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TRUST
THE GALAXY FUND
GROWTH AND INCOME FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
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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
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PAGE
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Expense Summary....................................................... 2
Financial Highlights.................................................. 3
Investment Objective and Policies..................................... 4
Investments, Strategies and Risks..................................... 4
Investment Limitations................................................ 8
Pricing of Shares..................................................... 9
How to Purchase and Redeem Shares..................................... 9
Distributor.......................................................... 9
Purchase of Shares................................................... 9
Redemption of Shares................................................. 10
Dividends and Distributions........................................... 11
Taxes................................................................. 11
Federal.............................................................. 11
State and Local...................................................... 12
Management of the Fund................................................ 12
Investment Adviser................................................... 12
Authority to Act as Investment Adviser............................... 13
Administrator........................................................ 13
Description of Galaxy and Its Shares.................................. 14
Shareholder Services Plan............................................ 14
Affiliate Agreement for Sub-Account Services......................... 15
Custodian and Transfer Agent.......................................... 15
Expenses.............................................................. 16
Performance and Yield Information..................................... 16
Miscellaneous......................................................... 17
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THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 concerning initial purchases and current
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 Growth and Income Fund (the "Fund") offered by
Galaxy.
The Fund's investment objective is to provide a relatively high total return
through long-term capital appreciation and current income. The Fund attempts
to achieve this objective by investing in a professionally managed,
diversified portfolio consisting primarily of common stocks of companies
believed to have prospects for above-average growth and dividends or of
companies where significant fundamental changes are taking place. Under normal
market and economic conditions, the Fund will invest at least 65% of its
assets in growth and income equity securities. The Fund seeks to achieve a
current dividend yield that exceeds the composite yield of securities included
in the Standard & Poor's 500 Composite Stock Index ("S&P 500").
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
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 Corporation, 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 and Retail 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.
The Fund is distributed by 440 Financial Distributors, Inc., and advised by
Fleet Investment Advisors Inc.
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.
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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 REPRESENTATIONTO THE CONTRARY IS A
CRIMINAL OFFENSE.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
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EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to Trust Shares and (ii) the operating
expenses for Trust Shares of the Fund. Examples based on the summary are also
shown.
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GROWTH AND
INCOME FUND
SHAREHOLDER TRANSACTION EXPENSES (TRUST SHARES)
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Sales Load....................................................... None
Sales Load on Reinvested Dividends............................... None
Deferred Sales Load.............................................. None
Redemption Fees.................................................. None
Exchange Fees.................................................... None
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Advisory Fees.................................................... .75%
12b-1 Fees....................................................... None
Other Expenses................................................... .20%
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Total Fund Operating Expenses.................................... .95%
====
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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:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Growth and Income Fund.......................... $10 $30 $52 $114
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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 current fees for
the Fund's Trust Shares that would have been applicable had they been in
effect. 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 included in 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.
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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, Retail Shares,
which are offered under a separate prospectus. 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 Shares
of the Fund bear the expenses incurred under Galaxy's Shareholder Services
Plan at an annual rate of .30% 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 Shares
bear differing transfer agency expenses.
The Growth and Income Equity Fund commenced operations on December 14, 1992
as a separate investment portfolio (the "Predecessor Fund") of The Shawmut
Funds, which was organized as a Massachusetts business trust. On December 4,
1995, the Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold two series of shares of
beneficial interest that were similar to the Fund's Trust Shares and Retail
Shares, respectively.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Trust Shares (the series that is
similar to the Fund's Trust Shares) for the six months ended April 30, 1995,
the fiscal year ended October 31, 1994 and the fiscal period ended October 31,
1993. The information for the fiscal year ended October 31, 1994 and for the
prior fiscal period ended October 31, 1993 was audited by Price Waterhouse
LLP, independent accountants for the Predecessor Fund, whose report thereon
appears in the Statement of Additional Information. Such Financial Highlights
should be read in conjunction with the financial statements and notes thereto
included in the Statement of Additional Information. Additional information
about the performance of the Predecessor Fund is contained in The Shawmut
Funds' Annual Report, which may be obtained without charge.
PREDECESSOR GROWTH AND INCOME FUND
(FOR A TRUST SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
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PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
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Net Asset Value, Beginning of Period.. $ 11.15 $ 10.69 $ 10.00
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Net Investment Income................ 0.13 0.25 0.18
Net realized and unrealized
gain/(loss) on investments.......... 0.71 0.72 0.69
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Total from Investment Operations.... 0.84 0.97 0.87
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Dividends to shareholders from net
investment income.................... (0.14) (0.23) (0.18)
Distributions to shareholders from net
realized gain on investment
transactions......................... (0.49) (0.28) --
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Total Distributions................. (0.63) (0.51) (0.18)
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Net Asset Value, End of Period........ $ 10.96 $ 11.15 $ 10.69
======== ======== ========
Total Return.......................... 8.09% 9.45% 8.80%
Expenses/3/.......................... 1.06%/2/ 1.04% 0.98%/2/
Net investment income/3/............. 2.43%/2/ 2.31% 2.11%/2/
Net Assets, End of Period (000
omitted)............................ $171,927 $156,827 $147,090
Portfolio Turnover Rate............... 20% 73% 38%
</TABLE>
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/1/ For the period from December 14, 1992 (date of initial public investment) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.28% and 2.65%, respectively,
for the period ended April 30, 1995, 1.24% and 2.51%, respectively, for the
year ended October 31, 1994, and 1.25% and 2.38%, respectively, for the
period ended October 31, 1993.
3
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide a relatively high total return
through long-term capital appreciation and current income. The Fund attempts
to achieve this objective by investing in a professionally managed,
diversified portfolio consisting primarily of common stocks of companies with
prospects for above-average growth and dividends or of companies where
significant fundamental changes are taking place. Under normal market
circumstances, the Fund will invest at least 65% of its assets in growth and
income equity securities. The Fund generally looks to achieve a current
dividend yield that exceeds the composite yield of securities included on the
S&P 500.
Fleet Investment Advisors Inc., the Fund's investment adviser (the
"Investment Adviser" or "Fleet") 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.
INVESTMENTS, STRATEGIES AND RISKS
Common Stock. As described above, the Fund invests primarily in equity
securities. As with other mutual funds that invest primarily in equity
securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time and the United States equity market tends to be cyclical, experiencing
both periods when stock prices generally increase and periods when stock
prices generally decrease. However, because the Fund invests primarily in
growth-oriented equity securities, there are some additional risk factors
associated with investment in the Fund. Growth-oriented stocks may include
issuers with smaller capitalizations. Small capitalization stocks have
historically been more volatile in price than larger capitalization stocks,
such as those included in the S&P 500. This is because, among other things,
smaller companies have a lower degree of liquidity in the equity market and
tend to have a greater sensitivity to changing economic conditions. Further,
in addition to exhibiting greater volatility, these stocks may, to some
degree, fluctuate independently of the stocks of large companies. That is, the
stock of small capitalization companies may decline in price as the price of
large company stocks rises or vice versa. Therefore, investors should expect
that the Fund will be more volatile than, and may fluctuate independently of,
broad stock market indices such as the S&P 500.
Convertible Securities. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund may invest in convertible bonds rated "BB" or higher by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or "Ba" or higher by Moody's Investors Service, Inc. ("Moody's") at
the time of investment. Securities rated "BB" by S&P or Fitch or "Ba" by
Moody's provide questionable protection of principal and interest in that such
securities either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt obligations that are not
rated, or determined to be, investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, the value
of lower-rated bonds tends to reflect short-term corporate,
4
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economic, and market developments, as well as investor perceptions of the
issuer's credit quality. In addition, lower-rated bonds may be more difficult
to dispose of or to value than high-rated, lower-yielding bonds. The
Investment Adviser will attempt to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer, as
well as by monitoring broad economic trends and corporate and legislative
developments. If a convertible bond is rated below "BB" or "Ba" according to
the characteristics set forth here after the Fund has purchased it, the Fund
is not required to eliminate the convertible bond from the portfolio, but will
consider appropriate action. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. The Fund does not intend to
invest in such lower-rated bonds during the current fiscal year. A description
of the rating categories is contained in the Appendix to the Statement of
Additional Information.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to movements
in the underlying equity securities. The holder is entitled to receive the
fixed income of a bond or the dividend preference of a preferred stock until
the holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used in whole or in part, customarily at full face
value, in lieu of cash to purchase the issuer's common stock. When owned as
part of a unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally will
expire before the bond's maturity. Convertible securities are senior to equity
securities, and therefore, have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than non-convertible securities of
similar quality. The Fund will exchange or convert the convertible securities
held in its portfolio into shares of the underlying common stock in instances
in which, in the Investment Adviser's opinion, the investment characteristics
of the underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for the Fund, the Investment
Adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Investment Adviser considers
numerous factors, including the economic and political outlook, the value of
the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability
and practices.
Securities of Foreign Issuers. The Fund may invest in the securities of
foreign issuers which are freely traded on United States securities exchanges
or in the over-the-counter market in the form of depository receipts.
Securities of a foreign issuer may present greater risks in the form of
nationalization, confiscation, domestic marketability, or other national or
international restrictions. As a matter of practice, the Fund will not invest
in the securities of a foreign issuer if any such risk appears to the
Investment Adviser to be substantial.
Options and Futures Contracts. The Fund may buy and sell options and futures
contracts to manage its exposure to changing interest rates, security prices,
and currency exchange rates. Some options and futures strategies, including
selling futures, buying puts, and writing calls, tend to hedge the Fund's
investments against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
strategy. The Fund may invest in options and futures based on any type of
security, index, or currency, including options and futures based on foreign
exchanges and options not traded on exchanges.
5
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Options and futures can be volatile investments, and involve certain risks.
If the Investment Adviser applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures may lower the Fund's
individual return. The Fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an illiquid
secondary market.
The Fund will not hedge more than 20% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. The Fund will
not buy futures or write puts whose underlying value exceeds 20% of its total
assets, and will not buy calls with a value exceeding 5% of its total assets.
Stock Index Futures, Swap Agreements, Indexed Securities and Options. The
Fund may utilize stock index futures contracts, options, swap agreements,
indexed securities, and options on futures contracts, subject to the
limitation that the value of these futures contracts, swap agreements, indexed
securities, and options will not exceed 20% of the Fund's total assets. The
Fund will not purchase options to the extent that more than 5% of the value of
its total assets would be invested in premiums on open put option positions.
In addition, the Fund does not intend to invest more than 5% of the market
value of its total assets in each of the following: futures contracts, swap
agreements, and indexed securities. When the Fund enters into a swap
agreement, assets of the Fund equal to the value of the swap agreement will be
segregated by the Fund.
There are several risks accompanying the utilization of futures contracts.
Positions in futures contracts may be closed only on an exchange or board of
trade that furnishes a secondary market for such contracts. While the Fund
plans to utilize futures contracts only if there exists an active market for
such contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because by definition, futures
contracts look to projected price levels in the future and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the corresponding stock index. The absence of a perfect price correlation
between the futures contract and its underlying stock index could stem from
investors choosing to close futures contracts by offsetting transactions,
rather than satisfying additional margin requirements. This could result in a
distortion of the relationship between the index and the futures market. In
addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation
by speculators in the futures market could result in price fluctuations.
Restricted and Illiquid Securities. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. The Fund
will limit its investments in illiquid securities, including certain
restricted securities not determined by the Board of Trustees to be liquid,
non-negotiable fixed time deposits with maturities over seven days, over-the-
counter options, and repurchase agreements providing for settlement in more
than seven days after notice, to 15% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
6
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The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
Securities Lending. The Fund may lend its portfolio securities on a short-
term or long-term basis, or both, to financial institutions such as banks and
broker/dealers. 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 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 will 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.
Temporary Investments. In such proportions, as, in the judgment of the
Investment Adviser, prevailing market conditions warrant, the Fund, for
temporary defensive purposes, invests in:
. short-term money market instruments rated in one of the top two ratings
categories by a nationally reorganized statistical rating organization;
. securities issued and/or guaranteed as to payment of principal and
interest by the U.S. Government, its agencies, or instrumentalities; and
. repurchase agreements.
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 upon notice of seven days or less, the repurchase
agreement will be considered an illiquid security and will be subject to the
Fund's 15% limitation on investing in illiquid securities.
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.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than
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3% of the outstanding voting stock of any one investment company will be owned
by the Fund. The Fund will invest in other investment companies primarily for
the purpose of investing its short-term cash which has not yet been invested
in other portfolio instruments. However, from time to time, on a temporary
basis, the Fund may invest exclusively in one other investment company similar
to the Fund.
Derivative Securities. The Fund may purchase certain "derivative"
securities. Derivative securities are instruments that derive their value from
the performance of underlying assets, interest rates, or indices, and include,
but are not limited to, put and call options, stock index futures and options,
indexed securities and swap agreements.
Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest rates or indices will decline;
credit risk that the dealer or other counterparty to the transaction will fail
to pay its obligations; volatility and leveraging risk that, if interest rates
change adversely, the value of the derivative security will decline more than
the assets, rates or indices on which it is based; liquidity risk that the
Fund will be unable to sell a derivative security when it wants because of
lack of market depth or market disruption; pricing risk that the value of a
derivative security will not correlate exactly to the value of the underlying
assets, rates or indices on which it is based; and operations risk that loss
will occur as a result of inadequate systems and controls, human error or
otherwise. Some derivative securities are more complex than others, and for
those instruments that have been developed recently, data are lacking
regarding their actual performance over complete market cycles.
The Investment Adviser will evaluate the risks presented by the derivative
securities purchased by the Fund, and will determine, in connection with its
day-to-day management of the Fund, how they will be used in furtherance of the
Fund's investment objective. It is possible, however, that the Investment
Adviser's evaluations will prove to be inaccurate or incomplete and, even when
accurate and complete, it is possible that the Fund will, because of the risks
discussed above, incur loss as a result of its investments in derivative
securities. See "Investment Objectives and Policies--Derivative Securities" in
the Statement of Additional Information for additional information.
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. Borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of its total assets to secure such borrowings; or
2. With respect to 75% of the value of its total assets, invest more than
5% in securities of any one issuer, other than cash, cash items, or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized
by such securities, or acquire more than 10% of the outstanding voting
securities of any one issuer.
8
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The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
3. The Fund may not invest more than 15% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (except
for commercial paper issued under Section 4(a) of the Securities Act of
1933 and certain other securities which meet the criteria for liquidity as
established by the Board of Trustees).
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, Presidents' 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 by dividing the value of all securities and other
assets attributable to a 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 assets in the Fund which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities quoted on the NASD National Market System are
also valued at the last sale price. Other securities traded on over-the-
counter markets are valued on the basis of their closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid and asked prices. Investments in debt
securities with remaining maturities of 60 days or less are valued based upon
the amortized cost method. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair
value by the Investment Adviser under the supervision of Galaxy's Board of
Trustees. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
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
9
<PAGE>
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 the Fund'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
requirements 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 an Institution 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 the 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.
10
<PAGE>
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 on the following Business Day to the Institution.
Payment for redemption orders 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 sixty 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 and paid
quarterly. 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 its 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
It is intended that the Fund will 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.
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.) Such ordinary income distributions will
qualify for the dividends received deduction for corporations to the extent of
the total qualifying dividends received by the Fund from domestic corporations
for the taxable year.
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 Trust
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.
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<PAGE>
If you are considering buying shares of the Fund on or just before the
record date of a dividend or 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 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
from those of the federal income tax law described above.
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 Fund. Fleet, which
commenced operations in 1984, also provides investment management and advisory
services to 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 Growth, Equity
Value, Equity Income, International Equity, Small Company Equity, Asset
Allocation, Small Cap Value, Short-Term Bond, Intermediate Government Income,
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 $25 billion at June 30, 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, Brendan Henebry, is primarily responsible for
the day-to-day management of the Fund's investment portfolio. Mr. Henebry
served as portfolio manager for the Predecessor Fund since its inception in
1992. He was associated with Shawmut Bank and its predecessor since 1965 and
was a Vice President since 1978. During the past six years he served as
manager of Shawmut Bank's Growth and Income Equity Management Group.
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
12
<PAGE>
assets of the Fund. The fees for the Fund are higher than fees paid by most
other mutual funds, although the Board of Trustees of Galaxy believes that
they are 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 all or a portion of
the 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.
The Predecessor Fund bore advisory fees during the most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A., its former adviser, at the effective annual rate of .60% of its
average daily net assets after fee waivers. Without fee waivers, the
Predecessor Fund would have borne advisory fees at the annual rate of 1.00% of
its 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 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 agree 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, 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.
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<PAGE>
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .107% of its 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 the Fund: Class U-Series 1 shares (Trust
Shares) and Class U-Series 2 shares (Retail Shares), both series representing
interests in the Fund.
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 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 and, as a result, the net yield
on the Fund's Trust Shares will generally be higher than the net yield on the
Fund's Retail 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.
Persons selling or servicing different series of shares of the Fund may
receive different compensation with respect to one particular series of shares
as opposed to the other series of shares in the Fund. Retail Shares of the
Fund are sold without a sales load 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 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 Shares. Such services will be provided to
Customers who are the beneficial owners of Retail Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail Shares. In consideration for
payment of up to .25% (on an
14
<PAGE>
annualized basis) of the average daily net asset value of Retail 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 Shares or the information necessary for sub-
accounting; and providing periodic mailings to Customers. In consideration for
payment of up to a separate .25% (on an annualized basis) of the average daily
net asset value of Retail 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 Shares; responding to Customer inquiries; and providing a service to
invest the assets of Customers in Retail 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 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 Shares of the Fund, and
to limit the payment under these servicing agreements for the Fund to no more
than .30% (on an annualized basis) of the average daily net asset value of the
Retail 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 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 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. ("Chase Manhattan"), located at 1 Chase
Manhattan Plaza, New York, New York 10081, a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as 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 purposes 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 Fund's
transfer and dividend disbursing agent. Services performed by these 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.
15
<PAGE>
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, 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 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, the S&P 500, an
unmanaged index of groups of common stocks, the Consumer Price Index, or the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange.
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 for Trust Shares of the Fund will be calculated
separately from the performance and yield data for the Fund's Retail Shares.
Because of the shareholder servicing fees currently borne only by Retail
Shares, the performance and yields on the Fund's Trust Shares can generally be
expected, at any given time, to be higher than the performance and yields on
the Fund's Retail Shares.
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 dividends and capital gain distributions made by the Fund during
the period are reinvested in Fund shares.
16
<PAGE>
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 the 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.
The portfolio manager of the Fund and other investment professionals may
from time to time discuss in advertising, sales literature or other materials,
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.
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 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 the Fund or portfolio (irrespective of
series designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
17
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FN-507 (12/95) 15004
<PAGE>
RETAIL
THE GALAXY FUND
GROWTH AND INCOME FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
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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 THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Highlights............................................................ 2
Expense Summary....................................................... 4
Financial Highlights.................................................. 5
Investment Objective and Policies..................................... 6
Investments, Strategies and Risks..................................... 6
Investment Limitations................................................ 10
Pricing of Shares..................................................... 11
How to Purchase and Redeem Shares..................................... 11
Distributor.......................................................... 11
Purchase of Shares................................................... 11
Public Offering Price................................................ 12
Quantity Discounts................................................... 13
Purchase Procedures--Customers of Institutions....................... 14
Purchase Procedures--Direct Investors................................ 15
Other Purchase Information........................................... 15
Redemption Procedures--Customers of Institutions..................... 16
Redemption Procedures--Direct Investors.............................. 16
Other Redemption Information......................................... 18
Investor Programs..................................................... 18
Exchange Privilege................................................... 18
Retirement Plans..................................................... 19
Automatic Investment Program and Systematic Withdrawal Plan.......... 19
College Investment Program........................................... 20
Direct Deposit Program............................................... 20
Information Services.................................................. 20
Galaxy Information Center............................................ 20
Voice Response System................................................ 21
Galaxy Shareholder Services.......................................... 21
Dividends and Distributions........................................... 21
Taxes................................................................. 21
Federal.............................................................. 21
State and Local...................................................... 22
Management of the Fund................................................ 22
Investment Adviser................................................... 22
Authority to Act as Investment Adviser............................... 23
Administrator........................................................ 23
Description of Galaxy and Its Shares.................................. 24
Shareholder Services Plan............................................ 24
Affiliate Agreement for Sub-Accounting Services...................... 25
Custodian and Transfer Agent.......................................... 25
Expenses.............................................................. 26
Performance and Yield Information..................................... 26
Miscellaneous......................................................... 27
</TABLE>
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<PAGE>
THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 concerning initial purchases and current
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 shares (the "Retail Shares")
which represent interests in the Growth and Income Fund (the "Fund") offered
by Galaxy.
The Fund's investment objective is to provide a relatively high total return
through long-term capital appreciation and current income. The Fund attempts
to achieve this objective by investing in a professionally managed,
diversified portfolio consisting primarily of common stocks of companies
believed to have prospects for above-average growth and dividends or of
companies where significant fundamental changes are taking place. Under normal
market and economic conditions, the Fund will invest at least 65% of its total
assets in growth and income equity securities. The Fund seeks to achieve a
current dividend yield that exceeds the composite yield of securities included
in the Standard & Poor's 500 Composite Stock Index ("S&P 500").
This Prospectus describes Retail Shares in the Fund. Retail Shares are
offered to customers ("Customers") of Fleet Brokerage Securities Corporation,
Fleet Brokerage Securities, Inc., Fleet Financial Group, Inc., its affiliates,
their correspondent banks, and other qualified banks, savings and loan
associations and broker/dealers ("Institutions"). Shares may also be purchased
directly by individuals or corporations, who submit a purchase application to
Galaxy, purchasing either for their own account or for the accounts of others
("Direct Investors"). Galaxy is also authorized to issue an additional series
of shares in the Fund ("Trust Shares"), which are offered under a separate
prospectus primarily 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. Retail Shares and Trust Shares in the 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 Fund" and "Description of Galaxy and Its
Shares" herein.
The Fund is distributed by 440 Financial Distributors, Inc., and advised by
Fleet Investment Advisors Inc.
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 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 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 Funds, 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.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
HIGHLIGHTS
Q: WHAT IS THE GALAXY FUND?
A: Galaxy is an open-end management investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different
investment portfolios, each having separate investment objectives and
policies. This Prospectus describes Galaxy's GROWTH AND INCOME FUND.
Prospectuses for Galaxy's MONEY MARKET, GOVERNMENT, TAX-EXEMPT, U.S. TREASURY,
CONNECTICUT MUNICIPAL MONEY MARKET, MASSACHUSETTS MUNICIPAL MONEY MARKET,
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, ASSET ALLOCATION AND SMALL CAP VALUE FUNDS may
be obtained by calling (800) 628-0414.
Q: WHO ADVISES THE FUND?
A: The Fund is managed by Fleet Investment Advisors Inc. (the "Investment
Adviser" or "Fleet"), an indirect wholly-owned subsidiary of Fleet Financial
Group, Inc. Fleet Financial Group, Inc. is a financial services company with
total assets as of June 30, 1995 of approximately $25 billion. See "Management
of the Fund--Investment Adviser."
Q: WHAT ADVANTAGES DOES THE FUND OFFER?
A: The Fund offers investors the opportunity to invest in a variety of
professionally managed, diversified investment portfolios without having to
become involved with the detailed accounting and safekeeping procedures
normally associated with direct investments in securities. The Fund also
offers the economic advantages of block trading in portfolio securities and
the availability of a family of twenty-four mutual funds should your
investment goals change.
Q: HOW TO BUY AND REDEEM SHARES?
A: The Fund is distributed by 440 Financial Distributors, Inc. Retail Shares
of the Fund are sold to individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors"). Retail Shares may also be purchased
on behalf of Customers of Fleet Brokerage Securities Corporation, Fleet
Securities, Inc., Fleet Financial Group, Inc., its affiliates, their
correspondent banks and other qualified banks, savings and loan associations
and broker/dealers ("Institutions"). Retail Shares may also be purchased by
employees of Fleet Financial Group, Inc. and its affiliates through payroll
deductions. Retail Shares of the Fund may be purchased at their net asset
value plus a maximum initial sales charge of 3.75%. Lower sales charges and
exemptions are available as described in this Prospectus. Share purchase and
redemption information for both Direct Investors and Customers is provided
below under "How to Purchase and Redeem Shares." Except as provided below in
"Investor Programs," the minimum initial investment for Direct Investors and
the minimum initial aggregate investment for Institutions purchasing on behalf
of their Customers is $2,500. The minimum investment for subsequent purchases
is $100. There are no minimum requirements for investors participating in the
Automatic Investment Program described below. Institutions may require
Customers to maintain certain minimum investments in Retail Shares. See "How
to Purchase and Redeem Shares--Purchase of Shares" below.
