies
paid or payable by the Trust pursuant to this Agreement will provide to the
Board of Trustees of the Trust, and the Board will review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish the Trust or its
designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
Section 8. The Trust may enter into other similar Servicing Agreements
with any other person or persons without your consent.
Section 9. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by
you hereunder be primarily intended to result in the sale of any Shares; (ii)
the compensation payable to you hereunder, together with any other compensation
payable to you by Customers in connection with the investment of their assets
in the Shares of the Funds, will be disclosed by you to your Customers, will be
authorized by your Customers and will not result in an excessive or
unreasonable fee to you; (iii) you will not advertise or otherwise promote your
Customer accounts primarily as a means of investing in Shares or establish or
maintain Customer accounts for the primary purpose of investing in Shares; (iv)
in the event an issue pertaining to this Agreement or our Shareholder Services
Plan related hereto is submitted for shareholder approval, you will vote any
Shares held for your own account in the same proportion as the vote of the
Shares held
-3-
<PAGE>
for your Customer's accounts; and (v) you will not engage in activities
pursuant to this Agreement which constitute acting as a broker or dealer under
state law unless you have obtained the licenses required by such law.
Section 10. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 19, 1995 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 13 hereof. This Agreement is terminable with
respect to Trust Shares of any of the Funds, without penalty, at any time by
the Trust (which the Funds, without penalty, at any time by the Trust (which
termination may be by a vote of a majority of the Disinterested Trustees as
defined in Section 13 hereof) or by you upon notice to the Trust.
Section 11. All notices and other communications between the parties to
this Agreement will be duly given if mailed, telegraphed, telexed or
transmitted by similar telecommunications device to the appropriate address
stated herein, or to such other address as either party shall so provide the
other.
Section 12. This Agreement will be construed in accordance with the laws
of the Commonwealth of Massachusetts and is nonassignable by the parties
hereto.
Section 13. This Agreement has been approved by vote of a majority of (i)
the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Trust and who have no direct or indirect financial interest in the operation of
the Shareholder Services Plan adopted by the Trust regarding the provisions of
support services to the beneficial owners of Shares or in any agreement related
thereto ("Disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on such approval.
Section 14. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not
-4-
<PAGE>
binding upon any of the Trustees, shareholders, or representatives of the Trust
personally, but bind only the Trust property, and all persons dealing with any
class of shares of the Trust must look solely to the Trust property belonging
to such class for the enforcement of any claims against the trust.
If you agree to be legally bound by the provisions of this Agreement, pleas
sign a copy of this letter where indicated below and promptly return it to the
Trust, c/o Neil Forrest, The Shareholder Services Group, Inc. d/b/a 440
Financial, 440 Lincoln Street, Worcester, MA 01653-1959.
Very truly yours,
THE GALAXY FUND
By:______________________
Date:___________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:__________________ By:______________________
(Authorized Officer)
37030
-5-
<PAGE>
Exhibit
11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Galaxy Fund:
We hereby consent to the following with respect to Post-Effective Amendment
No. 26 to the Registration Statement on Form N-1A (File No. 33-4806) under the
Securities Act of 1933, as amended, of The Galaxy Fund:
1. The incorporation by reference of our report dated December 8, 1995
accompanying the financial statements of the Short-Term Bond Fund, Intermediate
Government Income Fund, Corporate Bond Fund and High Quality Bond Fund (four
series of The Galaxy Fund) as of October 31, 1995 into the Statement of
Additional Information.
2. The reference to our firm under the heading "Auditors" in the
Statement of Additional Information.
3. The reference to our firm under the heading "Financial Highlights" in
the Prospectuses.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 29, 1995
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Counsel" in the Statement of Additional Information that is
included in Post-Effective Amendment No. 26 to the Registration Statement (No.
33-4806) on Form N-1A under the Securities Act of 1933, as amended, of The
Galaxy Fund. This consent does not constitute a consent under Section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
Philadelphia, Pennsylvania /s/ Drinker Biddle & Reath
December 29, 1995 Drinker Biddle & Reath
<TABLE> <S> <C>
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<NAME> SHORT TERM BOND RETAIL CLASS
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> SHORT TERM BOND TRUST CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERMEDIATE GOVERNMENT INCOME FUND RETAIL CLASS
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<NET-INVESTMENT-INCOME> 17527248
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<ACCUMULATED-NII-PRIOR> 36267
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> INTERMEDIATE GOVERNMENT INCOME FUND TRUST CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> HIGH QUALITY BOND TRUST CLASS
<S> <C>
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<PERIOD-END> OCT-31-1995
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<OVERDISTRIBUTION-GAINS> 5590980
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