2
<PAGE>
Q: WHEN ARE DIVIDENDS PAID?
A: The net investment income of the Fund is declared and paid quarterly. Net
realized capital gains of the Fund are distributed at least annually. See
"Dividends and Distributions."
Q: WHAT POTENTIAL RISKS ARE PRESENTED BY THE FUND'S INVESTMENT PRACTICES?
A: The Fund invests primarily in growth-oriented equity securities, which
may include securities of issuers with small capitalizations. As a result, the
Fund may be more volatile than, and may fluctuate independently of, broad
stock market indices. See "Investments, Strategies and Risks--Common Stock."
The Fund may invest in lower-rated convertible securities, which are high-
yield, high-risk bonds that are typically subject to greater market
fluctuations and may be more difficult to value or dispose of than higher-
rated, lower-yielding bonds. See "Investments, Strategies and Risks--
Convertible Securities." The Fund may invest in foreign securities that are
freely traded on U.S. securities exchanges or in over-the-counter markets in
the form of depository receipts. Investments in foreign securities may present
greater risks than those associated with investments in the securities of U.S.
issuers. See "Investments, Strategies and Risks--Securities of Foreign
Issuers." The Fund may also invest in certain "derivative" securities, such as
put and call options, stock index futures and options, indexed securities and
swap agreements. Derivative securities derive their value from the performance
of underlying assets, interest rates or indices and as a result entail
additional market and credit risks. See "Investments, Strategies and Risks--
Derivative Securities."
Q: WHAT SHAREHOLDER PRIVILEGES ARE OFFERED BY THE FUND?
A: Investors may exchange Retail Shares of the Fund having a value of at
least $100 for Retail Shares of any other portfolio offered by Galaxy in which
the investor has an existing account without paying an additional sales
charge. Galaxy offers Individual Retirement Accounts ("IRAs"), Simplified
Employee Pension Plans ("SEPs") and Keogh Plan accounts which can be
established by contacting Galaxy's distributor. Retail Shares are also
available for purchase through Multi-Employee Retirement Plans ("MERPs")
accounts which can be established by Customers directly with Fleet Brokerage
Securities Corporation or its affiliates. Galaxy also offers an Automatic
Investment Program which allows investors to automatically invest in Retail
Shares, as well as certain other shareholder privileges. See "Investor
Programs."
3
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to Retail Shares and (ii) the operating
expenses for Retail Shares of the Fund. SHAREHOLDER TRANSACTION EXPENSES are
charges you pay when buying or selling shares of the Fund. ANNUAL FUND
OPERATING EXPENSES are paid out of the Fund's assets and include fees for
portfolio management, maintenance of shareholder accounts, general Fund
administration, accounting and other services. Examples based on the summary
are also shown.
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
SHAREHOLDER TRANSACTION EXPENSES (RETAIL SHARES)
- -------------------------------- ----------------------
<S> <C>
Front End Sales Load Imposed on Purchases (as a percent-
age of offering price)................................. 3.75%
Sales Load on Reinvested Dividends...................... None
Deferred Sales Load..................................... None
Redemption Fees/1/...................................... None
Exchange Fees........................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------
<S> <C>
Advisory Fees........................................... .75%
12b-1 Fees.............................................. None
Other Expenses.......................................... .74%
-----
Total Fund Operating Expenses........................... 1.49%
=====
</TABLE>
- --------
/1/ Direct Investors are charged a $5.00 fee if redemption proceeds are paid by
wire.
EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING
(1) DEDUCTION AT THE TIME OF PURCHASE OF THE MAXIMUM APPLICABLE FRONT-END
SALES LOAD, (2) A 5% ANNUAL RETURN, AND (3) 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>
Growth and Income Fund.......................... $52 $83 $115 $207
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in Retail 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 current fees for
the Fund's Retail Shares that would have been applicable had they been in
effect. Reduced sales charges may be available. See "How to Purchase and
Redeem Shares--Public Offering Price" and "How to Purchase and Redeem Shares--
Quantity Discounts". 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 included in
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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
This Prospectus describes the Retail Shares in the Fund. Galaxy is also
authorized to issue an additional series of Shares in the Fund, Trust Shares,
which are offered under a separate prospectus. As described below under
"Description of Galaxy and Its Shares", Retail Shares and Trust Shares
represent equal pro rata interests in the Fund, except that (i) Retail Shares
of the Fund bear the expenses incurred under Galaxy's Shareholder Services
Plan at an annual rate of .30% 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) Retail Shares and Trust Shares
bear differing transfer agency expenses.
The Growth and Income Equity Fund commenced operations on February 12, 1993
as a separate investment portfolio (the "Predecessor Fund") of The Shawmut
Funds, which was organized as a Massachusetts business trust. On December 4,
1995, the Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund had offered and sold two series of shares
of beneficial interest that were similar to the Fund's Retail Shares and Trust
Shares, respectively.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Investment Shares (the series
that is similar to the Fund's Retail Shares) for the six months ended April
30, 1995, the fiscal year ended October 31, 1994 and the fiscal period ended
October 31, 1993. The information for the fiscal year ended October 31, 1994
and for the prior fiscal period ended October 31, 1993 was audited by Price
Waterhouse LLP, independent accountants for the Predecessor Fund, whose report
thereon appears in the Statement of Additional Information. Such Financial
Highlights should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information. Additional
information about the performance of the Predecessor Fund is contained in The
Shawmut Funds' Annual Report, which may be obtained without charge.
PREDECESSOR GROWTH AND INCOME FUND
(FOR AN INVESTMENT SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
------------ ----------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 11.15 $ 10.69 $ 10.23
------- ------- -------
Net Investment Income................. 0.12 0.22 0.15
Net realized and unrealized
gain/(loss) on investments........... 0.71 0.72 0.48
------- ------- -------
Total from Investment Operations..... 0.83 0.94 0.63
------- ------- -------
Dividends to shareholders from net in-
vestment income....................... (0.13) (0.20) (0.17)
Distributions to shareholders from net
realized gain on investment
transactions.......................... (0.49) (0.28) --
------- ------- -------
Total Distributions.................. (0.62) (0.48) (0.17)
------- ------- -------
Net Asset Value, End of Period......... $ 11.36 $ 11.15 $ 10.69
======= ======= =======
Total Return........................... 7.94% 9.12% 6.20%
Expenses/3/........................... 1.31%/2/ 1.29% 1.25%/2/
Net investment income/3/.............. .18%/2/ 2.06% 1.77%/2/
Net Assets, End of Period (000 omit-
ted)................................. $31,811 $22,244 $16,280
Portfolio Turnover Rate................ 20% 73% 38%
</TABLE>
- --------
/1/ For the period from February 12, 1993 (date of initial public offering) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.78% and 2.65%, respectively,
for the period ended April 30, 1995, 1.74% and 2.51%, respectively, for the
year ended October 31, 1994, and 1.78% and 1.30%, respectively, for the
period ended October 31, 1993.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to provide a relatively high total return
through long-term capital appreciation and current income. The Fund attempts
to achieve this objective by investing in a professionally managed,
diversified portfolio consisting primarily of common stocks of companies with
prospects for above-average growth and dividends or of companies where
significant fundamental changes are taking place. Under normal market
circumstances, the Fund will invest at least 65% of its assets in growth and
income equity securities. The Fund seeks to achieve a current dividend yield
that exceeds the composite yield of securities included on the S&P 500.
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.
INVESTMENTS, STRATEGIES AND RISKS
Common Stock. As described above, the Fund invests primarily in equity
securities. As with other mutual funds that invest primarily in equity
securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time and the United States equity market tends to be cyclical, experiencing
both periods when stock prices generally increase and periods when stock
prices generally decrease. However, because the Fund invests primarily in
growth-oriented equity securities, there are some additional risk factors
associated with investment in the Fund. Growth-oriented stocks may include
issuers with smaller capitalizations. Small capitalization stocks have
historically been more volatile in price than larger capitalization stocks,
such as those included in the S&P 500. This is because, among other things,
smaller companies have a lower degree of liquidity in the equity market and
tend to have a greater sensitivity to changing economic conditions. Further,
in addition to exhibiting greater volatility, these stocks may, to some
degree, fluctuate independently of the stocks of large companies. That is, the
stock of small capitalization companies may decline in price as the price of
large company stocks rises or vice versa. Therefore, investors should expect
that the Fund will be more volatile than, and may fluctuate independently of,
broad stock market indices such as the S&P 500.
Convertible Securities. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund may invest in convertible bonds rated "BB" or higher by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or "Ba" or higher by Moody's Investors Service, Inc. ("Moody's") at
the time of investment. Securities rated "BB" by S&P or Fitch or "Ba" by
Moody's provide questionable protection of principal and interest in that such
securities either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt obligations that are not
rated, or determined to be, investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, the value
of lower-rated bonds tends to reflect short-term corporate, economic, and
market developments, as well as investor perceptions of the issuer's credit
quality. In addition,
6
<PAGE>
lower-rated bonds may be more difficult to dispose of or to value than high-
rated, lower-yielding bonds. The Investment Adviser will attempt to reduce the
risks described above through diversification of the portfolio and by credit
analysis of each issuer, as well as by monitoring broad economic trends and
corporate and legislative developments. If a convertible bond is rated below
"BB" or "Ba" according to the characteristics set forth here after the Fund
has purchased it, the Fund is not required to eliminate the convertible bond
from the portfolio, but will consider appropriate action. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives. The
Fund does not intend to invest in such lower-rated bonds during the current
fiscal year. A description of the rating categories is contained in the
Appendix to the Statement of Additional Information.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to movements
in the underlying equity securities. The holder is entitled to receive the
fixed income of a bond or the dividend preference of a preferred stock until
the holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used in whole or in part, customarily at full face
value, in lieu of cash to purchase the issuer's common stock. When owned as
part of a unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally will
expire before the bond's maturity. Convertible securities are senior to equity
securities, and therefore, have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than non-convertible securities of
similar quality. The Fund will exchange or convert the convertible securities
held in its portfolio into shares of the underlying common stock in instances
in which, in the Investment Adviser's opinion, the investment characteristics
of the underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for the Fund, the Investment
Adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Investment Adviser considers
numerous factors, including the economic and political outlook, the value of
the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability
and practices.
Securities of Foreign Issuers. The Fund may invest in the securities of
foreign issuers which are freely traded on United States securities exchanges
or in the over-the-counter market in the form of depository receipts.
Securities of a foreign issuer may present greater risks in the form of
nationalization, confiscation, domestic marketability, or other national or
international restrictions. As a matter of practice, the Fund will not invest
in the securities of a foreign issuer if any such risk appears to the
Investment Adviser to be substantial.
Options and Futures Contracts. The Fund may buy and sell options and futures
contracts to manage its exposure to changing interest rates, security prices,
and currency exchange rates. Some options and futures strategies, including
selling futures, buying puts, and writing calls, tend to hedge the Fund's
investments against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
strategy. The Fund may invest in options and futures based on any type of
security, index, or currency, including options and futures based on foreign
exchanges and options not traded on exchanges.
7
<PAGE>
Options and futures can be volatile investments, and involve certain risks.
If the Investment Adviser applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures may lower the Fund's
individual return. The Fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an illiquid
secondary market.
The Fund will not hedge more than 20% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. The Fund will
not buy futures or write puts whose underlying value exceeds 20% of its total
assets, and will not buy calls with a value exceeding 5% of its total assets.
Stock Index Futures, Swap Agreements, Indexed Securities and Options. The
Fund may utilize stock index futures contracts, options, swap agreements,
indexed securities, and options on futures contracts, subject to the
limitation that the value of these futures contracts, swap agreements, indexed
securities, and options will not exceed 20% of the Fund's total assets. The
Fund will not purchase options to the extent that more than 5% of the value of
its total assets would be invested in premiums on open put option positions.
In addition, the Fund does not intend to invest more than 5% of the market
value of its total assets in each of the following: futures contracts, swap
agreements, and indexed securities. When the Fund enters into a swap
agreement, assets of the Fund equal to the value of the swap agreement will be
segregated by the Fund.
There are several risks accompanying the utilization of futures contracts.
Positions in futures contracts may be closed only on an exchange or board of
trade that furnishes a secondary market for such contracts. While the Fund
plans to utilize futures contracts only if there exists an active market for
such contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because by definition, futures
contracts look to projected price levels in the future and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the corresponding stock index. The absence of a perfect price correlation
between the futures contract and its underlying stock index could stem from
investors choosing to close futures contracts by offsetting transactions,
rather than satisfying additional margin requirements. This could result in a
distortion of the relationship between the index and the futures market. In
addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation
by speculators in the futures market could result in price fluctuations.
Restricted and Illiquid Securities. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. The Fund
will limit its investments in illiquid securities, including certain
restricted securities not determined by the Trustees to be liquid, non-
negotiable fixed time deposits with maturities over seven days, over-the-
counter options, and repurchase agreements providing for settlement in more
than seven days after notice, to 15% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
8
<PAGE>
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later days. The Fund may realize short-term profits or losses
upon the sale of such commitments.
Securities Lending. The Fund may lend its portfolio securities on a short-
term or long-term basis, or both, to financial institutions such as banks and
broker/dealers. 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 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 will 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.
Temporary Investments. In such proportions, as, in the judgment of the
Investment Adviser, prevailing market conditions warrant, the Fund may, for
temporary defensive purposes, invest in:
. short-term money market instruments rated in one of the top two rating
categories by a nationally recognized statistical rating organization;
. securities issued and/or guaranteed as to payment of principal and
interest by the U.S. Government, its agencies, or instrumentalities; and
. repurchase agreements.
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 upon notice of seven days or less, the repurchase
agreement will be considered an illiquid security and will be subject to the
Fund's 15% limitation on investing in illiquid securities.
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.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than
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<PAGE>
3% of the outstanding voting stock of any one investment company will be owned
by the Fund. The Fund will invest in other investment companies primarily for
the purpose of investing its short-term cash which has not as yet been
invested in other portfolios instruments. However, from time to time, on a
temporary basis, the Fund may invest exclusively in one other investment
company similar to the Fund.
Derivative Securities. The Fund may purchase certain "derivative"
securities. Derivative securities are instruments that derive their value from
the performance of underlying assets, interest rates, or indices, and include,
but are not limited to, put and call options, stock index futures and options,
indexed securities and swap agreements.
Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest rates or indices will decline;
credit risk that the dealer or other counterparty to the transaction will fail
to pay its obligations; volatility and leveraging risk that, if interest rates
change adversely, the value of the derivative security will decline more than
the assets, rates or indices on which it is based; liquidity risk that the
Fund will be unable to sell a derivative security when it wants because of
lack of market depth or market disruption; pricing risk that the value of a
derivative security will not correlate exactly to the value of the underlying
assets, rates or indices on which it is based; and operations risk that loss
will occur as a result of inadequate systems and controls, human error or
otherwise. Some derivative securities are more complex than others, and for
those instruments that have been developed recently, data are lacking
regarding their actual performance over complete market cycles.
The Investment Adviser will evaluate the risks presented by the derivative
securities purchased by the Fund, and will determine, in connection with its
day-to-day management of the Fund, how they will be used in furtherance of the
Fund's investment objective. It is possible, however, that the Investment
Adviser's evaluations will prove to be inaccurate or incomplete and, even when
accurate and complete, it is possible that the Fund will, because of the risks
discussed above, incur loss as a result of its investments in derivative
securities. See "Investment Objectives and Policies--Derivative Securities" in
the Statement of Additional Information for additional information.
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. Borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of its total assets to secure such borrowings; or
2. With respect to 75% of the value of its total assets, invest more than
5% in securities of any one issuer, other than cash, cash items, or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized
by such securities, or acquire more than 10% of the outstanding voting
securities of any one issuer.
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<PAGE>
The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
3. Invest more than 15% of its net assets in securities subject to
restrictions on resale under the Securities Act of 1933 (except for
commercial paper issued under Section 4(a) of the Securities Act of 1933
and certain other securities which meet the criteria for liquidity as
established by the Board of Trustees).
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 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 of the Fund for purposes of pricing
sales and redemptions is calculated by dividing the value of all securities
and other assets attributable to the shares of that series 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 assets in the Fund which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities quoted on the NASD National Market System are
also valued at the last sale price. Other securities traded on over-the-
counter markets are valued on the basis of their closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid and asked prices. Investments in debt
securities with remaining maturities of 60 days or less are valued based upon
the amortized cost method. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair
value by the Investment Adviser under the supervision of Galaxy's Board of
Trustees. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
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 Distributor has established several procedures to enable different types
of investors to purchase Retail Shares of the Fund. The Retail Shares
described in this Prospectus may be purchased by individuals or corporations,
who submit a purchase application to Galaxy, purchasing directly either for
their own accounts or for the accounts of others ("Direct Investors"). Retail
Shares may also be purchased by Fleet Brokerage Securities, Inc., Fleet
Securities, Inc., Fleet Financial Group, Inc., its affiliates, their
correspondent banks and
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<PAGE>
other qualified banks, savings and loan associations and broker/dealers
("Institutions") on behalf of their customers ("Customers"). Purchases by
Direct Investors may take place only on days on which the Distributor and
Galaxy's custodian and Galaxy's transfer agent are open for business
("Business Days"). If an Institution accepts a purchase order from a 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
Distributor's procedures. Retail Shares of the Fund will be issued only in
exchange for monetary consideration as described below.
PUBLIC OFFERING PRICE
The public offering price for Retail Shares of the Fund is the sum of the
net asset value of the Retail Shares purchased plus any applicable front-end
sales charge. The sales charge is assessed as follows:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
- --------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 3.75 3.90 3.75
$50,000 to $99,999...... 3.50 3.63 3.50
$100,000 to $249,999.... 3.00 3.09 3.00
$250,000 to $499,999.... 2.50 2.56 2.50
$500,000 to $999,999.... 2.00 2.04 2.00
$1,000,000 to
$2,999,999............. 1.00 1.01 1.00
$3,000,000 and over..... 0.50 0.50 0.50
</TABLE>
Further reductions in the sales charges shown above are also possible. See
"Quantity Discounts" below.
The Distributor will pay the appropriate reallowance to dealers to broker-
dealer organizations which have entered into agreements with the Distributor.
The reallowance to dealers may be changed from time to time.
At various times the Distributor may implement programs under which a
dealer's sales force may be eligible to win nominal awards for certain sales
efforts. Also, the Distributor in its discretion may from time to time,
pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily
intended to result in sales of Retail Shares of the Fund. If any such program
is made available to any dealer, it will be made available to all dealers on
the same terms and conditions. Payments made under such programs will be made
by the Distributor out of its own assets and not out of the assets of the
Fund. These programs will not change the price of Retail Shares or the amount
that the Fund will receive from such sales.
In certain situations or for certain individuals, the front-end sales charge
for Retail Shares of the Fund may be waived either because of the nature of
the investor or the reduced sales effort required to attract such investments.
In order to receive the sales charge waiver, an investor must explain the
status of his or her investment at the time of purchase. No sales charge is
assessed on the following types of transactions and/or investors:
. reinvestment of dividends and distributions;
. IRA, SEP and Keogh Plan accounts;
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<PAGE>
. purchases by persons who were beneficial owners of shares of the Fund or
any of the other portfolios offered by Galaxy or any other funds advised
by Fleet or its affiliates before December 1, 1995;
. purchases by directors, officers and employees of the Fund's Distributor
and of broker-dealers having agreements with the Fund's Distributor
pertaining to the sale of Retail Shares to the extent permitted by such
organizations;
. investors who purchase pursuant to a "wrap fee" program offered by any
broker-dealer or other financial institution or financial planning
organization;
. purchases by members of Galaxy's Board of Trustees;
. purchases by officers, directors, employees and retirees of Fleet
Financial Group, Inc. and any of its affiliates; and
. any purchase of Retail Shares pursuant to the Reinstatement Privilege
described below.
QUANTITY DISCOUNTS
Direct Investors or Customers may be entitled to reduced sales charges
through Rights of Accumulation, a Letter of Intent or a combination of
investments, as described below, even if the Direct Investor or Customer does
not wish to make an investment of a size that would normally qualify for a
quantity discount.
In order to obtain quantity discount benefits, a Direct Investor or Customer
must notify Galaxy's administrator, First Data Investor Services Group, Inc.
(formerly known as The Shareholder Services Group, Inc. d/b/a 440 Financial)
("First Data") at the time of purchase that he or she would like to take
advantage of any of the discount plans described below. Upon such
notification, the investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time and are subject
to confirmation of a Direct Investor's or Customer's holdings through a check
of appropriate records. For more information about quantity discounts, please
contact the Distributor or your Institution.
Rights of Accumulation. A reduced sales charge applies to any purchase of
Retail Shares of any portfolio of Galaxy that is sold with a sales charge
("Eligible Fund") where a Direct Investor's or Customer's then current
aggregate investment in Retail Shares is $50,000 or more. "Aggregate
investment" means the total of: (a) the dollar amount of the then current
purchase of shares of an Eligible Fund; and (b) the value (based on current
net asset value) of previously purchased and beneficially-owned shares of any
Eligible Fund on which a sales charge has been paid. If, for example, a Direct
Investor or Customer beneficially owns shares of one or more Eligible Funds
with an aggregate current value of $49,000 on which a sales charge has been
paid and subsequently purchases shares of an Eligible Fund having a current
value of $1,000, the sales charge applicable to the subsequent purchase would
be reduced to 3.50% of the offering price. Similarly, with respect to each
subsequent investment, all shares of Eligible Funds that are beneficially
owned by the investor at the time of investment may be combined to determine
the applicable sales charge.
Letter of Intent. By completing the Letter of Intent included as part of the
Account Application, a Direct Investor or Customer becomes eligible for the
reduced sales charge applicable to the total number of Eligible Fund Retail
Shares purchased in a 13-month period pursuant to the terms and under the
conditions set forth below and in the Letter of Intent. To compute the
applicable sales charge, the offering price of Retail Shares of an Eligible
Fund on which a sales charge has been paid and that are beneficially owned by
a Direct Investor or Customer on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales charge will be applied only to new purchases.
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<PAGE>
First Data will hold in escrow Retail Shares equal to 5% of the amount
indicated in the Letter of Intent for payment of a higher sales charge if a
Direct Investor or Customer does not purchase the full amount indicated in the
Letter of Intent. The escrow will be released when a Director Investor or
Customer fulfills the terms of the Letter of Intent by purchasing the
specified amount. If purchases qualify for a further sales charge reduction,
the sales charge will be adjusted to reflect a Direct Investor's or Customer's
total purchases. If total purchases are less than the amount specified, a
Direct Investor or Customer will be requested to remit an amount equal to the
difference between the sales charge actually paid and the sales charge
applicable to the total purchases. If such remittance is not received within
20 days, First Data, as attorney-in-fact pursuant to the terms of the Letter
of Intent and at the Distributor's direction, will redeem an appropriate
number of Retail Shares held in escrow to realize the difference. Signing a
Letter of Intent does not bind a Direct Investor or Customer to purchase the
full amount indicated at the sales charge in effect at the time of signing,
but a Direct Investor or Customer must complete the intended purchase in
accordance with the terms of the Letter of Intent to obtain the reduced sales
charge. To apply, a Direct Investor or Customer must indicate his or her
intention to do so under a Letter of Intent at the time of purchase.
Qualification for Discounts. For purposes of applying the Rights of
Accumulation and Letter of Intent privileges described above, the scale of
sales charges applies to the combined purchases made by any individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or the aggregate investments of a trustee or
custodian of any qualified pension or profit sharing plan or IRA established
(or the aggregate investment of a trustee or other fiduciary) for the benefit
of the persons listed above.
Reinstatement Privilege. Direct Investors and Customers may reinvest all or
any portion of their redemption proceeds in Retail Shares of the Fund or in
Retail Shares of another portfolio of Galaxy within 90 days of the redemption
trade date without paying a sales charge. Retail Shares so reinvested will be
purchased at a price equal to the net asset value next determined after the
Transfer Agent receives a reinstatement request and payment in proper form.
Direct Investors and Customers wishing to exercise this Privilege must
submit a written reinstatement request to the Transfer Agent stating that the
investor is eligible to use the Privilege. The reinstatement request and
payment must be received within 90 days of the trade date of the redemption.
Currently, there are no restrictions on the number of times an investor may
use this Privilege.
Generally, exercising the Reinstatement Privilege will not affect the
character of any gain or loss realized on redemptions for federal income tax
purposes. However, if a redemption results in a loss, the reinstatement may
result in the loss being disallowed under the Internal Revenue Code's "wash
sale" rules.
PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS
Purchase orders for Retail Shares are placed by Customers of Institutions
through their Institution. The Institution is responsible for transmitting
Customer purchase orders to the Distributor 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. Retail Shares purchased by Institutions on behalf of their
Customers will normally be held of record by the Institution and beneficial
ownership of Retail Shares will be recorded by the Institution and reflected
in the account statements provided to their Customers. Galaxy's transfer agent
may establish an account of record for each Customer of an Institution
reflecting beneficial ownership of Retail Shares. Depending on the terms of
the arrangement between a particular Institution and Galaxy's transfer agent,
confirmations of Retail Share purchases and redemptions and pertinent account
statements will either be sent by Galaxy's transfer agent directly to a
Customer with a copy to the Institution, or will be furnished directly
14
<PAGE>
to the Customer by the Institution. Other procedures for the purchase of
Retail Shares established by Institutions in connection with the requirements
of their Customer accounts may apply. Customers wishing to purchase Retail
Shares through their Institution should contact such entity directly for
appropriate purchase instructions.
PURCHASE PROCEDURES--DIRECT INVESTORS
Purchases by Mail. Retail Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to the Fund, to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
All purchase orders placed by mail must be accompanied by a purchase
application. Applications may be obtained by calling the Distributor at (800)
628-0414.
Subsequent investments in an existing account in any Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund in which the
additional investment is being made to Galaxy at the address above along with
either (a) the detachable form that regularly accompanies confirmation of a
prior transaction, (b) a subsequent order form that may be obtained from the
Distributor, or (c) a letter stating the amount of the investment, the name of
the Fund and the account number in which the investment is to be made. If a
Direct Investor's check does not clear, the purchase will be canceled.
OTHER PURCHASE INFORMATION
Purchases by Wire. Investors may also purchase Retail Shares by arranging to
transmit Federal funds by wire to Fleet Bank of Massachusetts, N.A. as agent
for First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), Galaxy's
transfer agent. Prior to making any purchase by wire, an investor must
telephone the Distributor at (800) 628-0413 to place an order and for
instructions. Federal funds and registration instructions should be wired
through the Federal Reserve System to:
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
ABA #0110-0013-8
DDA #79673-5702
Ref: The Galaxy Fund
Shareholder Name
Shareholder Account Number
Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to The Galaxy Fund, Box 7, 440 Lincoln
Street, Worcester, Massachusetts 01653-0007. Applications may be obtained by
calling the Distributor at (800) 628-0414. Redemptions will not be processed
until the application in proper form has been received by First Data. Direct
Investors making subsequent investments by wire should follow the instructions
above.
Except as provided in "Investor Programs" below, the minimum initial
investment by a Direct Investor, or initial aggregate investment by an
Institution investing on behalf of its Customers, is $2,500. The minimum
investment for subsequent purchases is $100. The minimum investment
requirement with respect to IRAs, SEPs, MERPs and Keogh Plans (see below under
"Retirement Plans") is $500 ($250 for spousal IRA accounts). There
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<PAGE>
are no minimum investment requirements for investors participating in the
Automatic Investment Program described below. Customers may agree with a
particular Institution to varying minimum initial and minimum subsequent
purchase requirements with respect to their accounts.
Galaxy reserves the right to reject any purchase order, in whole or in part,
or to waive any minimum investment requirement. The issuance of Retail Shares
to Direct Investors and Institutions is recorded on the books of Galaxy and
Retail Share certificates will not be issued.
Effective Time of Purchases. A purchase order for Retail Shares received and
accepted by the Distributor from an Institution or a Direct Investor on a
Business Day prior to the close of regular trading hours on the Exchange
(currently, 4:00 p.m. Eastern Time) will be executed at the net asset value
per share determined on that date, 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 fifth Business Day following the receipt of such order.
Such order will be executed on the day on which the purchase price is received
in proper form. 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 or Direct Investor submitting the order. Payment for orders which
are not received or accepted will be returned. If an Institution accepts a
purchase order from a 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 above procedures.
REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS
Customers of Institutions may redeem all or part of their Retail Shares in
accordance with procedures governing their accounts at Institutions. It is the
responsibility of the Institutions to transmit redemption orders to the
Distributor and credit their Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments to Institutions is
imposed by Galaxy, although Institutions may charge a Customer's account for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institutions.
Payments for redemption orders received by the Distributor on a Business Day
will normally be wired on the third Business Day to the Institutions.
Direct Investors may redeem all or part of their Retail Shares in accordance
with any of the procedures described below.
REDEMPTION PROCEDURES--DIRECT INVESTORS
Redemption by Mail. Retail Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
A written redemption request must (i) state the number of shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the shares are
registered. A redemption request for an amount in excess of $50,000, or for
any amount where (i) the proceeds are to be sent elsewhere than the address of
record (excluding the transfer of assets to a successor custodian), (ii) the
proceeds are to be sent to an address of record which has changed in the
preceding 90 days,
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<PAGE>
or (iii) the check is to be made payable to someone other than the registered
owner(s), must be accompanied by signature guarantees. The guarantor of a
signature must be a bank that is a member of the FDIC, a trust company, a
member firm of a national securities exchange or any other eligible guarantor
institution. 440 Financial will not accept guarantees from notaries public.
440 Financial may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received until First Data
receives all required documents in proper form. The Fund will ordinarily make
payment for Retail Shares redeemed by mail within three Business Days after
proper receipt by the Distributor of the redemption request. Questions with
respect to the proper form for redemption requests should be directed to the
Distributor at (800) 628-0413.
Redemption by Telephone. Direct Investors may redeem Retail Shares by
calling (800) 628-0413 and instructing the Distributor to mail a check for
redemption proceeds of up to $50,000 to the address of record. A redemption
request for an amount in excess of $50,000 or for any amount where (i) the
proceeds are to be sent elsewhere than the address of record (excluding the
transfer of assets to a successor custodian), (ii) the proceeds are to be sent
to an address of record which has changed in 90 days, or (iii) the check is to
be made payable to someone other than the registered owner(s), must be
accompanied by signature guarantees. (See "Redemption by Mail.")
Redemption by Wire. Direct Investors who have so indicated on the
application, or have subsequently arranged in writing to do so, may redeem
Retail Shares by instructing First Data by wire or telephone to wire the
redemption proceeds of $1,000 or more directly to a Direct Investor's account
at any commercial bank in the United States. First Data charges a $5.00 fee
for each wire redemption and the fee is deducted from the redemption proceeds.
The redemption proceeds must be paid to the same bank and account as
designated on the application or in written instructions subsequently received
by 440 Financial. To request redemption of Retail Shares by wire, Direct
Investors should call the Distributor at (800) 628-0413.
In order to arrange for redemption by wire after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Galaxy at the address listed above under
"Redemption by Mail." Such requests must be signed by the investor and
accompanied by a signature guarantee (see "Redemption by Mail" above for
details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees, or
guardians. If, due to temporary adverse conditions, investors are unable to
effect telephone transactions, investors are encouraged to follow the
procedures for transactions by wire or mail which are described above.
Galaxy reserves the right to refuse a wire or telephone redemption if it
believes it is advisable to do so. Procedures for redeeming Retail Shares by
wire or telephone may be modified or terminated at any time by Galaxy or First
Data. In attempting to confirm that telephone instructions are genuine, Galaxy
will use such procedures as are considered reasonable, including recording
those instructions and requesting information as to account registration (such
as the name in which an account is registered, the account number, recent
transactions in the account, and the account holder's social security number,
address and/or bank). If Galaxy fails to follow established procedures for the
authentication of telephone transactions, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
No redemption by a Direct Investor in the Fund will be processed until
Galaxy has received a completed application with respect to the Direct
Investor's account.
If any portion of the Retail Shares to be redeemed represents an investment
made by personal check, Galaxy reserves the right to delay payment of proceeds
until First Data is reasonably satisfied that the check has been
17
<PAGE>
collected, which could take up to 15 days from the purchase date. A Direct
Investor who anticipates the need for more immediate access to his or her
investment should purchase Retail Shares by Federal funds or bank wire or by
certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds.
OTHER REDEMPTION INFORMATION
Galaxy reserves the right to redeem accounts (other than retirement plan
accounts) involuntarily, upon 60 days' written notice, if the account's net
asset value falls below $250 as a result of redemptions. In addition, if an
investor has agreed with a particular Institution to maintain a minimum
balance in his or her account at the Institution with respect to Retail Shares
of the Fund, and the balance in such account falls below that minimum, the
Customer may be obliged by the Institution to redeem all of his or her shares.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by the Distributor.
Galaxy reserves the right to wire redemption proceeds within seven days after
receiving the redemption order if, in its judgement, an earlier payment could
adversely affect the Fund.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange Retail Shares of the Fund having a value of at least
$100 for Retail Shares of any of the other portfolios offered by Galaxy or
otherwise advised by Fleet or its affiliates in which the Direct Investor or
Customer maintains an existing account, provided that such other Retail Shares
may legally be sold in the state of the investor's residence. No additional
sales charge will be incurred when exchanging Retail Shares of the Fund for
Retail Shares of another Galaxy fund that imposes a sales change.
The minimum initial investment to establish an account in another portfolio
offered by Galaxy or otherwise advised by Fleet or its affiliates, except for
the Institutional Treasury Money Market Fund, by exchange is $2,500, unless at
the time of the exchange the Direct Investor or Customer elects, with respect
to the portfolio into which the exchange is being made, to participate in the
Automatic Investment Program described below, in which event there is no
minimum initial investment requirement. The minimum initial investment to
establish an account by exchange in the Institutional Treasury Money Market
Fund is $2 million.
An exchange involves a redemption of all or a portion of the shares of the
Fund and the investment of the redemption proceeds in shares of another
portfolio offered by Galaxy or otherwise advised by Fleet or its affiliates.
The redemption will be made at the per share net asset value next determined
after the exchange request is received. The shares of the portfolio to be
acquired will be purchased at the per share net asset value next determined
after acceptance of the exchange request.
Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding Galaxy's exchange privilege, Direct Investors
should call First Data at (800) 628-0413. Customers of Institutions should
call their Institution for such information. Customers exercising the exchange
privilege with the Money Market, Government, Tax-Exempt, U.S. Treasury,
Connecticut Municipal Money Market, Massachusetts Municipal Money Market,
Institutional Treasury Money Market, Short-Term Bond, Intermediate Government
Income, High Quality Bond, Tax-Exempt Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond, Rhode Island
18
<PAGE>
Municipal Bond, Equity Value, Equity Growth, Equity Income, International
Equity, Small Company Equity, Asset Allocation and Small Cap Value Funds
should request and review these Funds' prospectuses prior to making an
exchange (call (800) 628-0414 for a prospectus). Telephone all exchanges to
(800) 628-0413. See "How to Purchase and Redeem Shares--Redemption
Procedures--Direct Investors--Redemption by Wire" above for a description of
Galaxy's policy regarding telephone instructions.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy reserves the right to terminate the exchange privilege of
any shareholder who requests more than three exchanges a year. Galaxy will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has
requested and the time period over which their exchange requests have been
made, together with the level of expense to Galaxy which will result from
effecting additional exchange requests. The exchange privilege may be modified
or terminated at any time. At least 60 days' notice of any material
modification or termination will be given to shareholders except where notice
is not required under the regulations of the SEC.
Galaxy does not charge any exchange fee. However, Institutions may charge
such fees with respect to either all exchange requests or with respect to any
request which exceeds the permissible number of free exchanges during a
particular period. Customers of Institutions should contact their Institution
for applicable information.
For Federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor.
Before making an exchange request, the Customer should consult a tax or other
financial adviser to determine the tax consequences.
RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the
following tax-deferred prototype retirement plans:
Individual Retirement Accounts ("IRAs") (including "roll-overs" from
existing retirement plans), a retirement-savings vehicle for qualifying
individuals. The minimum initial investment for an IRA account is $500
($250 for a spousal account).
Simplified Employee Pension Plans ("SEPs"), a form of retirement plan for
sole proprietors, partnerships and corporations. The minimum initial
investment for a SEP account is $500.
Multi-Employee Pension Plans ("MERPs"), a retirement vehicle established
by employers for their employees which is qualified under Section 401(k)
and 403(b) of the Internal Revenue Code. The minimum initial investment for
a MERP is $500.
Keogh Plans, a retirement vehicle for self-employed individuals. The
minimum initial investment for a Keogh Plan is $500.
Investors purchasing Retail Shares pursuant to a retirement plan are not
subject to the minimum investment provisions described above under "How to
Purchase and Redeem Shares--Other Purchase Information". Detailed information
concerning eligibility and other matters related to these plans and the form
of application is available from Galaxy's distributor (call (800) 628-0413)
with respect to IRAs, SEPs and Keogh Plans and from Fleet Brokerage Securities
Corporation (call (800) 221-8210) with respect to MERPs.
AUTOMATIC INVESTMENT PROGRAM AND SYSTEMATIC WITHDRAWAL PLAN
The Automatic Investment Program permits a Direct Investor to purchase
Retail Shares of the Fund (minimum of $50 per transaction) each month.
Provided the Direct Investor's financial institution allows
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<PAGE>
automatic withdrawals, Retail Shares are purchased by transferring funds from
a Direct Investor's checking, bank money market, NOW or savings account
designated by the investor. The account designated will be debited in the
specified amount, and Retail Shares will be purchased, on a monthly or
quarterly basis, on any Business Day designated by a Direct Investor. If the
designated day falls on a weekend or holiday, the purchase will be made on the
Business Day closest to the designated day. Only an account maintained at a
domestic financial institution which is an Automated Clearing House member may
be so designated.
The Systematic Withdrawal Plan permits a Direct Investor to automatically
redeem Retail Shares of the Fund on a monthly, quarterly, semi-annual, or
annual basis on any Business Day designated by a Direct Investor, if the
account has a starting value of at least $10,000. If the designated day falls
on a weekend or holiday, the redemption will be made on the Business Day
closest to the designated day. Proceeds of the redemption will be sent to the
shareholder's address of record or financial institution within three Business
Days of the redemption. If redemptions exceed purchases and dividends, the
number of shares in the account will be reduced. Investors may terminate the
Systematic Withdrawal Plan at any time upon written notice to the Transfer
Agent (but not less than five days before a payment date). There is no charge
for this service. Purchasers of additional Retail Shares concurrently with
withdrawals are ordinarily not advantageous because of the sales charge.
COLLEGE INVESTMENT PROGRAM
The College Investment Program (the "College Program") permits an investor
to open an account with Galaxy and purchase Retail Shares of the Fund with a
minimum amount of $100 for initial or subsequent investments, except that if
the investor purchases Retail Shares through the Automatic Investment Program,
the minimum per transaction is $50. The College Program is designed to assist
investors who want to finance a college savings plan. See "Investor Programs--
Automatic Investment Program and Systematic Withdrawal Plan" for information
on the Automatic Investment Program. Retail Shares purchased in connection
with the College Program will be subject to the sales load described in this
Prospectus, unless the purchase qualifies for an exception to the load. Galaxy
reserves the right to redeem accounts participating in the College Program
involuntarily, upon 60 days' written notice, if the account's net asset value
falls below the applicable minimum initial investment as a result of
redemptions. See "How to Purchase and Redeem Shares--Other Redemption
Information" above for further information.
Investors in the College Program will receive consolidated monthly
statements of their accounts. Detailed information concerning College Program
accounts and applications may be obtained from Galaxy's distributor (call
(800)628-0413).
DIRECT DEPOSIT PROGRAM
If a shareholder receiving social security benefits are eligible for the
Direct Deposit Program. This Program enables a Direct Investor to purchase
Retail Shares of a Fund by having social security payments automatically
deposited into his or her Fund account. There is no minimum deposit
requirement. For instructions on how to enroll in the Direct Deposit Program,
Direct Investors should call the Distributor at 1-800-628-0413. Death or legal
incapacity will terminate a Direct Investor's participation in the Program. A
Direct Investor may elect at any time to terminate a Direct Investor's
participation upon 30 days' notice to the Direct Investor.
INFORMATION SERVICES
GALAXY INFORMATION CENTER--24 HOUR INFORMATION SERVICE. The Galaxy Information
Center provides Fund performance and investment information 24 hours a day, 7
days a week. To access the Galaxy Information Center, just call 1-800-628-
0414.
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<PAGE>
VOICE RESPONSE SYSTEM. The Voice Response System provides Direct Investors
automated access to Fund and account information as well as the ability to
make telephone exchanges and redemptions. These transactions are subject to
the terms and conditions described under Investor Programs. To access the
Voice Response System, just call 1-800-FOR-GALAXY (367-4599) from any touch-
tone telephone and follow the recorded instructions.
GALAXY SHAREHOLDER SERVICES. For account information and recent exchange
transactions, Direct Investors can call Galaxy Shareholder Services Monday
through Friday, between the hours of 9:00 a.m. to 5:00 p.m. (Eastern Time) at
1-800-629-0413.
Galaxy also offers a TDD service for the hearing impaired. Just call 1-800-
696-6515, 24 hours a day, 7 days a week.
Direct Investors residing outside the United States can contact Galaxy by
calling 1-508-855-5237.
Investment returns and principal values will vary with market conditions, so
that an investor's Retail Shares, when redeemed, may be worth more or less
than their original cost. Past performance is no guarantee of future results.
Unless otherwise indicated, total return figures include changes in share
price, and reinvestment of dividends and capital gains distributions, if any.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Fund is declared and paid
quarterly. Net realized capital gains are distributed at least annually.
Dividends and distributions will be paid in cash. Customers and Direct
Investors may elect to have their dividends reinvested in additional Retail
Shares of the Fund at the net asset value of such Retail Shares on the ex-
dividend date. Such election, or any revocation thereof, must be communicated
in writing to Galaxy's transfer agent (see "Custodian and Transfer Agent"
below) and will become effective with respect to dividends paid after its
receipt.
TAXES
FEDERAL
It is intended that the Fund will 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.
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 Trust shares.
(Federal income taxes for distributions to an IRA or a qualified retirement
plan are deferred under the Code.) Such ordinary income distributions will
qualify for the dividends received deduction for corporations to the extent of
the total qualifying dividends received by the distributing Fund from domestic
corporations for the taxable year.
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
21
<PAGE>
whether such gains are received in cash or reinvested in additional Retail
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 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 the 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
from those of the federal income tax law described above.
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 Fund. Fleet, which
commenced operations in 1984, also provides investment management and advisory
services to 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, 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, Asset Allocation
and Small Cap Value Funds. Fleet is an indirect wholly-owned subsidiary of
Fleet Financial Group, Inc., a registered bank holding company with total
assets of approximately $25 billion at June 30, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and in
accordance with the 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 Fund's portfolio manager, Brendan Henebry, is primarily responsible for
the day-to-day management of the Fund's investment portfolio. Mr. Henebry
served as portfolio manager for the Predecessor Fund since its
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<PAGE>
inception in 1992. He was associated with Shawmut Bank and its predecessor
since 1965 and was a Vice President since 1978. During the past six years he
served as manager of Shawmut Bank's Growth and Income Equity Management Group.
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 they are not
higher than average advisory fees paid by funds with similar investment
objectives and policies.
The Predecessor Fund bore advisory fees during its most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A, its former adviser, at the effective annual rate of .60% of its
average daily net assets after fee waivers. Without fee waivers, the
Predecessor Fund would have borne advisory fees at the annual rate of 1.00% of
its 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 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 agree 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 Retail
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
Series Group, Inc. d/b/a 440 Financial) ("First Data"), located at 4400
Computer Drive, Westboro, Massachusetts 01581, 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 of the Portfolios 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.
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<PAGE>
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .107% of its 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 two series of the Fund as follows:
Class U--Series 1 shares (Trust Shares) and Class U--Series 2 shares (Retail
Shares), both series representing interests in the Fund.
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 Trust 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 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 and, as a result, the net yield
on the Fund's Retail Shares will generally be lower than the net yield on 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.
Persons selling or servicing different series of shares of the Fund may
receive different compensation with respect to one particular series of shares
as opposed to the other series of shares in the Fund. Retail Shares of the
Fund have certain exchange and other privileges which are not available to
Trust Shares. Trust Shares of the Fund are sold without a sales load.
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 Shares. Such services will be provided to
Customers who are the beneficial owners of Retail Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail Shares. In consideration for
payment of up to .25% (on an
24
<PAGE>
annualized basis) of the average daily net asset value of Retail 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 Shares or the information necessary for sub-
accounting; and providing periodic mailings to Customers. In consideration for
payment of up to a separate .25% (on an annualized basis) of the average daily
net asset value of Retail 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 Shares; responding to Customer inquiries; and providing a service to
invest the assets of Customers in Retail 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 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 Shares of the Fund, and
to limit the payment under these servicing agreements for the Fund to no more
than .30% (on an annualized basis) of the average daily net asset value of the
Retail 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 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 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. ("Chase Manhattan"), 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 Fund's
transfer and dividend disbursing agent. Services performed by these 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.
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<PAGE>
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 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, the S&P 500, an
unmanaged index of groups of common stocks, the Consumer Price Index, or the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange.
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 for Retail Shares of the Fund will be
calculated separately from the performance and yield data for the Fund's Trust
Shares. Because of the shareholder servicing fees currently borne only by
Retail Shares, the performance and yields on the Fund's Retail Shares can
generally be expected, at any given time, to be lower than the performance and
yields on the Fund's Trust Shares.
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 analyzing 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 a 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
reflect the sales load charged by the Fund and assume that dividends and
capital gain distributions made by the Fund during the period are reinvested
in Fund shares.
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<PAGE>
The Fund may also advertise total return data without reflecting the sales
charge imposed on the purchase of Retail Shares in accordance with the rules
of the Securities and Exchange Commission. Quotations that do not reflect the
sales charge will be higher than quotations that do reflect sales charges.
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 the 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 Retail Shares of
the Fund will not be included in calculations of yield and performance.
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.
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 the Fund or a particular investment
portfolio 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 the Fund or portfolio (irrespective of
series designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
Inquiries regarding the Fund 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).
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FN-505 (12/95)
<PAGE>
THE GALAXY FUND
MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<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 THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Highlights............................................................ 2
Expense Summary....................................................... 4
Financial Highlights.................................................. 5
Investment Objective and Policies..................................... 6
Investments, Strategies and Risks..................................... 6
Investment Limitations................................................ 10
Pricing of Shares..................................................... 11
How to Purchase and Redeem Shares..................................... 11
Distributor.......................................................... 11
Purchase of Shares................................................... 12
Purchase Procedures--Customers of Institutions....................... 12
Purchase Procedures--Direct Investors................................ 12
Other Purchase Information........................................... 13
Redemption Procedures--Customers of Institutions..................... 14
Redemption Procedures--Direct Investors.............................. 14
Other Redemption Information......................................... 15
Investor Programs..................................................... 16
Exchange Privilege................................................... 16
Automatic Investment Program and Systematic Withdrawal Plan.......... 17
College Investment Program........................................... 17
Checkwriting......................................................... 17
Direct Deposit Program............................................... 18
Information Services.................................................. 18
Galaxy Information Center--24 Hour Information Service............... 18
Voice Response System................................................ 18
Galaxy Shareholder Services.......................................... 18
Dividends and Distributions........................................... 19
Taxes................................................................. 19
Federal.............................................................. 19
State and Local...................................................... 20
Miscellaneous........................................................ 20
Management of the Fund................................................ 20
Investment Adviser................................................... 20
Authority to Act as Investment Adviser............................... 21
Administrator........................................................ 21
Description of Galaxy and Its Shares.................................. 22
Shareholder Services Plan............................................ 22
Custodian and Transfer Agent.......................................... 23
Expenses.............................................................. 23
Performance and Yield Information..................................... 23
Miscellaneous......................................................... 24
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 regarding initial purchases and current
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 the Massachusetts Municipal Money Market Fund (the
"Fund"), a non-diversified money market portfolio offered to investors by
Galaxy.
The Fund's investment objective is to provide current income exempt from
Federal regular income tax and the income taxes imposed by the Commonwealth of
Massachusetts, consistent with relative stability of principal and liquidity.
The Fund attempts to achieve this objective by investing primarily in short-
term Massachusetts municipal securities, including securities of states,
territories and possessions of the United States which are not issued by or on
behalf of Massachusetts or its political subdivisions and financing
authorities, but which are exempt from income taxes imposed by the
Commonwealth of Massachusetts. The average maturity of the securities in the
Fund's portfolio, computed on a dollar-weighted basis, is 90 days or less.
The Fund is distributed by 440 Financial Distributors, Inc. and advised by
Fleet Investment Advisors Inc. The shares described in this Prospectus
("Shares") are offered to customers ("Customers") of 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 ("Institutions"). Shares may also be
purchased directly by individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors").
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.
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. THERE IS NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
----------------
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.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
HIGHLIGHTS
Q: WHAT IS THE GALAXY FUND?
A: Galaxy is an open-end management investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different
investment portfolios, each having separate investment objectives and
policies. This Prospectus describes Galaxy's MASSACHUSETTS MUNICIPAL MONEY
MARKET FUND. Prospectuses for Galaxy's MONEY MARKET, GOVERNMENT, TAX-EXEMPT,
U.S. TREASURY, CONNECTICUT 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, HIGH
QUALITY BOND, TAX-EXEMPT BOND, NEW YORK MUNICIPAL BOND, CONNECTICUT MUNICIPAL
BOND, MASSACHUSETTS MUNICIPAL BOND AND RHODE ISLAND MUNICIPAL BOND FUNDS may
be obtained by calling (800) 628-0414.
Q: WHO ADVISES THE FUND?
A: The Fund is managed by Fleet Investment Advisors Inc. (the "Investment
Adviser" or "Fleet"), an indirect wholly-owned subsidiary of Fleet Financial
Group, Inc. Fleet Financial Group, Inc. is a financial services company with
total assets as of June 30, 1995 of approximately $25 billion. See "Management
of the Fund--Investment Adviser."
Q: WHAT ADVANTAGES DOES THE FUND OFFER?
A: The Fund offers investors the opportunity to invest in a variety of
professionally managed investment portfolios without having to become involved
with the detailed accounting and safekeeping procedures normally associated
with direct investments in securities. The Fund also offers the economic
advantages of block trading in portfolio securities and the availability of a
family of twenty-four mutual funds should your investment goals change.
Q: HOW DOES ONE BUY AND REDEEM SHARES?
A: The Fund is distributed by 440 Financial Distributors, Inc. Shares of the
Fund are sold to individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors"). Shares may also be purchased on
behalf of Customers of 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
("Institutions"). Share purchase and redemption information for both Direct
Investors and Customers is provided below under "How to Purchase and Redeem
Shares." Except as provided below in "Investor Programs," the minimum initial
investment for Direct Investors and the minimum initial aggregate investment
for Institutions purchasing on behalf of their Customers is $2,500. The
minimum investment for subsequent purchases is $100. There are no minimum
investment requirements for investors participating in the Automatic
Investment Program described below. Institutions may require Customers to
maintain certain minimum investments in Shares. See "How to Purchase and
Redeem Shares--Purchase of Shares" below.
Q: WHEN ARE DIVIDENDS PAID?
A: The net investment income of the Fund is declared daily and paid monthly.
Net realized capital gains of the Fund are distributed at least annually. See
"Dividends and Distributions."
2
<PAGE>
Q: WHAT POTENTIAL RISKS ARE PRESENTED BY THE FUND'S INVESTMENT PRACTICES?
A: The Fund invests primarily in Massachusetts Municipal Securities (as
defined below) rated within the two highest ratings of Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, Inc. ("Fitch"). The achievement of its investment objective
is dependent upon the ability of the issuers of Massachusetts Municipal
Securities to meet their continuing obligations for the payment of principal
and interest. In addition, because the Fund is non-diversified, its investment
return may be dependent upon the performance of a smaller number or particular
type of securities relative to a diversified portfolio. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. In
addition, the Fund may acquire "stand-by commitments" with respect to
Massachusetts Municipal Securities held in its portfolio. The value of the
Fund's portfolio securities will generally vary inversely with changes in
prevailing interest rates. See "Investment Objective and Policies" and
"Investments, Strategies and Risks".
Q: WHAT SHAREHOLDER PRIVILEGES ARE OFFERED BY THE FUND?
A: Investors may exchange Shares of the Fund having a value of at least $100
for Shares of any other portfolio offered by Galaxy in which the investor has
an existing account. Galaxy also offers Individual Retirement Accounts
("IRAs"), which can be established by contacting Galaxy's distributor. Shares
are also available for purchase through Simplified Employee Pension Plans
("SEPs"), Multi-Employee Retirement Plans ("MERPs") and Keogh Plan accounts,
which can be established directly with Fleet Brokerage Securities Corporation
or its affiliates. Galaxy offers an Automatic Investment Program which allows
investors to automatically invest in Shares on a monthly basis. See "Investor
Programs."
3
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund and (ii) the Fund's operating expenses. Examples based on
the summary are also shown.
<TABLE>
<CAPTION>
MASSACHUSETTS
MUNICIPAL
MONEY MARKET
SHAREHOLDER TRANSACTION EXPENSES FUND
- -------------------------------- -------------
<S> <C>
Sales Load........................................................ None
Sales Load on Reinvested Dividends................................ None
Deferred Sales Load............................................... None
Redemption Fees/1/................................................ None
Exchange Fees..................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------
<S> <C>
Advisory Fees..................................................... .40%
12b-1 Fees........................................................ None
Other Expenses (After Expense Reimbursements)..................... .22%
----
Total Fund Operating Expenses (After Expense Reimbursements)...... .62%
====
</TABLE>
- --------
/1/ Direct Investors are charged a $5.00 fee if redemption proceeds are paid by
wire.
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>
Massachusetts Municipal Money Market Fund....... $ 6 $19 $34 $76
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in the Fund will bear
directly or indirectly. They are based on the expenses incurred by the Fund
during the last fiscal year, restated to reflect the current fees that would
have been applicable had they been in effect. Without expense reimbursements
by the Adviser and Administrator, Other Expenses would be 0.17% and Total Fund
Operating Expenses would be 0.67%. 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
included in 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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The Fund commenced operations on October 5, 1993 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds, which was organized
as a Massachusetts business trust. On December 4, 1995, the Fund was
reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold shares of beneficial interest that were
similar to the Shares of the Fund.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Investment Shares for the six
months ended April 30, 1995, the fiscal year ended October 31, 1994 and the
fiscal period ended October 31, 1993. The information for the fiscal year
ended October 31, 1994 and for the prior fiscal period ended October 31, 1993
was audited by Price Waterhouse LLP, independent accountants for the
Predecessor Fund, whose report thereon appears in the Statement of Additional
Information. Such Financial Highlights should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information. Additional information about the performance of the Predecessor
Fund is contained in The Shawmut Funds' Annual Report, which may be obtained
without charge.
PREDECESSOR MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
(FOR AN INVESTMENT SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
------------ ----------- ------------
<S> <C> <C> <C>
Net asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Net Investment Income................. 0.02 0.02 0.001
------- ------- -------
Total from Investment Operations:.... 0.02 0.02 0.001
------- ------- -------
Dividends to shareholders from net
investment income..................... (0.02) -- (0.001)
------- ------- -------
Total Distributions.................. (0.02) (0.02) (0.001)
------- ------- -------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return........................... 1.58% 1.99% 0.12%
Expenses/3/........................... 0.56%/2/ 0.53% 0.11%/2/
Net Investment Income/3/.............. 3.17%/2/ 2.00% 2.75%/2/
Net Assets, End of Period (000
omitted)............................. $34,248 $31,516 $ 1,237
</TABLE>
- --------
/1/ For the period from October 5, 1993 (date of initial public investment) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.14% and 3.75%, respectively,
for the period ended April 30, 1995, 1.21% and 2.68%, respectively, for the
year ended October 31, 1994, and 35.42% and 38.06%, respectively, for the
period ended October 31, 1993.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Fleet Investment Advisors Inc. (the "Investment Adviser" or "Fleet") 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 in the following
paragraph or 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.
The Fund's investment objective is to provide current income exempt from
Federal regular income tax and the income taxes imposed by the Commonwealth of
Massachusetts, consistent with stability of principal and liquidity. The Fund
attempts to achieve this objective by investing in a portfolio of
Massachusetts Municipal Securities (as defined below) with remaining
maturities of thirteen months or less at the time of purchase. As a matter of
fundamental policy that cannot be changed without shareholder approval, the
Fund invests its assets so that at least 80% of its annual interest income is
exempt from Federal regular income tax or at least 80% of the total value of
its assets are invested in obligations the interest income from which is
exempt from Federal regular income tax. The Fund's investment objective and
the investment policy described in the preceding sentence cannot be changed
without approval of shareholders. The average maturity of the securities in
the Fund's portfolio, computed on a dollar-weighted basis, is 90 days or less.
The value of the Fund's portfolio securities will generally vary inversely
with changes in prevailing interest rates.
Under normal circumstances, at least 65% of the value of the Fund's assets
will be invested in debt obligations issued by or on behalf of the
Commonwealth of Massachusetts and its political subdivisions and financing
authorities, and obligations of other states, territories and possessions of
the United States, including the District of Columbia, and any political sub-
division, or financing authority of any of these, the interest income from
which is, in the opinion of qualified legal counsel, exempt from Federal
regular income tax and the income taxes imposed by the Commonwealth of
Massachusetts upon non-corporate taxpayers. Debt obligations issued by or on
behalf of the Commonwealth of Massachusetts, its political subdivisions,
authorities, agencies, instrumentalities and corporations, and certain other
governmental issuers such as Puerto Rico, the interest on which, in the
opinion of bond counsel to the issuer, is exempt from Federal and
Massachusetts personal income tax ("Massachusetts Municipal Securities").
Examples of Massachusetts Municipal Securities include, but are not limited
to:
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
. municipal leases, including certificates of participation in leases;
. tender option bonds; and
. participation, trust, and partnership interests in any of the foregoing
obligations.
INVESTMENTS, STRATEGIES AND RISKS
Variable Rate Demand Notes. Variable rate demand notes are long-term
Municipal Securities that have variable or floating interest rates and provide
the Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to
6
<PAGE>
cause the securities to trade at par. The interest rate may float or be
adjusted at regular intervals (ranging from daily to annually), and is
normally based on an applicable interest index or another published interest
rate or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time of
each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the later
of the date of the next interest rate adjustment or the date on which the Fund
may next tender the security for repurchase.
Ratings. The Massachusetts Municipal Securities in which the Fund invests
must either be rated in one of the two highest short-term rating categories by
one or more nationally recognized statistical rating organizations ("Rating
Agencies") or be of comparable quality to securities having such ratings.
These rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by Standard &
Poor's Rating Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch Investors Services, Inc.
("Fitch") are all considered to be rated in one of the two highest short-term
rating categories. The Fund will follow applicable regulations in determining
whether a security rated by more than one Rating Agency can be treated as
being in one of the two highest short-term rating categories. See "Investment
Limitations".
If a Municipal Security has not been rated by a Rating Agency, the Fund's
Investment Adviser will acquire the security only if it determines that the
security is of comparable quality to securities that have received the
requisite ratings. In this regard, the adviser will generally treat
Massachusetts Municipal Securities as eligible portfolio securities if the
issuer has received long-term bond ratings within the two highest rating
categories by a Rating Agency with respect to other bond issues. The
Investment Adviser also considers other relevant information in its evaluation
of unrated short-term securities.
Credit Enhancement. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. The Fund will not treat credit enhanced securities as having been
issued by the credit enhancer for diversification purposes, unless the Fund
has invested more than 10% of its assets in securities issued, guaranteed, or
otherwise credit enhanced by the credit enhancer, in which case the securities
will be treated as having been issued both by the issuer and the credit
enhancer. The bankruptcy, receivership, or default of the credit enhancer may
adversely affect the quality and marketability of the underlying security. The
Fund may have more than 25% of its total assets invested in securities the
credit for which has been enhanced by banks or insurance companies.
Demand Features. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand feature may be
issued by the issuer of the underlying security, a dealer in the securities,
or by another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide liquidity and
not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the
demand feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely affect the
liquidity of the underlying security. Demand features that are exercisable
even after a payment default on the underlying security may be treated as a
form of credit enhancement.
7
<PAGE>
Restricted and Illiquid Securities. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which
are subject to restrictions on resale under Federal securities laws. Pursuant
to criteria established by the Board of Trustees, certain restricted
securities may be considered liquid. To the extent restricted securities are
deemed to be illiquid, the Fund will limit their purchase, together with other
securities not considered to be liquid, to 10% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
Temporary Investments. From time to time on a temporary basis, when the
Investment Adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Massachusetts
municipal tax-exempt obligations or other taxable, temporary investments. All
temporary investments will satisfy the same credit quality standards as
Massachusetts Municipal Securities. See "Ratings" above. Temporary investments
include: investments in other mutual funds; notes issued by or on behalf of
municipal or corporate issuers; marketable obligations issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities; other debt
securities; commercial paper; certificates of deposit of banks; and repurchase
agreements (arrangements in which the organization sells the Fund a temporary
investment and agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to Federal regular income
tax or the income taxes imposed by the Commonwealth of Massachusetts.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund. The Fund will invest in other investment companies primarily for the
purpose of investing its short-term cash which has not as yet been invested in
other portfolio instruments. However, from time to time, on a temporary basis,
the Fund may invest exclusively in one other investment company managed
similarly to the Fund.
8
<PAGE>
Municipal Leases. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Participation Interests. The Fund may purchase interests in Massachusetts
Municipal Securities from financial institutions such as commercial and
investment banks, savings and loan associations, and insurance companies.
These interests may take the form of participations, beneficial interests in a
trust, partnership interests, or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from Federal
regular income tax. The Fund invests in these participation interests in order
to obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Massachusetts Municipal Securities.
Tender Option Bonds. The Fund may purchase tender option bonds and similar
securities. A tender option bond generally has a long maturity and bears
interest at a fixed rate substantially higher than prevailing short-term tax-
exempt rates, and is coupled with an agreement by a third party, such as a
bank, broker-dealer, or other financial institution, pursuant to which such
institution grants the security holders the option, usually upon not more than
seven days notice or at periodic intervals, to tender their securities to the
institution and receive the face value of the security. In providing the
option, the financial institution receives a fee that reduces the fixed rate
of the underlying bond and results in the Fund effectively receiving a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
The Fund's Investment Adviser will monitor, on an ongoing basis, the
creditworthiness of the issuer of the tender option bond, the financial
institution providing the option, and any custodian holding the underlying
long-term bond. The bankruptcy, receivership, or default of any of the parties
to the tender option bond will adversely affect the quality and marketability
of the security.
Non-Diversification. The Fund is a non-diversified investment portfolio. As
such, there is no limit on the percentage of assets which can be invested in
any single issuer. An investment in the Fund, therefore, will entail greater
risk than would exist in a diversified investment portfolio because the higher
percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. Any economic,
political, or regulatory developments affecting the value of the securities in
the Fund's portfolio will have a greater impact on the total value of the
portfolio that would be the case if the portfolio was diversified among more
issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code.
This undertaking requires that at the end of each quarter of the taxable year,
with regard to at least 50% of its total assets, no more than 5% of its total
assets are invested in the securities of a single issuer; beyond that, no more
than 25% of its total assets are invested in the securities of a single
issuer.
Massachusetts Municipal Securities. Massachusetts Municipal Securities are
generally issued to finance public works, such as airports, bridges, highways,
housing, health-related entities, transportation-related projects, educational
programs, water and pollution control, and sewer works. They are also issued
to repay outstanding obligations, to raise funds for general operating
expenses, and to make loans to other public institutions and for other
facilities.
Massachusetts Municipal Securities include industrial development bonds
issued by or on behalf of public authorities to provide financing aid to
acquire sites or construct and equip facilities for privately or publicly
owned corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby increases
local employment.
9
<PAGE>
The two principal classifications of Massachusetts Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority. Industrial development
bonds are typically classified as revenue bonds.
Standby Commitments. Some securities dealers are willing to sell
Massachusetts Municipal Securities to the Fund accompanied by their
commitments to repurchase the Massachusetts Municipal Securities prior to
maturity, at the Fund's option, for the amortized cost of the Massachusetts
Municipal Securities at the time of repurchase. These arrangements are not
used to protect against changes in the market value of Massachusetts Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Massachusetts Municipal
Securities accompanied by these standby commitments could be greater than the
cost of Massachusetts Municipal Securities without such commitments. Standby
commitments are not marketable or otherwise assignable and have value only to
the Fund. The default or bankruptcy of a securities dealer giving such a
commitment would not affect the quality of the Massachusetts Municipal
Securities purchased. However, without a standby commitment, these securities
could be more difficult to sell. The Fund enters into standby commitments only
with those dealers whose credit the Investment Adviser believes to be of high
quality.
Massachusetts Investment Risks. The Fund's ability to achieve its investment
objective depends on the ability of issuers of Massachusetts Municipal
Securities to meet their continuing obligations to pay principal and interest.
Since the Fund invests primarily in Massachusetts Municipal Securities, the
value of the Fund's Shares may be especially affected by factors pertaining to
the economy of Massachusetts and other factors specifically affecting the
ability of issuers to Massachusetts Municipal Securities to meet their
obligations. As a result, the value of the Fund's Shares may fluctuate more
widely than the value of shares of a portfolio investing in securities of
issuers in a number of different states. The ability of Massachusetts and its
political subdivisions to meet their obligations will depend primarily on the
availability of tax and other revenues to those governments and on their
fiscal conditions generally. The amount of tax and other revenues available to
governmental issuers of Massachusetts Municipal Securities may be affected
from time to time by economic, political and demographic conditions within
Massachusetts. In addition, constitutional or statutory restrictions may limit
a government's power to raise revenues or increase taxes. The availability of
federal, state and local aid to an issuer of Massachusetts Municipal
Securities may also affect that issuer's ability to meet its obligations.
Payments of principal and interest on limited obligation bonds will depend on
the economic condition of the facility or specific revenue source from whose
revenues the payments will be made, which in turn could be affected by
economic, political and demographic conditions in Massachusetts or a
particular locality. Any reduction in the actual or perceived ability of an
issuer of Massachusetts Municipal Securities to meet its obligations
(including a reduction in the rating of its outstanding securities) would
likely affect adversely the market value and marketability of its obligations
and could affect adversely the values of other Massachusetts Municipal
Securities as well.
INVESTMENT LIMITATIONS
The following investment limitation is a matter 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."
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1. The Fund will not borrow money directly or pledge securities except,
under certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge up to 10% of the value of its total
assets to secure such borrowings.
The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
2. The Fund will not invest more than 5% of its total assets in
industrial development bonds or other Municipal Securities when the payment
of principal and interest is the responsibility of companies (or
guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor.
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.
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitation, as set forth in this
Prospectus and the Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the 1940 Act. In particular, the Fund will comply with the
various requirements of Rule 2a-7 which regulates money market mutual funds.
The Fund will determine the effective maturity of its respective investments,
as well as its ability to consider a security as having received the requisite
short-term ratings by Rating Agencies, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
PRICING OF SHARES
Net asset value per Share of the Fund is determined as of 11:00 a.m.
(Eastern Time) and 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, 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 by dividing the value of all securities and other
assets attributable to the Fund, less the liabilities attributable to the
Fund, by the number of outstanding shares of the Fund.
The assets in the Fund are valued based upon the amortized cost method.
Pursuant to this method, a security is valued by reference to the Fund's
acquisition cost as adjusted for amortization of premium or accretion of
discount, regardless of the impact of fluctuating interests rates on the
market value of the security. Although Galaxy seeks to maintain the net asset
value per share of the Fund at $1.00, there can be no assurance that the net
asset value per share will not vary.
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 Distributor has established several procedures to enable different types
of investors to purchase Shares of the Fund. Shares may be purchased by 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 ("Institutions") on behalf of
their customers ("Customers"). Shares may also be purchased by individuals or
corporations, who submit a purchase application to Galaxy, purchasing directly
either for their own accounts or for the accounts of others ("Direct
Investors"). Purchases may take place only on days on which the Distributor,
Galaxy's custodian and Galaxy's transfer agent are open for business
("Business Days"). If an Institution accepts a purchase order from a 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
Distributor's procedures. Shares of the Fund will be issued only in exchange
for monetary consideration as described below.
PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS
Purchase orders for Shares are placed by Customers of Institutions through
their Institution. The Institution is responsible for transmitting Customer
purchase orders to the Distributor 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. Shares
purchased by Institutions on behalf of their Customers will normally be held
of record by the Institutions and beneficial ownership of Shares will be
recorded by the Institutions and reflected in the account statements provided
to their Customers. Galaxy's transfer agent may establish an account of record
for each Customer of an Institution reflecting beneficial ownership of Shares.
Depending on the terms of the arrangement between a particular Institution and
Galaxy's transfer agent, confirmations of Share purchases and redemptions and
pertinent account statements will either be sent by Galaxy's transfer agent
directly to a Customer with a copy to the Institution, or will be furnished
directly to the Customer by the Institution. Other procedures for the purchase
of Shares established by Institutions in connection with the requirements of
their Customer accounts may apply. Customers wishing to purchase Shares
through their Institution should contact such entity directly for appropriate
purchase instructions.
PURCHASE PROCEDURES--DIRECT INVESTORS
Purchases by Mail. Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to the Fund, to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
All purchase orders placed by mail must be accompanied by a purchase
application. Applications may be obtained by calling the Distributor at (800)
628-0414.
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund in which the
additional investment is being made to Galaxy at the address above along with
either (a) the detachable form that regularly accompanies confirmation of a
prior transaction, (b) a subsequent order form that may be obtained from the
Distributor, or (c) a letter stating the amount of the investment, the name of
the Fund and the account number in which the investment is to be made. If a
Direct Investor's check does not clear, the purchase will be cancelled.
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Purchases by Wire. Investors may also purchase Shares by arranging to
transmit Federal funds by wire to Fleet Bank of Massachusetts, N.A. as agent
for First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), Galaxy's
transfer agent. Prior to making any purchase by wire, an investor must
telephone (800) 628-0413 to place an order and for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve
System to:
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
ABA #0110-0013-8
DDA #79673-5702
Ref: The Galaxy Fund
Shareholder Name
Shareholder Account Number
Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to The Galaxy Fund, Box 7, 440 Lincoln
Street, Worcester, Massachusetts 01653-0007. Applications may be obtained by
calling the Distributor at (800) 628-0414. Redemptions will not be processed
until the application in proper form has been received by First Data. Direct
Investors making subsequent investments by wire should follow the instructions
above.
OTHER PURCHASE INFORMATION
Investment Minimums. Except as provided in "Investor Programs" below, the
minimum initial investment by a Direct Investor, or initial aggregate
investment by an Institution investing on behalf of its Customers, is $2,500.
The minimum investment for subsequent purchases is $100. There are no minimum
investment requirements for investors participating in the Automatic
Investment Program described below. Customers may agree with a particular
Institution to varying minimum initial and minimum subsequent purchase
requirements with respect to their accounts.
Galaxy reserves the right to reject any purchase order, in whole or in part,
or to waive any minimum investment requirement. The issuance of Shares to
Direct Investors and Institutions is recorded on the books of Galaxy and Share
certificates will not be issued.
Effective Time of Purchases. A purchase order for Shares received and
accepted by the Distributor on a Business Day will be executed at the net
asset value per share next determined after receipt of the order and will
receive the dividend declared on the day of purchase if Galaxy's custodian
receives the purchase price in Federal funds or other immediately available
funds by 11:00 a.m. (Eastern Time) that day. Purchase orders received after
11:00 a.m. (Eastern Time) and prior to 4:00 p.m. (Eastern Time) on a Business
Day for which such funds have been received by 4:00 p.m. will be effective as
of 4:00 p.m, and investors will begin receiving dividends the following day.
Purchase orders made by Direct Investors are not effective until the amount to
be invested has been converted to Federal funds. In those cases in which a
Director Investor pays for Shares by check, Federal funds will generally
become available two business days after a purchase order is received. In
certain circumstances, Galaxy may not require that amounts invested by
Institutions on behalf of their Customers be converted into Federal funds. If
an Institution accepts a purchase order from a 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 above procedures.
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<PAGE>
REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS
Customers of Institutions may redeem all or part of their Shares in
accordance with procedures governing their accounts at Institutions. It is the
responsibility of the Institutions to transmit redemption orders to the
Distributor and credit their Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments to Institutions is
imposed by Galaxy, although Institutions may charge a Customer's account for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institutions.
REDEMPTION PROCEDURES--DIRECT INVESTORS
Direct Investors may redeem all or part of their Shares in accordance with
any of the procedures described below.
Redemption by Mail. Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
A written redemption request must (i) state the number of Shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the Shares are
registered. A redemption request for an amount in excess of $50,000, or for
any amount where (i) the proceeds are to be sent elsewhere than the address of
record (excluding the transfer of assets to a successor custodian), (ii) the
proceeds are to be sent to an address of record which has changed in the
preceding 90 days, or (iii) the check is to be made payable to someone other
than the registered owner(s), must be accompanied by signature guarantees. The
guarantor of a signature must be a bank which is a member of the FDIC, a trust
company, a member firm of a national securities exchange or any other eligible
guarantor institution. First Data will not accept guarantees from notaries
public. First Data may require additional supporting documents for redemptions
made by corporations, executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received until First Data
receives all required documents in proper form. The Fund ordinarily will make
payment for Shares redeemed by mail within three Business Days after proper
receipt by First Data of the redemption request. Questions with respect to the
proper form for redemption requests should be directed to First Data at (800)
628-0413.
Redemption by Telephone. Direct Investors may redeem Shares by calling (800)
628-0413 and instructing the Distributor to mail a check for redemption
proceeds of up to $50,000 to the address of record. A redemption request for
an amount in excess of $50,000, or for any amount where (i) the proceeds are
to be sent elsewhere than the address of record (excluding the transfer of
assets to a successor custodian, (ii) the proceeds are to be sent to an
address of record which has changed in the preceding 90 days, or (iii) the
check is to be made payable to someone other than the registered owner(s),
must be accompanied by signature guarantees. (See "Redemption by Mail.")
Redemption by Wire. Direct Investors who have so indicated on the
application, or have subsequently arranged in writing to do so, may redeem
Shares by instructing First Data by wire or telephone to wire the redemption
proceeds of $1,000 or more directly to a Direct Investor's account at any
commercial bank in the United States. First Data charges a $5.00 fee for each
wire redemption and the fee is deducted from the
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<PAGE>
redemption proceeds. The redemption proceeds must be paid to the same bank and
account as designated on the application or in written instructions
subsequently received by First Data.
Direct Investors may request that Shares be redeemed and redemption proceeds
be wired on the same day if telephone redemption instructions are received by
First Data by 11:00 a.m. (Eastern Time) on the day of redemption. Shares
redeemed and wired on the same day will not receive the dividend declared on
the day of redemption. Redemption requests made after 11:00 a.m. (Eastern
Time) will receive the dividend declared on the day of redemption, and
redemption proceeds will be wired the following Business Day. To request
redemption of Shares by wire, Director Investors should call the Distributor
at (800) 628-0418.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to Galaxy at the address listed above
under "Redemption by Mail." Such requests must be signed by the investor and
accompanied by a signature guarantee (see "Redemption by Mail" above for
details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees, or
guardians. If, due to temporary adverse conditions, Direct Investors are
unable to effect telephone transactions, Direct Investors are encouraged to
follow the procedures for transactions by wire or mail which are described
above.
Galaxy reserves the right to refuse a wire or telephone redemption if it
believes it is advisable to do so. Procedures for redeeming Shares by wire or
telephone may be modified or terminated at any time by Galaxy or First Data.
In attempting to confirm that telephone instructions are genuine, Galaxy will
use such procedures as are considered reasonable, including recording those
instructions and requesting information as to account registration (such as
the name in which an account is registered, the account number, recent
transactions in the account, and the account holder's social security number,
address and/or bank). If Galaxy fails to follow established procedures for the
authentication of telephone instructions, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
No redemption by a Direct Investor in the Fund will be processed until
Galaxy has received a completed application with respect to the Direct
Investor's account.
If any portion of the Shares to be redeemed represents an investment made by
personal check, Galaxy reserves the right to delay payment of proceeds until
First Data is reasonably satisfied that the check has been collected, which
could take up to 15 days from the purchase date. A Direct Investor who
anticipates the need for more immediate access to his or her investment should
purchase Shares by Federal funds or bank wire or by certified or cashier's
check. Banks normally impose a charge in connection with the use of bank
wires, as well as certified checks, cashier's checks and Federal funds.
OTHER REDEMPTION INFORMATION
Galaxy reserves the right to redeem accounts (other than retirement plan
accounts) involuntarily, upon 60 days' written notice, if the account's net
asset value falls below $250 as a result of redemptions. In addition, if an
investor has agreed with a particular Institution to maintain a minimum
balance in his or her account at the Institution with respect to Fund Shares,
and the balance in such account falls below that minimum, the Customer may be
obliged by the Institution to redeem all of his or her Shares.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order. 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.
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<PAGE>
Galaxy may redeem Shares involuntarily or make payment for redemption in
securities if it appears appropriate to do so in light of Galaxy's
responsibilities under the 1940 Act. See the Statement of Additional
Information under "Net Asset Value--Connecticut Municipal Money Market and
Massachusetts Municipal Money Market Funds," for example of when such
redemptions might be appropriate.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange Shares of the Fund having a value of at least $100 for
Shares of any of the other portfolios offered by Galaxy or otherwise advised
by Fleet or its affiliates in which the Direct Investor or Customer maintains
an existing account, provided that such other shares may legally be sold in
the state of the investor's residence. The minimum initial investment to
establish an account in another portfolio offered by Galaxy or otherwise
advised by Fleet or its affiliates, except for the Institutional Treasury
Money Market Fund, by exchange is $2,500, unless with respect to Direct
Investors, at the time of the exchange the Direct Investor elects, with
respect to the portfolio into which the exchange is being made, to participate
in the Automatic Investment Program described below, in which event there is
no minimum initial investment requirement. The minimum initial investment to
establish an account by exchange in the Institutional Treasury Money Market
Fund is $2 million.
An exchange involves a redemption of all or a portion of the Shares of the
Fund and the investment of the redemption proceeds in shares of another
portfolio offered by Galaxy or otherwise advised by Fleet or its affiliates.
When Shares of the Fund are exchanged for Retail Shares of another portfolio
of Galaxy which is sold with a sales charge, the applicable sales charge, if
any, will be deducted. Shares of any investment portfolio of Galaxy acquired
by a previous exchange transaction involving shares on which a sales charge
has been paid, as well as additional shares acquired through reinvestment of
dividends or distributions on such shares, may be redeemed and the proceeds
used to purchase, without a sales charge, Retail Shares of any other
investment portfolio offered by Galaxy.
Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding Galaxy's exchange privilege, Direct Investors
should call First Data at (800) 628-0413. Customers of Institutions should
call their Institution for such information. Customers exercising the exchange
privilege with the Money Market, Government, Tax-Exempt, U.S. Treasury,
Connecticut 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 and High Quality Bond Funds should
request and review these Funds' prospectuses prior to making an exchange (call
(800) 628-0414 for a prospectus). Telephone all exchanges to (800) 628-0413.
See "How to Purchase and Redeem Shares--Redemption Procedures--Direct
Investors--Redemption by Wire" above for a description of Galaxy's policy
regarding telephone instructions.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy reserves the right to terminate the exchange privilege of
any shareholder who requests more than three exchanges a year. Galaxy will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has
requested and the time period over which their exchange requests have been
made, together with the level of expense to Galaxy which will result from
effecting additional exchange requests. The exchange privilege may be modified
or terminated at any time. At least 60 days' notice
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<PAGE>
of any material modification or termination will be given to shareholders
except where notice is not required under the regulations of the Securities
and Exchange Commission.
Galaxy does not charge any exchange fee. However, Institutions may charge
such fees with respect to either all exchange requests or with respect to any
request which exceeds the permissible number of free exchanges during a
particular period. Customers of Institutions should contact their Institution
for applicable information.
For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor.
Before making an exchange request, the Customer should consult a tax or other
financial adviser to determine the tax consequences.
AUTOMATIC INVESTMENT PROGRAM AND SYSTEMATIC WITHDRAWAL PLAN
The Automatic Investment Program permits a Direct Investor to purchase Fund
Shares (minimum of $50 per transaction) each month. Provided the Direct
Investor's financial institution allows automatic withdrawals, Fund shares are
purchased by transferring funds from a Direct Investor's checking, bank money
market, NOW or savings account designated by the Direct Investor. The account
designated will be debited in the specified amount, and Fund shares will be
purchased on a monthly or quarterly basis, on any Business Day designated by a
Direct Investor. If the designated day falls on a weekend or holiday, the
purchase will be made on the Business Day closest to the designated day. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated.
The Systematic Withdrawal Plan permits a Direct Investor to automatically
redeem Fund Shares on a monthly, quarterly, semi-annual, or annual basis on
any Business Day designated by a Direct Investor, if the account has a
starting value of at least $10,000. If the designated day falls on a weekend
or holiday, the redemption will be made on the Business Day closest to the
designated day. Proceeds of the redemption will be sent to the shareholder's
address of record or financial institution within three Business Days of the
redemption. If redemptions exceed purchases and dividends, the number of
shares in the account will be reduced. Investors may terminate the Systematic
Withdrawal Plan at any time upon written notice to the Transfer Agent (but not
less than five days before a payment date). There is no charge for this
service.
COLLEGE INVESTMENT PROGRAM
The College Investment Program (the "College Program") permits an investor
to open an account with Galaxy and purchase Shares of the Fund with a minimum
amount of $100 for initial or subsequent investments, except that if the
investor purchases Shares through the Automatic Investment Program, the
minimum per transaction is $50. The College Program is designed to assist
investors who want to finance a college savings plan. See "Investor Programs--
Automatic Investment Program and Systematic Withdrawal Plan" for information
on the Automatic Investment Program. Galaxy reserves the right to redeem
accounts participating in the College Program involuntarily, upon 60 days'
written notice, if the account's net asset value falls below the applicable
minimum initial investment as a result of redemptions. See "How to Purchase
and Redeem Shares--Other Redemption Information" above for further
information.
Investors in the College Program will receive consolidated monthly
statements of their accounts. Detailed information concerning College Program
accounts and applications may be obtained from Galaxy's distributor (call
(800) 628-0413).
CHECKWRITING
Checkwriting is available for Direct Investors with respect to the Fund. A
charge for use of the checkwriting privilege may be imposed by Galaxy. There
is no limit to the number of checks a Direct Investor may write per
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month in an amount per check of $250 or more. To obtain checks, a Direct
Investor must complete the signature card that accompanies the account
application. To establish this checkwriting service after opening an account
in the Fund, Direct Investors must contact the Distributor by telephone (1-
800-628-0414) or mail to obtain a signature card. A signature guarantee may be
required. A DIRECT INVESTOR WILL RECEIVE THE DAILY DIVIDENDS DECLARED ON THE
SHARES TO BE REDEEMED UP TO THE DAY THAT A CHECK IS PRESENTED TO THE CUSTODIAN
FOR PAYMENT. Upon 30 days' written notice to Direct Investors, the
checkwriting privilege may be modified or terminated. An account in the Fund
may not be closed by writing a check.
DIRECT DEPOSIT PROGRAM
Direct Investors receiving social security benefits are eligible for the
Direct Deposit Program. This Program enables a Director Investor to purchase
Shares of the Fund by having social security payments automatically deposited
into his or her Fund account. There is no minimum deposit requirement. For
instructions on how to enroll in the Direct Deposit Program, Direct Investors
should call the Distributor at 1-800-628-0413. Death or legal incapacity will
terminate a Direct Investor's participation in the Program. A Direct Investor
may elect at any time to terminate his or her participation by notifying in
writing the Social Security Administration. Further, Galaxy may terminate a
Direct Investor's participation upon 30 days' notice to the Direct Investor.
INFORMATION SERVICES
GALAXY INFORMATION CENTER--24 HOUR INFORMATION SERVICE. The Galaxy Information
Center provides Fund performance and investment information 24 hours a day, 7
days a week. To access the Galaxy Information Center just call 1-800-628-0414.
VOICE RESPONSE SYSTEM. The Voice Response System provides Direct Investors
automated access to Fund and account information as well as the ability to
make telephone exchanges and redemptions. These transactions are subject to
the terms and conditions described under Investor Programs. To access the
Voice Response System, just call 1-800-FOR-GLXY (367-4599) from any touch-tone
telephone and follow the recorded instructions.
GALAXY SHAREHOLDER SERVICES. For account information and recent exchange
transactions, Direct Investors can call Galaxy Shareholder Services Monday
through Friday, between the hours of 9:00 a.m. to 5:00 p.m. (Eastern Time) at
1-800-628-0413.
Galaxy also offers a TDD service for the hearing impaired. Just call 1-800-
696-6515, 24 hours a day, 7 days a week.
Direct Investors residing outside the United States can contact Galaxy by
calling 1-508-855-5237.
The Fund's yields reflect any fee waivers in effect, represent past
performance and will vary. If fee waivers are in effect and fees are not
waived, yields would be reduced. Past performance is no guarantee of future
results. Current yield refers to income earned by the Fund's investments over
a 7-day period. It is then annualized and stated as a percentage of the
investment. Effective yield is the same as current yield except that it
assumes the income earned by an investment in the Fund will be reinvested. An
investment in the Fund is neither insured nor guaranteed by the U.S.
Government nor is there any assurance the Fund will be able to maintain a
stable net asset value of $1.00 per share.
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DIVIDENDS AND DISTRIBUTIONS
The net investment income of the Fund is declared daily as a dividend to the
persons who are shareholders of the Fund immediately after the 11:00 a.m.
pricing of shares on the day of declaration. Net income for dividend purposes
consists of all accrued income, whether taxable or tax-exempt, plus discount
earned on the Fund's assets, less amortization of premium on such assets and
accrued expenses attributable to the Fund. The Fund does not expect to realize
net capital gains. However, if any such gains are realized, they will be paid
out to shareholders no less frequently than annually.
Dividends are paid monthly within five Business Day after the end of each
calendar month or within five Business Day after a shareholder's complete
redemption of Shares in the Fund. Institutions, unless they request otherwise,
will automatically receive dividends and distributions in cash. Institutions
may pay dividends to Customers in cash or reinvest such cash distributions in
additional shares. Direct Investors will have the option as provided on the
application of electing to (a) automatically receive dividends and
distributions in additional Shares of the Fund at the net asset value of such
Shares on the payment date or (b) receive dividends and distributions in cash.
Any revocation of such election must be made in writing to First Data and will
become effective with respect to dividends paid after its receipt.
TAXES
FEDERAL
It is intended that the Fund will 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.
The policy of the Fund is to pay dividends with respect to each taxable year
equal to at least the sum of 90% of its net exempt interest income and 90% of
its net investment company taxable income, if any. Dividends derived from
interest on Municipal Securities (known as exempt-interest dividends) may be
treated by the Fund's shareholders as items of interest excludable from their
gross income under Section 103(a) of the Code, unless under the circumstances
applicable to a particular shareholder, exclusion would be disallowed. (See
the Statement of Additional Information under "Additional Information
Concerning Taxes.")
If the Fund should hold certain "private activity bonds" issued after August
7, 1986, shareholders must include, as an item of tax preference, the portion
of dividends paid by the Fund that is attributable to interest on such bonds
in its federal alternative minimum taxable income for purposes of determining
liability (if any) for the 26% to 28% alternative minimum tax for individuals
and the 20% alternative minimum tax and the environmental tax applicable to
corporations. Corporate shareholders must also take all exempt-interest
dividends into account in determining certain adjustments for federal
alternative minimum and environmental tax purposes. Shareholders receiving
Social Security benefits should note that all exempt-interest dividends will
be taken into account in determining the taxability of such benefits. Interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
generally is not deductible for federal income tax purposes.
Dividends from the Fund which are derived from taxable income or from long-
term or short-term capital gains will be subject to federal income tax,
whether such dividends are paid in the form of cash or additional Shares of
the Fund.
19
<PAGE>
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 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Fund may be
taxable to shareholders under state or local law as dividend income, even
though all or a portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Distributions by the Fund to its shareholders are exempt from Massachusetts
personal income taxation to the extent they are derived from (and designated
by the Fund as being derived from) (i) interest on Massachusetts Municipal
Securities, or (ii) capital gains realized by the Fund from the sale of
certain Massachusetts Municipal Securities. Distributions from the Fund's
other net investment income and short-term capital gains will be taxable as
ordinary income. Distributions from the Fund's net long-term capital gains
will be taxable as long-term capital gains regardless of how long the
shareholder has owned Fund shares. The tax treatment of distributions is the
same whether distributions are paid in cash or in additional Shares of the
Fund. Distributions by the Fund to corporate shareholders, including exempt-
interest dividends, may be subject to Massachusetts corporate excise tax.
MISCELLANEOUS
The foregoing summarizes some of the important 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 and Massachusetts personal income tax consequences of
distributions made each year.
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, Institutional Treasury
Money Market, Equity Value, Equity Growth, Equity Income, International
Equity, Small
20
<PAGE>
Company Equity, Asset Allocation, Growth and Income, Small Cap Value, Short-
Term Bond, Intermediate Government Income, 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 subsidiary of Fleet Financial Group, Inc., a registered bank
holding company with total assets of approximately $25 billion at June 30,
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.
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 the annual rate of .40% of the first $750,000,000 of the
average daily net assets of the Fund plus .35% of the average daily net assets
of the Fund in excess of $750,000,000. 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.
The Predecessor Fund bore advisory fees during the most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A., its former adviser, at the effective annual rate of .42% of its
average daily net assets after fee waivers. Without fee waivers, the
Predecessor Fund would have borne advisory fees at the annual rate of .50 of
1% of its 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 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 their net asset value per share or result
in financial losses 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, serves as the Funds'
administrator. First Data is a wholly-owned subsidiary of First Data
Corporation.
21
<PAGE>
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.
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .183% of its average daily net assets after fee waivers.
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 the Fund, Class W shares. 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 these other portfolios, which are offered through separate
prospectuses, contact the Distributor at (800) 628-0414. The Fund is
classified as a non-diversified company under the 1940 Act.
Each share of Galaxy (irrespective of series designation) has a par value of
$.001, 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 has adopted a Shareholder Services Plan pursuant to which the Fund
may pay up to .25% (on an annualized basis) of the average daily net asset
value of the Fund to Institutions (including Fleet Bank and its affiliates) in
consideration for certain support services enumerated below. Such services
will be provided to Customers who are the beneficial owners of shares. These
services supplement the services provided by First Data as administrator and
transfer agent, and are described more fully in the Statement of Additional
Information under "Shareholder Services Plan." Services under the Shareholder
Services Plan may include: aggregating and processing purchase and redemption
requests and placing net purchase and redemption orders with the Distributor;
processing dividend payments from the Fund; providing Customers with
information as to
22
<PAGE>
their positions in shares; providing sub-accounting with respect to shares or
the information necessary for sub-accounting; and providing periodic mailings
to Customers.
As of the date of this Prospectus, Galaxy will enter into servicing
agreements under the Shareholder Services Plan and intends to limit the
payment under these servicing agreements for the Fund to no more than .10% (on
an annualized basis) of the average daily net asset value of the Shares of the
Fund beneficially owned by Customers of Institutions. Galaxy understands that
Institutions may charge fees to their Customers who are owners of 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 Shares.
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.
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, 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 other relevant
indexes or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, such data is reported in national financial publications such as
Donoghue's Money Fund Report (R), a widely recognized independent publication
that monitors the performance of mutual funds. Also, the Fund's yield data may
be reported to national financial publications including, but not limited to,
Money Magazine, Forbes, Barron's, The Wall Street Journal, and The New York
Times, or in publications of a local or regional nature. The Fund's
performance may also be compared to the
23
<PAGE>
average yields reported by the Bank Rate Monitor for money market deposit
accounts offered by the 50 leading banks and thrift institutions in the top
five standard metropolitan statistical areas.
The yields of the Fund will refer to the income generated over a seven-day
period identified in the advertisement. This income is annualized, i.e., the
income during a particular week is assumed to be generated each week over a
52-week period, and is shown as a percentage of the investment. The Fund may
also advertise its "effective yield" which is calculated similarly but, when
annualized, the income from an investment in the Fund is assumed to be
reinvested. Consequently, the "effective yield" will be slightly higher
because of the compounding effect of the assumed reinvestment. Also, the Fund
may from time to time advertise a "tax-equivalent yield" to demonstrate the
level of taxable yield necessary to produce an after-tax yield equivalent to
that achieved by the Fund. The "tax-equivalent yield" will be computed by
dividing the tax-exempt portion of the Fund's yield by a denominator
consisting of one minus a stated combined Federal and state income tax rate
and adding the product to that portion, if any, of the Fund's yield which is
not tax-exempt.
The Fund's yields will fluctuate and any quotation of yield should not be
considered as representative of future performance of the Fund. 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 is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses, and market conditions. Any
fees charged by Institutions with respect to accounts of Customers that have
invested in Shares of the Fund will not be included in calculations of yield.
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.
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 Galaxy or the Fund or a particular investment portfolio
means, with respect to the approval of an investment advisory agreement or a
change in an investment objective or a fundamental investment policy, the
affirmative vote of the holders of the lesser of (a) more than 50% of the
outstanding shares of Galaxy or the Fund or portfolio (irrespective of series
designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
Inquiries regarding the Fund 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).
24
<PAGE>
FN-504 (12/95) 15002
<PAGE>
TRUST
THE GALAXY FUND
SMALL CAP VALUE FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<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
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Summary....................................................... 2
Financial Highlights.................................................. 3
Investment Objective and Policies..................................... 4
Investments, Strategies and Risks..................................... 4
Investment Limitations................................................ 8
Pricing of Shares..................................................... 9
How to Purchase and Redeem Shares..................................... 9
Distributor.......................................................... 9
Purchase of Shares................................................... 9
Redemption of Shares................................................. 10
Dividends and Distributions........................................... 11
Taxes................................................................. 11
Federal.............................................................. 11
State and Local...................................................... 12
Management of the Fund................................................ 12
Investment Adviser................................................... 12
Authority to Act as Investment Adviser............................... 13
Administrator........................................................ 13
Description of Galaxy and Its Shares.................................. 14
Shareholder Services Plan............................................ 14
Affiliate Agreement for Sub-Account Services......................... 15
Custodian and Transfer Agent.......................................... 15
Expenses.............................................................. 15
Performance and Yield Information..................................... 16
Miscellaneous......................................................... 17
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 concerning initial purchases and current
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 Small Cap Value Fund (the "Fund") offered by
Galaxy.
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve this objective by investing, under
normal circumstances, at least 65% of its total assets in equity securities of
companies that have a market value capitalization of up to $1 billion.
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
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 loans associations
and broker/dealers on behalf of their customers. Trust Shares and Retail
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.
The Fund is distributed by 440 Financial Distributors, Inc., and advised by
Fleet Investment Advisors Inc.
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.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to Trust Shares and (ii) the operating
expenses for Trust Shares of the Fund. Examples based on the summary are also
shown.
<TABLE>
<CAPTION>
SMALL
CAP VALUE
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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------
<S> <C>
Advisory Fees.................................................... .75%
12b-1 Fees....................................................... None
Other Expenses................................................... .25%
-----
Total Fund Operating Expenses.................................... 1.00%
=====
</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>
Small Cap Value Fund............................ $10 $31 $54 $120
</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 the expenses incurred
by the Fund during the last fiscal year, restated to reflect the current fees
for the Fund's Trust Shares that would have been applicable had they been in
effect. 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 included in 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.
2
<PAGE>
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, Retail Shares,
which are offered under a separate prospectus. 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 Shares
of the Fund bear the expenses incurred under Galaxy's Shareholder Services
Plan at an annual rate of .30% 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 Shares
bear differing transfer agency expenses.
The Small Capitalization Equity Fund commenced operations on December 14,
1992 as a separate investment portfolio (the "Predecessor Fund") of The
Shawmut Funds, which was organized as a Massachusetts business trust. On
December 4, 1995, the Fund was reorganized as a new portfolio of Galaxy. Prior
to the reorganization, the Predecessor Fund offered and sold two series of
shares of beneficial interest that were similar to the Fund's Trust Shares and
Retail Shares, respectively.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Trust Shares (the series that is
similar to the Fund's Trust Shares) for the six months ended April 30, 1995,
the fiscal year ended October 31, 1994 and the fiscal period ended October 31,
1993. The information for the fiscal year ended October 31, 1994 and for the
prior fiscal period ended October 31, 1993 was audited by Price Waterhouse
LLP, independent accountants for the Predecessor Fund, whose report thereon
appears in the Statement of Additional Information. Such Financial Highlights
should be read in conjunction with the financial statements and notes thereto
included in the Statement of Additional Information. Additional information
about the performance of the Predecessor Fund is contained in The Shawmut
Funds' Annual Report, which may be obtained without charge.
PREDECESSOR SMALL CAP VALUE FUND
(FOR A TRUST SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
------------ ----------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 11.07 $ 11.21 $ 10.00
-------- -------- --------
Net Investment Income............... -- 0.02 0.002
Net realized and unrealized
gain/(loss) on investments......... 0.57 0.17 1.210
-------- -------- --------
Total from Investment Operations: . 0.57 0.19 1.212
-------- -------- --------
Dividends to shareholders from net
investment income.................. -- (0.01) (0.002)
Distributions in Excess of Net In-
vestment Income.................... (0.01) -- --
Distributions to shareholders from
net realized gain on investment
transactions....................... (0.57) (0.32) --
-------- -------- --------
Total Distributions................ (0.58) (0.33) (0.002)
-------- -------- --------
Net Asset Value, End of Period....... $ 11.06 $ 11.07 $ 11.21
======== ======== ========
Total Return......................... 5.74% 1.86% 12.12%
Expenses/3/......................... 1.15%/2/ 1.06% 1.01%/2/
Net investment income/3/............ 0.02%/2/ 0.15% 0.02%/2/
Net Assets, End of Period (000 omit-
ted)............................... $105,141 $101,905 $100,382
Portfolio Turnover Rate.............. 13% 29% 29%
</TABLE>
- --------
/1/ For the period from December 14, 1992 (date of initial public investment) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.41% and 0.28%, respectively,
for the period ended April 30, 1995, 1.34% and 0.43%, respectively, for the
year ended October 31, 1994, and 1.29% and 0.30%, respectively, for the
period ended October 31, 1993.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve its investment objective by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of companies that have a market value capitalization of up to $1
billion.
Fleet Investment Advisors Inc. ("the Investment Adviser" or "Fleet") 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.
INVESTMENTS, STRATEGIES AND RISKS
Common Stock. As described above, the Fund invests primarily in equity
securities. As with other mutual funds that invest primarily in equity
securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time and the United States equity market tends to be cyclical, experiencing
both periods when stock prices generally increase and periods when stock
prices generally decrease. However, because the Fund invests primarily in
small capitalization stocks, there are some additional risk factors associated
with investment in the Fund. Small capitalization stocks have historically
been more volatile in price than larger capitalization stocks, such as those
included in the Standard & Poor's 500 Composite Stock Index ("S&P 500"). This
is because, among other things, smaller companies have a lower degree of
liquidity in the equity market and tend to have a greater sensitivity to
changing economic conditions. Further, in addition to exhibiting greater
volatility, these stocks may, to some degree, fluctuate independently of the
stocks of large companies. That is, the stock of small capitalization
companies may decline in price as the price of large company stocks rises or
vice versa. Therefore, investors should expect that the Fund will be more
volatile than, and may fluctuate independently of, broad stock market indices
such as the S&P 500.
Convertible Securities. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund may invest in convertible bonds rated "BB" or higher by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or "Ba" or higher by Moody's Investors Service, Inc. ("Moody's") at
the time of investment. Securities rated "BB" by S&P or Fitch or "Ba" by
Moody's provide questionable protection of principal and interest in that such
securities either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt obligations that are not
rated, or determined to be, investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, the value
of lower-rated bonds tends to reflect short-term corporate, economic, and
market developments, as well as investor perceptions of the issuer's credit
quality. In addition, lower-rated bonds may be more difficult to dispose of or
to value than high-rated, lower-yielding bonds. The Investment Adviser will
attempt to reduce the risks described above through diversification of the
portfolio and by credit analysis of each issuer, as well as by monitoring
broad economic trends and corporate and legislative
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developments. If a convertible bond is rated below "BB" or "Ba" according to
the characteristics set forth here after the Fund has purchased it, the Fund
is not required to eliminate the convertible bond from the portfolio, but will
consider appropriate action. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. The Fund does not intend to
invest in such lower-rated bonds during the current fiscal year. A description
of the rating categories is contained in the Appendix to the Statement of
Additional Information.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to movements
in the underlying equity securities. The holder is entitled to receive the
fixed income of a bond or the dividend preference of a preferred stock until
the holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used in whole or in part, customarily at full face
value, in lieu of cash to purchase the issuer's common stock. When owned as
part of a unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally will
expire before the bond's maturity. Convertible securities are senior to equity
securities, and therefore, have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than non-convertible securities of
similar quality. The Fund will exchange or convert the convertible securities
held in its portfolio into shares of the underlying common stock in instances
in which, in the Investment Adviser's opinion, the investment characteristics
of the underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for the Fund, the Investment
Adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Investment Adviser considers
numerous factors, including the economic and political outlook, the value of
the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability
and practices.
Securities of Foreign Issuers. The Fund may invest in the securities of
foreign issuers which are freely traded on United States securities exchanges
or in the over-the-counter market in the form of depository receipts.
Securities of a foreign issuer may present greater risks in the form of
nationalization, confiscation, domestic marketability, or other national or
international restrictions. As a matter of practice, the Fund will not invest
in the securities of a foreign issuer if any such risk appears to the
Investment Adviser to be substantial.
Options and Futures Contracts. The Fund may buy and sell options and futures
contracts to manage its exposure to changing interest rates, security prices,
and currency exchange rates. Some options and futures strategies, including
selling futures, buying puts, and writing calls, tend to hedge the Fund's
investments against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
strategy. The Fund may invest in options and futures based on any type of
security, index, or currency, including options and futures based on foreign
exchanges and options not traded on exchanges.
Options and futures can be volatile investments, and involve certain risks.
If the Investment Adviser applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures may lower the
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Fund's individual return. The Fund could also experience losses if the prices
of its options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an illiquid
secondary market.
The Fund will not hedge more than 20% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. The Fund will
not buy futures or write puts whose underlying value exceeds 20% of its total
assets, and will not buy calls with a value exceeding 5% of its total assets.
Stock Index Futures, Swap Agreements, Indexed Securities and Options. The
Fund may utilize stock index futures contracts, options, swap agreements,
indexed securities, and options on futures contracts, subject to the
limitation that the value of these futures contracts, swap agreements, indexed
securities, and options will not exceed 20% of the Fund's total assets. The
Fund will not purchase options to the extent that more than 5% of the value of
its total assets would be invested in premiums on open put option positions.
In addition, the Fund does not intend to invest more than 5% of the market
value of its total assets in each of the following: futures contracts, swap
agreements, and indexed securities. When the Fund enters into a swap
agreement, assets of the Fund equal to the value of the swap agreement will be
segregated by the Fund.
There are several risks accompanying the utilization of futures contracts.
Positions in futures contracts may be closed only on an exchange or board of
trade that furnishes a secondary market for such contracts. While the Fund
plans to utilize futures contracts only if there exists an active market for
such contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because by definition, futures
contracts look to projected price levels in the future and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the corresponding stock index. The absence of a perfect price correlation
between the futures contract and its underlying stock index could stem from
investors choosing to close futures contracts by offsetting transactions,
rather than satisfying additional margin requirements. This could result in a
distortion of the relationship between the index and the futures market. In
addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation
by speculators in the futures market could result in price fluctuations.
Restricted and Illiquid Securities. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. The Fund
will limit its investments in illiquid securities, including certain
restricted securities not determined by the Board of Trustees to be liquid,
non-negotiable fixed time deposits with maturities over seven days, over-the-
counter options, and repurchase agreements providing for settlement in more
than seven days after notice, to 15% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at
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current market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits or
losses upon the sale of such commitments.
Securities Lending. The Fund may lend its portfolio securities on a short-
term or long-term basis, or both, to financial institutions such as banks and
broker/dealers. 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 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 will 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.
Temporary Investments. In such proportions, as, in the judgment of the
Investment Adviser, prevailing market conditions warrant, the Fund may, for
temporary defensive purposes, invest in:
. short-term money market instruments rated in one of the top two rating
categories by a nationally recognized statistical rating organization;
. securities issued and/or guaranteed as to payment of principal and
interest by the U.S. Government, its agencies, or instrumentalities; and
. repurchase agreements.
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 upon notice of seven days or less, the repurchase
agreement will be considered an illiquid security and will be subject to the
Fund's 15% limitation on investing in illiquid securities.
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.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund. The Fund will
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invest in other investment companies primarily for the purpose of investing
its short-term cash which has not as yet been invested in other portfolio
instruments. However, from time to time, on a temporary basis, the Fund may
invest exclusively in one other investment company similar to the Fund.
Derivative Securities. The Fund may purchase certain "derivative"
securities. Derivative securities are instruments that derive their value from
the performance of underlying assets, interest rates, or indices, and include,
but are not limited to, put and call options, stock index futures and options,
indexed securities and swap agreements.
Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest rates or indices will decline;
credit risk that the dealer or other counterparty to the transaction will fail
to pay its obligations; volatility and leveraging risk that, if interest rates
change adversely, the value of the derivative security will decline more than
the assets, rates or indices on which it is based; liquidity risk that the
Fund will be unable to sell a derivative security when it wants because of
lack of market depth or market disruption; pricing risk that the value of a
derivative security will not correlate exactly to the value of the underlying
assets, rates or indices on which it is based; and operations risk that loss
will occur as a result of inadequate systems and controls, human error or
otherwise. Some derivative securities are more complex than others, and for
those instruments that have been developed recently, data are lacking
regarding their actual performance over complete market cycles.
The Investment Adviser will evaluate the risks presented by the derivative
securities purchased by the Fund, and will determine, in connection with its
day-to-day management of the Fund, how they will be used in furtherance of the
Fund's investment objective. It is possible, however, that the Investment
Adviser's evaluations will prove to be inaccurate or incomplete and, even when
accurate and complete, it is possible that the Fund will, because of the risks
discussed above, incur loss as a result of its investments in derivative
securities. See "Investment Objectives and Policies--Derivative Securities" in
the Statement of Additional Information for additional information.
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. Borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of its total assets to secure such borrowings; or
2. With respect to 75% of the value of its total assets, invest more than
5% in securities of any one issuer, other than cash, cash items, or
securities issued or guaranteed by the government of the United States or,
its agencies or instrumentalities and repurchase agreements collateralized
by such securities, or acquire more than 10% of the outstanding voting
securities of any one issuer.
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The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
3. The Fund may not invest more than 15% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (except
for commercial paper issued under Section 4(a) of the Securities Act of
1933 and certain other securities which meet the criteria for liquidity as
established by the Board of Trustees).
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, 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 by dividing the value of all securities and other
assets attributable to a 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 assets in the Fund which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities quoted on the NASD National Market System are
also valued at the last sale price. Other securities traded on over-the-
counter markets are valued on the basis of their closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid and asked prices. Investments in debt
securities with remaining maturities of 60 days or less are valued based upon
the amortized cost method. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair
value by the Investment Adviser under the supervision of Galaxy's Board of
Trustees. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
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
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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 the Fund'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
requirements 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 an Institution 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 the 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 on the following Business Day to the Institution.
Payment for redemption orders received
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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 sixty 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 and paid
quarterly. 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 its 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
It is intended that the Fund will 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.
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 Trust Shares.
(Federal income taxes for distributions to an IRA or a qualified retirement
plan are deferred under the Code.) Such ordinary income distributions will
qualify for the dividends received deduction for corporations to the extent of
the total qualifying dividends received by the Fund from domestic corporations
for the taxable year.
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 Trust
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 or 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.
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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
from those of the Federal income tax law described above.
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 Fund. Fleet, which
commenced operations in 1984, also provides investment management and advisory
services to 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, Short-Term Bond, Intermediate Government
Income, 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 $25 billion at June 30, 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, Peter Larson, is primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Larson served as
the portfolio manager of the Predecessor Fund since its inception in 1992. He
joined Shawmut Bank in 1963 as an investment officer and was a Vice President
in charge of Shawmut Bank's Small Cap Equity Management product since
inception in 1982.
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 fees for the Fund are higher than fees paid by most other mutual
funds, although the Board of Trustees of Galaxy believes that they are not
higher than average advisory fees paid by funds with similar investment
objectives and policies.
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Fleet may from time to time, in its discretion, waive all or a portion of
the 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.
The Predecessor Fund bore advisory fees during the most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A., its former adviser, at the effective annual rate of .75% of its
average daily net assets after fee waivers. Without fee waivers, the
Predecessor Fund would have borne advisory fees at the annual rate of 1.00% of
its 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 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 agree 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, 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.
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .107% of its average daily net assets after fee waivers.
13
<PAGE>
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 the Fund: Class X--Series 1 shares (Trust
Shares) and Class X--Series 2 shares (Retail Shares), both series representing
interests in the Fund.
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 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 and, as a result, the net yield
on the Fund's Trust Shares will generally be higher than the net yield on the
Fund's Retail 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.
Persons selling or servicing different series of shares of the Fund may
receive different compensation with respect to one particular series of shares
as opposed to the other series of shares in the Fund. Retail Shares of the
Fund are sold without a sales load 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 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 Shares. Such services will be provided to
Customers who are the beneficial owners of Retail Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail Shares. In consideration for
payment of up to .25% (on an annualized basis) of the average daily net asset
value of Retail 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 Shares or the
information necessary for sub-accounting; and providing periodic mailings to
Customers. In consideration for payment of up to a separate .25% (on an
annualized basis) of the average daily net asset value of Retail Shares
14
<PAGE>
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 Shares; responding to Customer
inquiries; and providing a service to invest the assets of Customers in Retail
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 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 Shares of the Fund, and
to limit the payment under these servicing agreements for the Fund to no more
than .30% (on an annualized basis) of the average daily net asset value of the
Retail 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 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 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. ("Chase Manhattan"), located at 1 Chase
Manhattan Plaza, New York, New York 10081, a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as custodian of the Fund's assets. 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 Fund's transfer and dividend disbursing
agent. Services performed by these 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.
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
15
<PAGE>
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 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, the S&P 500, an
unmanaged index of groups of common stocks, the Consumer Price Index, or the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange.
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 for Trust Shares of the Fund will be calculated
separately from the performance and yield data of the Fund's Retail Shares.
Because of the shareholder servicing fees currently borne only by Retail
Shares, the performance and yields on the Fund's Trust Shares can generally be
expected, at any given time, to be higher than the performance and yields on
the Fund's Retail Shares.
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 dividends 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 the kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses, and market conditions. Any additional fees charged
16
<PAGE>
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.
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.
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 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 the Fund or portfolio (irrespective of
series designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
17
<PAGE>
FN-508 (12/95) 15003
<PAGE>
RETAIL
THE GALAXY FUND
SMALL CAP VALUE FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<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 THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Highlights............................................................ 2
Expense Summary....................................................... 4
Financial Highlights.................................................. 5
Investment Objective and Policies..................................... 6
Investments, Strategies and Risks..................................... 6
Investment Limitations................................................ 10
Pricing of Shares..................................................... 11
How to Purchase and Redeem Shares..................................... 11
Distributor.......................................................... 11
Purchase of Shares................................................... 11
Public Offering Price................................................ 12
Quantity Discounts................................................... 13
Purchase Procedures--Customers of Institutions....................... 14
Purchase Procedures--Direct Investors................................ 15
Other Purchase Information........................................... 15
Redemption Procedures--Customers of Institutions..................... 16
Redemption Procedures--Direct Investors.............................. 16
Other Redemption Information......................................... 18
Investor Programs..................................................... 18
Exchange Privilege................................................... 18
Retirement Plans..................................................... 19
Automatic Investment Program and Systematic Withdrawal Plan.......... 20
College Investment Program........................................... 20
Direct Deposit Program............................................... 20
Information Services.................................................. 21
Galaxy Information Center............................................ 21
Voice Response System................................................ 21
Galaxy Shareholder Services.......................................... 21
Dividends and Distributions........................................... 21
Taxes................................................................. 22
Federal.............................................................. 22
State and Local...................................................... 22
Management of the Fund................................................ 22
Investment Adviser................................................... 23
Authority to Act as Investment Adviser............................... 23
Administrator........................................................ 24
Description of Galaxy and Its Shares.................................. 24
Shareholder Services Plan............................................ 25
Affiliate Agreement for Sub-Accounting Services...................... 25
Custodian and Transfer Agent.......................................... 26
Expenses.............................................................. 26
Performance and Yield Information..................................... 26
Miscellaneous......................................................... 27
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 concerning initial purchases and current
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 shares (the "Retail Shares")
which represent interests in the Small Cap Value Fund (the "Fund") offered by
Galaxy.
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve this objective by investing, under
normal circumstances, at least 65% of its total assets in equity securities of
companies that have a market value capitalization of up to $1 billion.
This Prospectus describes Retail Shares in the Fund. Retail Shares are
offered to customers ("Customers") of 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 ("Institutions"). Shares may also be purchased directly by
individuals or corporations, who submit a purchase application to Galaxy,
purchasing either for their own account or for the accounts of others ("Direct
Investors"). Galaxy is also authorized to issue an additional series of shares
in the Fund ("Trust Shares"), which are offered under a separate prospectus
primarily 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.
Retail Shares and Trust Shares in the 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 Fund" and "Description of Galaxy and Its Shares" herein.
The Fund is distributed by 440 Financial Distributors, Inc., and advised by
Fleet Investment Advisors Inc.
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 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 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 Funds, 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.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
HIGHLIGHTS
Q: WHAT IS THE GALAXY FUND?
A: Galaxy is an open-end management investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different
investment portfolios, each having separate investment objectives and
policies. This Prospectus describes Galaxy's SMALL CAP VALUE FUND.
Prospectuses for Galaxy's MONEY MARKET, GOVERNMENT, TAX-EXEMPT, U.S. TREASURY,
CONNECTICUT MUNICIPAL MONEY MARKET, MASSACHUSETTS MUNICIPAL MONEY MARKET,
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, ASSET ALLOCATION AND GROWTH AND INCOME FUNDS may
be obtained by calling (800) 628-0414.
Q: WHO ADVISES THE FUND?
A: The Fund is managed by Fleet Investment Advisors Inc. (the "Investment
Adviser" or "Fleet"), an indirect wholly-owned subsidiary of Fleet Financial
Group, Inc. Fleet Financial Group, Inc. is a financial services company with
total assets as of June 30, 1995 of approximately $25 billion. See "Management
of the Fund--Investment Adviser."
Q: WHAT ADVANTAGES DOES THE FUND OFFER?
A: The Fund offers investors the opportunity to invest in a variety of
professionally managed, diversified investment portfolios without having to
become involved with the detailed accounting and safekeeping procedures
normally associated with direct investments in securities. The Fund also
offers the economic advantages of block trading in portfolio securities and
the availability of a family of twenty-four mutual funds should your
investment goals change.
Q: HOW TO BUY AND REDEEM SHARES?
A: The Fund is distributed by 440 Financial Distributors, Inc. Retail Shares
of the Fund are sold to individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors"). Retail Shares may also be purchased
on behalf of Customers of 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
("Institutions"). Retail Shares may also be purchased by employees of Fleet
Financial Group, Inc. and its affiliates through payroll deductions. Retail
Shares of the Fund may be purchased at their net asset value plus a maximum
initial sales charge of 3.75%. Lower sales charges and exemptions are
available as described in this Prospectus. Share purchase and redemption
information for both Direct Investors and Customers is provided below under
"How to Purchase and Redeem Shares." Except as provided below in "Investor
Programs", the minimum initial investment for Direct Investors and the minimum
initial aggregate investment for Institutions purchasing on behalf of their
Customers is $2,500. The minimum investment for subsequent purchases is $100.
There are no minimum requirements for investors participating in the Automatic
Investment Program described below. Institutions may require Customers to
maintain certain minimum investments in Retail Shares. See "How to Purchase
and Redeem Shares--Purchase of Shares" below.
2
<PAGE>
Q: WHEN ARE DIVIDENDS PAID?
A: The net investment income of the Fund is declared and paid quarterly. Net
realized capital gains of the Fund are distributed at least annually. See
"Dividends and Distributions."
Q: WHAT POTENTIAL RISKS ARE PRESENTED BY THE FUND'S INVESTMENT PRACTICES?
A: The Fund invests primarily in small capitalization stocks. As a result,
the Fund may be more volatile than, and may fluctuate independently of, broad
stock market indices. See "Investments, Strategies and Risks--Common Stock."
The Fund may invest in lower-rated convertible securities, which are high-
yield, high-risk bonds that are typically subject to greater market
fluctuations and may be more difficult to value or dispose of than higher-
rated, lower-yielding bonds. See "Investments, Strategies and Risks--
Convertible Securities." The Fund may invest in foreign securities that are
freely traded on U.S. securities exchanges or in the over-the-counter markets
in the form of depository receipts. Investments in foreign securities may
present greater risks than those associated with investments in the securities
of U.S. issuers. See "Investments, Strategies and Risks--Securities of Foreign
Issuers." The Fund may also invest in certain "derivative" securities, such as
put and call options, stock index futures and options, indexed securities and
swap agreements. Derivative securities derive their value from the performance
of underlying assets, interest rates or indices and as a result entail
additional market and credit risks. See "Investments, Strategies and Risks--
Derivative Securities."
Q: WHAT SHAREHOLDER PRIVILEGES ARE OFFERED BY THE FUND?
A: Investors may exchange Retail Shares of the Fund having a value of at
least $100 for Retail Shares of any other portfolio offered by Galaxy in which
the investor has an existing account without paying an additional sales
charge. Galaxy offers Individual Retirement Accounts ("IRAs"), Simplified
Employee Pension Plans ("SEPs") and Keogh Plan accounts which can be
established by contacting Galaxy's distributor. Retail Shares are also
available for purchase through Multi-Employee Retirement Plans ("MERPs")
accounts which can be established by Customers directly with Fleet Brokerage
Securities Inc. or its affiliates. Galaxy also offers an Automatic Investment
Program which allows investors to automatically invest in Retail Shares, as
well as certain other shareholder privileges. See "Investor Programs."
3
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund with respect to Retail Shares and (ii) the operating
expenses for Retail Shares of the Fund. SHAREHOLDER TRANSACTION EXPENSES are
charges you pay when buying or selling shares of the Fund. ANNUAL FUND
OPERATING EXPENSES are paid out of the Fund's assets and include fees for
portfolio management, maintenance of shareholder accounts, general Fund
administration, accounting and other services. Examples based on the summary
are also shown.
<TABLE>
<CAPTION>
SMALL CAP
VALUE FUND
SHAREHOLDER TRANSACTION EXPENSES (RETAIL SHARES)
- -------------------------------- ---------------
<S> <C>
Front End Sales Load Imposed on Purchases (as a percentage of
offering price)............................................... 3.75%
Sales Load on Reinvested Dividends............................. None
Deferred Sales Load............................................ None
Redemption Fees/1/............................................. None
Exchange Fees.................................................. None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------
<S> <C>
Advisory Fees.................................................. .75%
12b-1 Fees..................................................... None
Other Expenses................................................. .86%
-----
Total Fund Operating Expenses.................................. 1.61%
=====
</TABLE>
- --------
/1/ Direct Investors are charged a $5.00 fee if redemption proceeds are paid by
wire.
EXAMPLE: YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING
(1) DEDUCTION AT THE TIME OF PURCHASE OF THE MAXIMUM APPLICABLE FRONT-END
SALES LOAD, (2) A 5% ANNUAL RETURN, AND (3) 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>
Small Cap Value Fund............................ $54 $86 $121 $219
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in Retail 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 current fees for
the Fund's Retail Shares that would have been applicable had they been in
effect. Reduced sales charges may be available. See "How to Purchase and
Redeem Shares--Public Offering Price" and "How to Purchase and Redeem Shares--
Quantity Discounts." 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 included in
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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
This Prospectus describes the Retail Shares in the Fund. Galaxy is also
authorized to issue an additional series of Shares in the Fund, Trust Shares,
which are offered under a separate prospectus. As described below under
"Description of Galaxy and Its Shares", Retail Shares and Trust Shares
represent equal pro rata interests in the Fund, except that (i) Retail Shares
of the Fund bear the expenses incurred under Galaxy's Shareholder Services
Plan at an annual rate of .30% 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) Retail Shares and Trust Shares
bear differing transfer agency expenses.
The Small Capitalization Equity Fund commenced operations on February 12,
1993 as a separate investment portfolio (the "Predecessor Fund") of The
Shawmut Funds, which was organized as a Massachusetts business trust. On
December 4, 1995, the Fund was reorganized as a new portfolio of Galaxy. Prior
to the reorganization, the Predecessor Fund offered and sold two series of
shares of beneficial interest that were similar to the Fund's Retail Shares
and Trust Shares, respectively.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Investment Shares (the series
that is similar to the Fund's Retail Shares) for the six months ended April
30, 1995, the fiscal year ended October 31, 1994 and the fiscal period ended
October 31, 1993. The information for the fiscal year ended October 31, 1994
and for the prior fiscal period ended October 31, 1993 was audited by Price
Waterhouse LLP, independent accountants for the Predecessor Fund, whose report
thereon appears in the Statement of Additional Information. Such Financial
Highlights should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information. Additional
information about the performance of the Predecessor Fund is contained in The
Shawmut Funds' Annual Report, which may be obtained without charge.
PREDECESSOR SMALL CAP VALUE FUND
(FOR AN INVESTMENT SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
------------ ----------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 11.06 $ 11.21 $ 10.52
------- ------- -------
Net Investment Income.............. (0.01) (0.01) (0.008)
Net realized and unrealized
gain/(loss) on investments........ 0.56 0.18 0.698
------- ------- -------
Total from Investment Operations. 0.55 0.17 0.690
------- ------- -------
Dividends to shareholders from net
investment income................... -- 0.00 0.000
Distributions to shareholders from
net realized gain on investment
transactions........................ (0.57) (0.32) --
------- ------- -------
Total Distributions.............. (0.57) (0.32) 0.000
------- ------- -------
Net Asset Value, End of Period....... $ 11.04 $ 11.06 $ 11.21
======= ======= =======
Total Return......................... 5.58% 1.64% 6.56%
Expenses/3/........................ 1.40%/2/ 1.31% 1.33%/2/
Net investment income/3/........... (0.23%)/2/ (0.10%) (0.19%)/2/
Net Assets, End of Period (000
omitted).......................... $21,434 $19,764 $15,014
Portfolio Turnover Rate.............. 13% 29% 29%
</TABLE>
- --------
/1/ For the period from February 12, 1993 (date of initial public offering) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.91% and 0.28%, respectively,
for the period ended April 30, 1995, 1.84% and 0.43%, respectively, for the
year ended October 31, 1994, and 1.87% and 0.35%, respectively, for the
period ended October 31, 1993.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to provide long-term capital
appreciation. The Fund seeks to achieve its investment objective by investing,
under normal circumstances, at least 65% of its assets in equity securities of
companies that have a market value capitalization of up to $1 billion.
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.
INVESTMENTS, STRATEGIES AND RISKS
Common Stock. As described above, the Fund invests primarily in equity
securities. As with other mutual funds that invest primarily in equity
securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time and the United States equity market tends to be cyclical, experiencing
both periods when stock prices generally increase and periods when stock
prices generally decrease. However, because the Fund invests primarily in
small capitalization stocks, there are some additional risk factors associated
with investment in the Fund. Small capitalization stocks have historically
been more volatile in price than larger capitalization stocks, such as those
included in the Standard & Poor's 500 Composite Stock Index ("S&P 500"). This
is because, among other things, smaller companies have a lower degree of
liquidity in the equity market and tend to have a greater sensitivity to
changing economic conditions. Further, in addition to exhibiting greater
volatility, these stocks may, to some degree, fluctuate independently of the
stocks of large companies. That is, the stock of small capitalization
companies may decline in price as the price of large company stocks rises or
vice versa. Therefore, investors should expect that the Fund will be more
volatile than, and may fluctuate independently of, broad stock market indices
such as the S&P 500.
Convertible Securities. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund may invest in convertible bonds rated "BB" or higher by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or "Ba" or higher by Moody's Investors Service, Inc. ("Moody's") at
the time of investment. Securities rated "BB" by S&P or Fitch or "Ba" by
Moody's provide questionable protection of principal and interest in that such
securities either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Debt obligations that are not
rated, or determined to be, investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, the value
of lower-rated bonds tends to reflect short-term corporate, economic, and
market developments, as well as investor perceptions of the issuer's credit
quality. In addition, lower-rated bonds may be more difficult to dispose of or
to value than high-rated, lower-yielding bonds. The Investment Adviser will
attempt to reduce the risks described above through diversification of the
portfolio and by credit analysis of each issuer, as well as by monitoring
broad economic trends and corporate and legislative developments. If a
convertible bond is rated below "BB" or "Ba" according to the characteristics
set forth here
6
<PAGE>
after the Fund has purchased it, the Fund is not required to eliminate the
convertible bond from the portfolio, but will consider appropriate action. The
investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment
objectives. The Fund does not intend to invest in such lower-rated bonds
during the current fiscal year. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information.
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to movements
in the underlying equity securities. The holder is entitled to receive the
fixed income of a bond or the dividend preference of a preferred stock until
the holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used in whole or in part, customarily at full face
value, in lieu of cash to purchase the issuer's common stock. When owned as
part of a unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally will
expire before the bond's maturity. Convertible securities are senior to equity
securities, and therefore, have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than non-convertible securities of
similar quality. The Fund will exchange or convert the convertible securities
held in its portfolio into shares of the underlying common stock in instances
in which, in the Investment Adviser's opinion, the investment characteristics
of the underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for the Fund, the Investment
Adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the Investment Adviser considers
numerous factors, including the economic and political outlook, the value of
the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability
and practices.
Securities of Foreign Issuers. The Fund may invest in the securities of
foreign issuers which are freely traded on United States securities exchanges
or in the over-the-counter market in the form of depository receipts.
Securities of a foreign issuer may present greater risks in the form of
nationalization, confiscation, domestic marketability, or other national or
international restrictions. As a matter of practice, the Fund will not invest
in the securities of a foreign issuer if any such risk appears to the
Investment Adviser to be substantial.
Options and Futures Contracts. The Fund may buy and sell options and futures
contracts to manage its exposure to changing interest rates, security prices,
and currency exchange rates. Some options and futures strategies, including
selling futures, buying puts, and writing calls, tend to hedge the Fund's
investments against price fluctuations. Other strategies, including buying
futures, writing puts, and buying calls, tend to increase market exposure.
Options and futures may be combined with each other or with forward contracts
in order to adjust the risk and return characteristics of the overall
strategy. The Fund may invest in options and futures based on any type of
security, index, or currency, including options and futures based on foreign
exchanges and options not traded on exchanges.
Options and futures can be volatile investments, and involve certain risks.
If the Investment Adviser applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures may lower the Fund's
individual return. The Fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an illiquid
secondary market.
7
<PAGE>
The Fund will not hedge more than 20% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. The Fund will
not buy futures or write puts whose underlying value exceeds 20% of its total
assets, and will not buy calls with a value exceeding 5% of its total assets.
Stock Index Futures, Swap Agreements, Indexed Securities and Options. The
Fund may utilize stock index futures contracts, options, swap agreements,
indexed securities, and options on futures contracts, subject to the
limitation that the value of these futures contracts, swap agreements, indexed
securities, and options will not exceed 20% of the Fund's total assets. The
Fund will not purchase options to the extent that more than 5% of the value of
its total assets would be invested in premiums on open put option positions.
In addition, the Fund does not intend to invest more than 5% of the market
value of its total assets in each of the following: futures contracts, swap
agreements, and indexed securities. When the Fund enters into a swap
agreement, assets of the Fund equal to the value of the swap agreement will be
segregated by the Fund.
There are several risks accompanying the utilization of futures contracts.
Positions in futures contracts may be closed only on an exchange or board of
trade that furnishes a secondary market for such contracts. While the Fund
plans to utilize futures contracts only if there exists an active market for
such contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because by definition, futures
contracts look to projected price levels in the future and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the corresponding stock index. The absence of a perfect price correlation
between the futures contract and its underlying stock index could stem from
investors choosing to close futures contracts by offsetting transactions,
rather than satisfying additional margin requirements. This could result in a
distortion of the relationship between the index and the futures market. In
addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation
by speculators in the futures market could result in price fluctuations.
Restricted and Illiquid Securities. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. The Fund
will limit its investments in illiquid securities, including certain
restricted securities not determined by the Board of Trustees to be liquid,
non-negotiable fixed time deposits with maturities over seven days, over-the-
counter options, and repurchase agreements providing for settlement in more
than seven days after notice, to 15% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
8
<PAGE>
Securities Lending. The Fund may lend its portfolio securities on a short-
term or long-term basis, or both, to financial institutions such as banks and
broker/dealers. 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 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 will 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.
Temporary Investments. In such proportions, as, in the judgment of the
Investment Adviser, prevailing market conditions warrant, the Fund may, for
temporary defensive purposes, invest in:
. short-term money market instruments rated in one of the top two rating
categories by a nationally recognized statistical rating organization;
. securities issued and/or guaranteed as to payment of principal and
interest by the U.S. Government, its agencies, or instrumentalities; and
. repurchase agreements.
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 upon notice of seven days or less, the repurchase
agreement will be considered an illiquid security and will be subject to the
Fund's 15% limitation on investing in illiquid securities.
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.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund. The Fund will invest in other investment companies primarily for the
purpose of investing its short-term cash which has not as yet been invested in
other portfolio instruments. However, from time to time, on a temporary basis,
the Fund may invest exclusively in one other investment company similar to the
Fund.
9
<PAGE>
Derivative Securities. The Fund may purchase certain "derivative"
securities. Derivative securities are instruments that derive their value from
the performance of underlying assets, interest rates, or indices, and include,
but are not limited to, put and call options, stock index futures and options,
indexed securities and swap agreements.
Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest rates or indices will decline;
credit risk that the dealer or other counterparty to the transaction will fail
to pay its obligations; volatility and leveraging risk that, if interest rates
change adversely, the value of the derivative security will decline more than
the assets, rates or indices on which it is based; liquidity risk that the
Fund will be unable to sell a derivative security when it wants because of
lack of market depth or market disruption; pricing risk that the value of a
derivative security will not correlate exactly to the value of the underlying
assets, rates or indices on which it is based; and operations risk that loss
will occur as a result of inadequate systems and controls, human error or
otherwise. Some derivative securities are more complex than others, and for
those instruments that have been developed recently, data are lacking
regarding their actual performance over complete market cycles.
The Investment Adviser will evaluate the risks presented by the derivative
securities purchased by the Fund, and will determine, in connection with its
day-to-day management of the Fund, how they will be used in furtherance of the
Fund's investment objective. It is possible, however, that the Investment
Adviser's evaluations will prove to be inaccurate or incomplete and, even when
accurate and complete, it is possible that the Fund will, because of the risks
discussed above, incur loss as a result of its investments in derivative
securities. See "Investment Objectives and Policies--Derivative Securities" in
the Statement of Additional Information for additional information.
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. Borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of its total assets to secure such borrowings; or
2. With respect to 75% of the value of its total assets, invest more than
5% in securities of any one issuer, other than cash, cash items, or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized
by such securities, or acquire more than 10% of the outstanding voting
securities of any one issuer.
The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
10
<PAGE>
3. Invest more than 15% of its net assets in securities subject to
restrictions on resale under the Securities Act of 1933 (except for
commercial paper issued under Section 4(a) of the Securities Act of 1933
and certain other securities which meet the criteria for liquidity as
established by the Board of Trustees).
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 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 of the Fund for purposes of pricing
sales and redemptions is calculated by dividing the value of all securities
and other assets attributable to the shares of that series 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 assets in the Fund which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities quoted on the NASD National Market System are
also valued at the last sale price. Other securities traded on over-the-
counter markets are valued on the basis of their closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid and asked prices. Investments in debt
securities with remaining maturities of 60 days or less are valued based upon
the amortized cost method. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair
value by the Investment Adviser under the supervision of Galaxy's Board of
Trustees. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
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 Distributor has established several procedures to enable different types
of investors to purchase Retail Shares of the Fund. The Retail Shares
described in this Prospectus may be purchased by individuals or corporations,
who submit a purchase application to Galaxy, purchasing directly either for
their own accounts or for the accounts of others ("Direct Investors"). Retail
Shares may also be purchased by 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 ("Institutions") on behalf of their customers
("Customers"). Purchases by Direct Investors may take place only on days on
which the Distributor
11
<PAGE>
and Galaxy's custodian and Galaxy's transfer agent are open for business
("Business Days"). If an Institution accepts a purchase order from a 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
Distributor's procedures. Retail Shares of the Fund will be issued only in
exchange for monetary consideration as described below.
PUBLIC OFFERING PRICE
The public offering price for Retail Shares of the Fund is the sum of the
net asset value of the Retail Shares purchased plus any applicable front-end
sales charge. The sales charge is assessed as follows:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
- --------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 3.75 3.90 3.75
$50,000 to $99,999...... 3.50 3.63 3.50
$100,000 to $249,999.... 3.00 3.09 3.00
$250,000 to $499,999.... 2.50 2.56 2.50
$500,000 to $999,999.... 2.00 2.04 2.00
$1,000,000 to
$2,999,999............. 1.00 1.01 1.00
$3,000,000 and over..... 0.50 0.50 0.50
</TABLE>
Further reductions in the sales charges shown above are also possible. See
"Quantity Discounts" below.
The Distributor will pay the appropriate reallowance to dealers to broker-
dealer organizations which have entered into agreements with the Distributor.
The reallowance to dealers may be changed from time to time.
At various times the Distributor may implement programs under which a
dealer's sales force may be eligible to win nominal awards for certain sales
efforts. Also, the Distributor in its discretion may from time to time,
pursuant to objective criteria established by the Distributor, pay fees to
qualifying dealers for certain services or activities which are primarily
intended to result in sales of Retail Shares of the Fund. If any such program
is made available to any dealer, it will be made available to all dealers on
the same terms and conditions. Payments made under such programs will be made
by the Distributor out of its own assets and not out of the assets of the
Fund. These programs will not change the price of Retail Shares or the amount
that the Fund will receive from such sales.
In certain situations or for certain individuals, the front-end sales charge
for Retail Shares of the Fund may be waived either because of the nature of
the investor or the reduced sales effort required to attract such investments.
In order to receive the sales charge waiver, an investor must explain the
status of his or her investment at the time of purchase. No sales charge is
assessed on the following types of transactions and/or investors:
. reinvestment of dividends and distributions;
. IRA, SEP and Keogh Plan accounts;
. purchases by persons who were beneficial owners of shares of the Fund or
any of the other portfolios offered by Galaxy or any other funds advised
by Fleet or its affiliates before December 1, 1995;
12
<PAGE>
. purchases by directors, officers and employees of the Fund's Distributor
and of broker-dealers having agreements with the Fund's Distributor
pertaining to the sale of Retail Shares to the extent permitted by such
organizations;
. purchases by members of Galaxy's Board of Trustees;
. investors who purchase pursuant to a "wrap fee" program offered by any
broker-dealer or other financial institution or financial planning
organization;
. purchases by officers, directors, employees and retirees of Fleet
Financial Group, Inc. and any of its affiliates; and
. any purchase of Retail Shares pursuant to the Reinstatement Privilege
described below.
QUANTITY DISCOUNTS
Direct Investors or Customers may be entitled to reduced sales charges
through Rights of Accumulation, a Letter of Intent or a combination of
investments, as described below, even if the Direct Investor or Customer does
not wish to make an investment of a size that would normally qualify for a
quantity discount.
In order to obtain quantity discount benefits, a Direct Investor or Customer
must notify Galaxy's administrator, First Data Investor Services Group, Inc.
(formerly known as The Shareholder Services Group, Inc. d/b/a 440 Financial)
("First Data") at the time of purchase that he or she would like to take
advantage of any of the discount plans described below. Upon such
notification, the investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time and are subject
to confirmation of a Direct Investor's or Customer's holdings through a check
of appropriate records. For more information about quantity discounts, please
contact the Distributor or your Institution.
Rights of Accumulation. A reduced sales charge applies to any purchase of
Retail Shares of any portfolio of Galaxy that is sold with a sales charge
("Eligible Fund") where a Direct Investor's or Customer's then current
aggregate investment in Retail Shares is $50,000 or more. "Aggregate
investment" means the total of: (a) the dollar amount of the then current
purchase of shares of an Eligible Fund; and (b) the value (based on current
net asset value) of previously purchased and beneficially-owned shares of any
Eligible Fund on which a sales charge has been paid. If, for example, a Direct
Investor or Customer beneficially owns shares of one or more Eligible Funds
with an aggregate current value of $49,000 on which a sales charge has been
paid and subsequently purchases shares of an Eligible Fund having a current
value of $1,000, the sales charge applicable to the subsequent purchase would
be reduced to 3.50% of the offering price. Similarly, with respect to each
subsequent investment, all shares of Eligible Funds that are beneficially
owned by the investor at the time of investment may be combined to determine
the applicable sales charge.
Letter of Intent. By completing the Letter of Intent included as part of the
Account Application, a Direct Investor or Customer becomes eligible for the
reduced sales charge applicable to the total number of Eligible Fund Retail
Shares purchased in a 13-month period pursuant to the terms and under the
conditions set forth below and in the Letter of Intent. To compute the
applicable sales charge, the offering price of Retail Shares of an Eligible
Fund on which a sales charge has been paid and that are beneficially owned by
a Direct Investor or Customer on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales charge will be applied only to new purchases.
13
<PAGE>
First Data will hold in escrow Retail Shares equal to 5% of the amount
indicated in the Letter of Intent for payment of a higher sales charge if a
Direct Investor or Customer does not purchase the full amount indicated in the
Letter of Intent. The escrow will be released when a Director Investor or
Customer fulfills the terms of the Letter of Intent by purchasing the
specified amount. If purchases qualify for a further sales charge reduction,
the sales charge will be adjusted to reflect a Direct Investor's or Customer's
total purchases. If total purchases are less than the amount specified, a
Direct Investor or Customer will be requested to remit an amount equal to the
difference between the sales charge actually paid and the sales charge
applicable to the total purchases. If such remittance is not received within
20 days, First Data, as attorney-in-fact pursuant to the terms of the Letter
of Intent and at the Distributor's direction, will redeem an appropriate
number of Retail Shares held in escrow to realize the difference. Signing a
Letter of Intent does not bind a Direct Investor or Customer to purchase the
full amount indicated at the sales charge in effect at the time of signing,
but a Direct Investor or Customer must complete the intended purchase in
accordance with the terms of the Letter of Intent to obtain the reduced sales
charge. To apply, a Direct Investor or Customer must indicate his or her
intention to do so under a Letter of Intent at the time of purchase.
Qualification for Discounts. For purposes of applying the Rights of
Accumulation and Letter of Intent privileges described above, the scale of
sales charges applies to the combined purchases made by any individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or the aggregate investments of a trustee or
custodian of any qualified pension or profit sharing plan or IRA established
(or the aggregate investment of a trustee or other fiduciary) for the benefit
of the persons listed above.
Reinstatement Privilege. Direct Investors and Customers may reinvest all or
any portion of their redemption proceeds in Retail Shares of the Fund or in
Retail Shares of another portfolio of Galaxy within 90 days of the redemption
trade date without paying a sales charge. Retail Shares so reinvested will be
purchased at a price equal to the net asset value next determined after the
Transfer Agent receives a reinstatement request and payment in proper form.
Direct Investors and Customers wishing to exercise this Privilege must
submit a written reinstatement request to the Transfer Agent stating that the
investor is eligible to use the Privilege. The reinstatement request and
payment must be received within 90 days of the trade date of the redemption.
Currently, there are no restrictions on the number of times an investor may
use this Privilege.
Generally, exercising the Reinstatement Privilege will not affect the
character of any gain or loss realized on redemptions for federal income tax
purposes. However, if a redemption results in a loss, the reinstatement may
result in the loss being disallowed under the Internal Revenue Code's "wash
sale" rules.
PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS
Purchase orders for Retail Shares are placed by Customers of Institutions
through their Institution. The Institution is responsible for transmitting
Customer purchase orders to the Distributor 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. Retail Shares purchased by Institutions on behalf of their
Customers will normally be held of record by the Institution and beneficial
ownership of Retail Shares will be recorded by the Institution and reflected
in the account statements provided to their Customers. Galaxy's transfer agent
may establish an account of record for each Customer of an Institution
reflecting beneficial ownership of Retail Shares. Depending on the terms of
the arrangement between a particular Institution and Galaxy's transfer agent,
confirmations of Retail Share purchases and redemptions and pertinent account
statements will either be sent by Galaxy's transfer agent directly to a
Customer with a copy to the Institution, or will be furnished directly
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to the Customer by the Institution. Other procedures for the purchase of
Retail Shares established by Institutions in connection with the requirements
of their Customer accounts may apply. Customers wishing to purchase Retail
Shares through their Institution should contact such entity directly for
appropriate purchase instructions.
PURCHASE PROCEDURES--DIRECT INVESTORS
Purchases by Mail. Retail Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to the Fund, to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
All purchase orders placed by mail must be accompanied by a purchase
application. Applications may be obtained by calling the Distributor at (800)
628-0414.
Subsequent investments in an existing account in any Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund in which the
additional investment is being made to Galaxy at the address above along with
either (a) the detachable form that regularly accompanies confirmation of a
prior transaction, (b) a subsequent order form that may be obtained from the
Distributor, or (c) a letter stating the amount of the investment, the name of
the Fund and the account number in which the investment is to be made. If a
Direct Investor's check does not clear, the purchase will be canceled.
OTHER PURCHASE INFORMATION
Purchases by Wire. Investors may also purchase Retail Shares by arranging to
transmit Federal funds by wire to Fleet Bank of Massachusetts, N.A. as agent
for First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial) ("First Data"), Galaxy's
transfer agent. Prior to making any purchase by wire, an investor must
telephone the Distributor at (800) 628-0413 to place an order and for
instructions. Federal funds and registration instructions should be wired
through the Federal Reserve System to:
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
ABA #0110-0013-8
DDA #79673-5702
Ref:The Galaxy Fund
Shareholder Name
Shareholder Account Number
Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to The Galaxy Fund, Box 7, 440 Lincoln
Street, Worcester, Massachusetts 01653-0007. Applications may be obtained by
calling the Distributor at (800) 628-0414. Redemptions will not be processed
until the application in proper form has been received by First Data. Direct
Investors making subsequent investments by wire should follow the instructions
above.
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Except as provided in "Investor Programs" below, the minimum initial
investment by a Direct Investor, or initial aggregate investment by an
Institution investing on behalf of its Customers, is $2,500. The minimum
investment for subsequent purchases is $100. The minimum investment
requirement with respect to IRAs, SEPs, MERPs and Keogh Plans (see below under
"Retirement Plans") is $500 ($250 for spousal IRA accounts). There are no
minimum investment requirements for investors participating in the Automatic
Investment Program described below. Customers may agree with a particular
Institution to varying minimum initial and minimum subsequent purchase
requirements with respect to their accounts.
Galaxy reserves the right to reject any purchase order, in whole or in part,
or to waive any minimum investment requirement. The issuance of Retail Shares
to Direct Investors and Institutions is recorded on the books of Galaxy and
Retail Share certificates will not be issued.
Effective Time of Purchases. A purchase order for Retail Shares received and
accepted by the Distributor from an Institution or a Direct Investor on a
Business Day prior to the close of regular trading hours on the Exchange
(currently, 4:00 p.m. Eastern Time) will be executed at the net asset value
per share determined on that date, 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 fifth Business Day following the receipt of such order.
Such order will be executed on the day on which the purchase price is received
in proper form. 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 or Direct Investor submitting the order. Payment for orders which
are not received or accepted will be returned. If an Institution accepts a
purchase order from a 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 above procedures.
REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS
Customers of Institutions may redeem all or part of their Retail Shares in
accordance with procedures governing their accounts at Institutions. It is the
responsibility of the Institutions to transmit redemption orders to the
Distributor and credit their Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments to Institutions is
imposed by Galaxy, although Institutions may charge a Customer's account for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institutions.
Payments for redemption orders received by the Distributor on a Business Day
will normally be wired on the third Business Day to the Institutions.
Direct Investors may redeem all or part of their Retail Shares in accordance
with any of the procedures described below.
REDEMPTION PROCEDURES--DIRECT INVESTORS
Redemption by Mail. Retail Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
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A written redemption request must (i) state the number of shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the shares are
registered. A redemption request for an amount in excess of $50,000, or for
any amount where (i) the proceeds are to be sent elsewhere than the address of
record (excluding the transfer of assets to a successor custodian), (ii) the
proceeds are to be sent to an address of record which has changed in the
preceding 90 days, or (iii) the check is to be made payable to someone other
than the registered owner(s), must be accompanied by signature guarantees. The
guarantor of a signature must be a bank that is a member of the FDIC, a trust
company, a member firm of a national securities exchange or any other eligible
guarantor institution. First Data will not accept guarantees from notaries
public. First Data may require additional supporting documents for redemptions
made by corporations, executors, administrators, trustees and guardians. A
redemption request will not be deemed to be properly received until First Data
receives all required documents in proper form. The Fund will ordinarily make
payment for Retail Shares redeemed by mail within three Business Days after
proper receipt by the Distributor of the redemption request. Questions with
respect to the proper form for redemption requests should be directed to the
Distributor at (800) 628-0413.
Redemption by Telephone. Direct Investors may redeem Retail Shares by
calling (800) 628-0413 and instructing the Distributor to mail a check for
redemption proceeds of up to $50,000 to the address of record. A redemption
request for an amount in excess of $50,000 or for any amount where (i) the
proceeds are to be sent elsewhere than the address of record (excluding the
transfer of assets to a successor custodian), (ii) the proceeds are to be sent
to an address of record which has changed in 90 days, or (iii) the check is to
be made payable to someone other than the registered owner(s), must be
accompanied by signature guarantees. (See "Redemption by Mail.")
Redemption by Wire. Direct Investors who have so indicated on the
application, or have subsequently arranged in writing to do so, may redeem
Retail Shares by instructing First Data by wire or telephone to wire the
redemption proceeds of $1,000 or more directly to a Direct Investor's account
at any commercial bank in the United States. First Data charges a $5.00 fee
for each wire redemption and the fee is deducted from the redemption proceeds.
The redemption proceeds must be paid to the same bank and account as
designated on the application or in written instructions subsequently received
by First Data. To request redemption of Retail Shares by wire, Direct
Investors should call the Distributor at (800) 628-0413.
In order to arrange for redemption by wire after an account has been opened
or to change the bank or account designated to receive redemption proceeds, a
written request must be sent to Galaxy at the address listed above under
"Redemption by Mail." Such requests must be signed by the investor and
accompanied by a signature guarantee (see "Redemption by Mail" above for
details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees, or
guardians. If, due to temporary adverse conditions, investors are unable to
effect telephone transactions, investors are encouraged to follow the
procedures for transactions by wire or mail which are described above.
Galaxy reserves the right to refuse a wire or telephone redemption if it
believes it is advisable to do so. Procedures for redeeming Retail Shares by
wire or telephone may be modified or terminated at any time by Galaxy or First
Data. In attempting to confirm that telephone instructions are genuine, Galaxy
will use such procedures as are considered reasonable, including recording
those instructions and requesting information as to account registration (such
as the name in which an account is registered, the account number, recent
transactions in the account, and the account holder's social security number,
address and/or bank). If Galaxy fails to follow established procedures for the
authentication of telephone instructions, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
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<PAGE>
No redemption by a Direct Investor in the Fund will be processed until
Galaxy has received a completed application with respect to the Direct
Investor's account.
If any portion of the Retail Shares to be redeemed represents an investment
made by personal check, Galaxy reserves the right to delay payment of proceeds
until First Data is reasonably satisfied that the check has been collected,
which could take up to 15 days from the purchase date. A Direct Investor who
anticipates the need for more immediate access to his or her investment should
purchase Retail Shares by Federal funds or bank wire or by certified or
cashier's check. Banks normally impose a charge in connection with the use of
bank wires, as well as certified checks, cashier's checks and Federal funds.
OTHER REDEMPTION INFORMATION
Galaxy reserves the right to redeem accounts (other than retirement plan
accounts) involuntarily, upon 60 days' written notice, if the account's net
asset value falls below $250 as a result of redemptions. In addition, if an
investor has agreed with a particular Institution to maintain a minimum
balance in his or her account at the Institution with respect to Retail Shares
of the Fund, and the balance in such account falls below that minimum, the
Customer may be obliged by the Institution to redeem all of his or her shares.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order by the Distributor.
Galaxy reserves the right to wire redemption proceeds within seven days after
receiving the redemption order if, in its judgement, an earlier payment could
adversely affect the Fund.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange Retail Shares of the Fund having a value of at least
$100 for Retail Shares of any of the other portfolios offered by Galaxy or
otherwise advised by Fleet or its affiliates in which the Direct Investor or
Customer maintains an existing account, provided that such other Retail Shares
may legally be sold in the state of the investor's residence. No additional
sales charge will be incurred when exchanging Retail Shares of the Fund for
Retail Shares of another Galaxy fund that imposes a sales charge.
The minimum initial investment to establish an account in another portfolio
offered by Galaxy or otherwise advised by Fleet or its affiliates, except for
the Institutional Treasury Money Market Fund, by exchange is $2,500, unless at
the time of the exchange the Direct Investor or Customer elects, with respect
to the portfolio into which the exchange is being made, to participate in the
Automatic Investment Program described below, in which event there is no
minimum initial investment requirement. The minimum initial investment to
establish an account by exchange in the Institutional Treasury Money Market
Fund is $2 million.
An exchange involves a redemption of all or a portion of the shares of the
Fund and the investment of the redemption proceeds in shares of another
portfolio offered by Galaxy or otherwise advised by Fleet or its affiliates.
The redemption will be made at the per share net asset value next determined
after the exchange request is received. The shares of the portfolio to be
acquired will be purchased at the per share net asset value next determined
after acceptance of the exchange request.
Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding Galaxy's exchange privilege, Direct
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<PAGE>
Investors should call First Data at (800) 628-0413. Customers of Institutions
should call their Institution for such information. Customers exercising the
exchange privilege with the Money Market, Government, Tax-Exempt, U.S.
Treasury, Connecticut Municipal Money Market, Massachusetts Municipal Money
Market, Institutional Treasury Money Market, Short-Term Bond, Intermediate
Government Income, 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, Asset Allocation and Growth and Income Funds
should request and review these Funds' prospectuses prior to making an
exchange (call (800) 628-0414 for a prospectus). Telephone all exchanges to
(800) 628-0413. See "How To Purchase and Redeem Shares--Redemption
Procedures--Direct Investors--Redemptions by Wire" above for a description of
Galaxy's policy on telephone instructions.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy reserves the right to terminate the exchange privilege of
any shareholder who requests more than three exchanges a year. Galaxy will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has
requested and the time period over which their exchange requests have been
made, together with the level of expense to Galaxy which will result from
effecting additional exchange requests. The exchange privilege may be modified
or terminated at any time. At least 60 days' notice of any material
modification or termination will be given to shareholders except where notice
is not required under the regulations of the SEC.
Galaxy does not charge any exchange fee. However, Institutions may charge
such fees with respect to either all exchange requests or with respect to any
request which exceeds the permissible number of free exchanges during a
particular period. Customers of Institutions should contact their Institution
for applicable information.
For Federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor.
Before making an exchange request, the Customer should consult a tax or other
financial adviser to determine the tax consequences.
RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the
following tax-deferred prototype retirement plans:
Individual Retirement Accounts ("IRAs") (including "roll-overs" from
existing retirement plans), a retirement-savings vehicle for qualifying
individuals. The minimum initial investment for an IRA account is $500
($250 for a spousal account).
Simplified Employee Pension Plans ("SEPs"), a form of retirement plan for
sole proprietors, partnerships and corporations. The minimum initial
investment for a SEP account is $500.
Multi-Employee Pension Plans ("MERPs"), a retirement vehicle established
by employers for their employees which is qualified under Section 401(k)
and 403(b) of the Internal Revenue Code. The minimum initial investment for
a MERP is $500.
Keogh Plans, a retirement vehicle for self-employed individuals. The
minimum initial investment for a Keogh Plan is $500.
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<PAGE>
Investors purchasing Retail Shares pursuant to a retirement plan are not
subject to the minimum investment provisions described above under "How to
Purchase and Redeem Shares--Other Purchase Information". Detailed information
concerning eligibility and other matters related to these plans and the form
of application is available from Galaxy's distributor (called (800) 628-0413)
with respect to IRAs, SEPs and Keogh Plans and from Fleet Brokerage Securities
Corporation (call (800) 221-8210) with respect to MERPs.
AUTOMATIC INVESTMENT PROGRAM AND SYSTEMATIC WITHDRAWAL PLAN
The Automatic Investment Program permits a Direct Investor to purchase
Retail Shares of the Fund (minimum of $50 per transaction) each month.
Provided the Direct Investor's financial institution allows automatic
withdrawals, Retail Shares are purchased by transferring funds from a Direct
Investor's checking, bank money market, NOW or savings account designated by
the investor. The account designated will be debited in the specified amount,
and Retail Shares will be purchased, on a monthly or quarterly basis, on any
Business Day designated by a Direct Investor. If the designated day falls on a
weekend or holiday, the purchase will be made on the Business Day closest to
the designated day. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Systematic Withdrawal Plan permits a Direct Investor to automatically
redeem Retail Shares of the Fund on a monthly, quarterly, semi-annual, or
annual basis on any Business Day designated by a Direct Investor, if the
account has a starting value of at least $10,000. If the designated day falls
on a weekend or holiday, the redemption will be made on the Business Day
closest to the designated day. Proceeds of the redemption will be sent to the
shareholder's address of record or financial institution within three Business
Days of the redemption. If redemptions exceed purchases and dividends, the
number of shares in the account will be reduced. Investors may terminate the
Systematic Withdrawal Plan at any time upon written notice to the Transfer
Agent (but not less than five days before a payment date). There is no charge
for this service. Purchases of additional Retail Shares concurrently with
withdrawals are ordinarily not advantageous because of the sales charge.
COLLEGE INVESTMENT PROGRAM
The College Investment Program (the "College Program") permits an investor
to open an account with Galaxy and purchase Retail Shares of the Fund with a
minimum amount of $100 for initial or subsequent investments, except that if
the investor purchases Retail Shares through the Automatic Investment Program,
the minimum per transaction is $50. The College Program is designed to assist
investors who want to finance a college savings plan. See "Investor Programs--
Automatic Investment Program and Systematic Withdrawal Plan" for information
on the Automatic Investment Program. Retail Shares purchased in connection
with the College Program will be subject to the sales load described in this
Prospectus, unless the purchase qualifies for an exemption to the load. Galaxy
reserves the right to redeem accounts participating in the College Program
involuntarily, upon 60 days' written notice, if the account's net asset value
falls below the applicable minimum initial investment as a result of
redemptions. See "How to Purchase and Redeem Shares--Other Redemption
Information" above for further information.
Investors in the College Program will receive consolidated monthly
statements of their accounts. Detailed information concerning College Program
accounts and applications may be obtained from Galaxy's distributor (call
(800) 628-0413).
DIRECT DEPOSIT PROGRAM
If a shareholder receiving social security benefits are eligible for the
Direct Deposit Program. This Program enables a Direct Investor to purchase
Retail Shares of a Fund by having social security payments automatically
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deposited into his or her Fund account. There is no minimum deposit
requirement. For instructions on how to enroll in the Direct Deposit Program,
Direct Investors should call the Distributor at 1-800-628-0413. Death or legal
incapacity will terminate a Direct Investor's participation in the Program. A
Direct Investor may elect at any time to terminate a Direct Investor's
participation upon 30 days' notice to the Direct Investor.
INFORMATION SERVICES
GALAXY INFORMATION CENTER--24 HOUR INFORMATION SERVICE. The Galaxy Information
Center provides Fund performance and investment information 24 hours a day, 7
days a week. To access the Galaxy Information Center, just call 1-800-628-
0414.
VOICE RESPONSE SYSTEM. The Voice Response System provides Direct Investors
automated access to Fund and account information as well as the ability to
make telephone exchanges and redemptions. These transactions are subject to
the terms and conditions described under Investor Programs. To access the
Voice Response System, just call 1-800-FOR-GALAXY (367-4599) from any touch-
tone telephone and follow the recorded instructions.
GALAXY SHAREHOLDER SERVICES. For account information and recent exchange
transactions, Direct Investors can call Galaxy Shareholder Services Monday
through Friday, between the hours of 9:00 a.m. to 5:00 p.m. (Eastern Time) at
1-800-629-0413.
Galaxy also offers a TDD service for the hearing impaired. Just call 1-800-
696-6515, 24 hours a day, 7 days a week.
Direct Investors residing outside the United States can contact Galaxy by
calling 1-508-855-5237.
Investment returns and principal values will vary with market conditions, so
that an investor's Retail Shares, when redeemed, may be worth more or less
than their original cost. Past performance is no guarantee of future results.
Unless otherwise indicated, total return figures include changes in share
price, and reinvestment of dividends and capital gains distributions, if any.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Fund is declared and paid
quarterly. Net realized capital gains are distributed at least annually.
Dividends and distributions will be paid in cash. Customers and Direct
Investors may elect to have their dividends reinvested in additional Retail
Shares of the Fund at the net asset value of such Retail Shares on the ex-
dividend date. Such election, or any revocation thereof, must be communicated
in writing to Galaxy's transfer agent (see "Custodian and Transfer Agent"
below) and will become effective with respect to dividends paid after its
receipt.
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TAXES
FEDERAL
It is intended that the Fund will 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.
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 Trust shares.
(Federal income taxes for distributions to an IRA or a qualified retirement
plan are deferred under the Code.) Such ordinary income distributions will
qualify for the dividends received deduction for corporations to the extent of
the total qualifying dividends received by the distributing Fund from domestic
corporations for the taxable year.
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 Retail
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 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 the 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
from those of the federal income tax law described above.
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.
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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 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, 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, Asset Allocation
and Growth and Income Funds. Fleet is an indirect wholly-owned subsidiary of
Fleet Financial Group, Inc., a registered bank holding company with total
assets of approximately $25 billion at June 30, 1995.
Subject to the general supervision of Galaxy's Board of Trustees and in
accordance with the 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 Fund's portfolio manager, Peter Larson, is primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Larson served as
the portfolio manager of the Predecessor Fund since its inception in 1992. He
joined Shawmut Bank in 1963 as an investment officer and was a Vice President
in charge of Shawmut Bank's Small Cap Equity Management product since
inception in 1982.
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 they are not
higher than average advisory fees paid by funds with similar investment
objectives and policies.
The Predecessor Fund bore advisory fees during its most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A., its former adviser, at the effective annual rate of .75% of its
average daily net assets after fee waivers. Without fee waivers, the
Predecessor Fund would have borne advisory fees at the annual rate of 1.00% of
its 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 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 agree 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 Retail
Share or result in financial loss to any shareholder. State securities laws on
this issue
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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
Series Group, Inc. d/b/a 440 Financial) ("First Data"), located at 4400
Computer Drive, Westboro, Massachusetts 01581, 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 of the Portfolios 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.
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .107% of its average daily net assets after fee waivers.
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 two series of the Fund as follows:
Class X--Series 1 shares (Trust Shares) and Class X--Series 2 shares (Retail
Shares), both series representing interests in the Fund.
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 Trust 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 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 and, as a result, the net yield
on the Fund's Retail Shares will generally be lower than the net yield on 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.
Persons selling or servicing different series of shares of the Fund may
receive different compensation with respect to one particular series of shares
as opposed to the other series of shares in the Fund. Retail Shares of the
Fund have certain exchange and other privileges which are not available to
Trust Shares. Trust Shares of the Fund are sold without a sales load.
24
<PAGE>
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 Shares. Such services will be provided to
Customers who are the beneficial owners of Retail Shares and are intended to
supplement the services provided by Galaxy's administrator and transfer agent
to the shareholders of record of the Retail Shares. In consideration for
payment of up to .25% (on an annualized basis) of the average daily net asset
value of Retail 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 Shares or the
information necessary for sub-accounting; and providing periodic mailings to
Customers. In consideration for payment of up to a separate .25% (on an
annualized basis) of the average daily net asset value of Retail 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 Shares; responding to Customer inquiries; and
providing a service to invest the assets of Customers in Retail 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 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 Shares of the Fund, and
to limit the payment under these servicing agreements for the Fund to no more
than .30% (on an annualized basis) of the average daily net asset value of the
Retail 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 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 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
25
<PAGE>
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. ("Chase Manhattan"), 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 Fund's
transfer and dividend disbursing agent. Services performed by these 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.
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 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, the S&P 500, an
unmanaged index of groups of common stocks, the Consumer Price Index, or the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange.
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
26
<PAGE>
local or regional nature may also be used in comparing the performance and
yields of the Fund. The performance and yield data for Retail Shares of the
Fund will be calculated separately from the performance and yield data for the
Fund's Trust Shares. Because of the shareholder servicing fees currently borne
only by Retail Shares, the performance and yields on the Fund's Retail Shares
can generally be expected, at any given time, to be lower than the performance
and yields on the Fund's Trust Shares.
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 analyzing 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 a 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
reflect the sales load charged by the Fund and assume that dividends and
capital gain distributions made by the Fund during the period are reinvested
in Fund shares.
The Fund may also advertise total return data without reflecting the sales
charge imposed on the purchase of Retail Shares in accordance with the rules
of the Securities and Exchange Commission. Quotations that do not reflect the
sales charge will be higher than quotations that do reflect sales charges.
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 the 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 Retail Shares of
the Fund will not be included in calculations of yield and performance.
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.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent certified public accountants.
27
<PAGE>
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of either Galaxy or the Fund or a particular investment
portfolio 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 the Fund or portfolio (irrespective of
series designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
Inquiries regarding the Fund 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).
28
<PAGE>
FN-506 (12/95)
<PAGE>
THE GALAXY FUND
CONNECTICUT MUNICIPAL MONEY MARKET FUND
PROSPECTUS
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<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 THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Highlights............................................................ 2
Expense Summary....................................................... 4
Financial Highlights.................................................. 5
Investment Objective and Policies..................................... 6
Investments, Strategies and Risks..................................... 6
Investment Limitations................................................ 11
Pricing of Shares..................................................... 11
How to Purchase and Redeem Shares..................................... 12
Distributor.......................................................... 12
Purchase of Shares................................................... 12
Purchase Procedures--Customers of Institutions....................... 12
Purchase Procedures--Direct Investors................................ 13
Other Purchase Information........................................... 13
Redemption Procedures--Customers of Institutions..................... 14
Redemption Procedures--Direct Investors.............................. 14
Other Redemption Information......................................... 16
Investor Programs..................................................... 16
Exchange Privilege................................................... 16
Automatic Investment Program and Systematic Withdrawal Plan.......... 17
College Investment Program........................................... 18
Checkwriting......................................................... 18
Direct Deposit Program............................................... 18
Information Services.................................................. 18
Galaxy Information Center--24 Hour Information Service............... 18
Voice Response System................................................ 18
Galaxy Shareholder Services.......................................... 19
Dividends and Distributions........................................... 19
Taxes................................................................. 19
Federal.............................................................. 19
State and Local...................................................... 20
Miscellaneous........................................................ 21
Management of the Fund................................................ 21
Investment Adviser................................................... 21
Authority to Act as Investment Adviser............................... 22
Administrator........................................................ 22
Description of Galaxy and Its Shares.................................. 22
Shareholder Services Plan............................................ 23
Custodian and Transfer Agent.......................................... 23
Expenses.............................................................. 24
Performance and Yield Information..................................... 24
Miscellaneous......................................................... 25
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE GALAXY FUND
4400 Computer Drive For applications and information
Westboro, Massachusetts 01581 regarding initial purchases and current
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 the Connecticut Municipal Money Market Fund (the
"Fund"), a non-diversified investment portfolio offered to investors by
Galaxy.
The Fund's investment objective is to provide current income exempt from
Federal regular income tax and the Connecticut state income tax on
individuals, trusts and estates, consistent with relative stability of
principal and liquidity. The Fund attempts to achieve this objective by
investing primarily in short-term Connecticut municipal securities, including
securities of states, territories and possessions of the United States which
are not issued by or on behalf of Connecticut or its political subdivisions
and financing authorities, but which are exempt from the Connecticut state
income tax on individuals, trusts and estates (the "CSIT"). The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, is 90 days or less.
The Fund is distributed by 440 Financial Distributors, Inc. and advised by
Fleet Investment Advisors Inc. The shares described in this Prospectus
("Shares") are offered to customers ("Customers") of 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 ("Institutions"). Shares may also be
purchased directly by individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors").
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.
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. THERE IS NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
----------------
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.
OCTOBER 27, 1995
(AS REVISED DECEMBER 4, 1995)
<PAGE>
HIGHLIGHTS
Q: WHAT IS THE GALAXY FUND?
A: Galaxy is an open-end management investment company (commonly known as a
mutual fund) that offers investors the opportunity to invest in different
investment portfolios, each having separate investment objectives and
policies. This Prospectus describes GALAXY'S CONNECTICUT MUNICIPAL MONEY
MARKET FUND. Prospectuses for Galaxy's MONEY MARKET, GOVERNMENT, TAX-EXEMPT,
U.S. TREASURY, 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, HIGH
QUALITY BOND, TAX-EXEMPT BOND, NEW YORK MUNICIPAL BOND, CONNECTICUT MUNICIPAL
BOND, MASSACHUSETTS MUNICIPAL BOND AND RHODE ISLAND MUNICIPAL BOND FUNDS may
be obtained by calling (800) 628-0414.
Q: WHO ADVISES THE FUND?
A: The Fund is managed by Fleet Investment Advisors Inc. (the "Investment
Adviser" or "Fleet"), an indirect wholly-owned subsidiary of Fleet Financial
Group, Inc. Fleet Financial Group, Inc. is a financial services company with
total assets as of June 30, 1995 of approximately $25 billion. See "Management
of the Fund--Investment Adviser."
Q: WHAT ADVANTAGES DOES THE FUND OFFER?
A: The Fund offers investors the opportunity to invest in a variety of
professionally managed investment portfolios without having to become involved
with the detailed accounting and safekeeping procedures normally associated
with direct investments in securities. The Fund also offers the economic
advantages of block trading in portfolio securities and the availability of a
family of twenty-four mutual funds should your investment goals change.
Q: HOW DOES ONE BUY AND REDEEM SHARES?
A: The Fund is distributed by 440 Financial Distributors, Inc. Shares of the
Fund are sold to individuals or corporations, who submit a purchase
application to Galaxy, purchasing either for their own accounts or for the
accounts of others ("Direct Investors"). Shares may also be purchased on
behalf of Customers of Fleet Brokerage Securities Corporation, Fleet
Securities, Inc., Fleet Financial Group, Inc., its affiliates, their
correspondent banks and other qualified banks, savings and loan associations
and broker/dealers ("Institutions"). Share purchase and redemption information
for both Direct Investors and Customers is provided below under "How to
Purchase and Redeem Shares." Except as provided below in "Investor Programs,"
the minimum initial investment for Direct Investors and the minimum initial
aggregate investment for Institutions purchasing on behalf of their Customers
is $2,500. The minimum investment for subsequent purchases is $100. There are
no minimum investment requirements for investors participating in the
Automatic Investment Program described below. Institutions may require
Customers to maintain certain minimum investments in Shares. See "How to
Purchase and Redeem Shares--Purchase of Shares" below.
Q: WHEN ARE DIVIDENDS PAID?
A: The net investment income of the Fund is declared daily and paid monthly.
Net realized capital gains of the Fund are distributed at least annually. See
"Dividends and Distributions."
2
<PAGE>
Q: WHAT POTENTIAL RISKS ARE PRESENTED BY THE FUND'S INVESTMENT PRACTICES?
A: The Fund invests primarily in Connecticut Municipal Securities (as
defined below) rated within the two highest ratings of Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, Inc. ("Fitch"). The achievement of its investment objective
is dependent upon the ability of the issuers of Connecticut Municipal
Securities to meet their continuing obligations for the payment of principal
and interest. In addition, because the Fund is non-diversified, its investment
return may be dependent upon the performance of a smaller number or particular
type of securities relative to a diversified portfolio. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. In
addition, the Fund may acquire "stand-by commitments" with respect to
Connecticut Municipal Securities held in its portfolio. The value of the
Fund's portfolio securities will generally vary inversely with changes in
prevailing interest rates. See "Investment Objective and Policies" and
"Investments, Strategies and Risks".
Q: WHAT SHAREHOLDER PRIVILEGES ARE OFFERED BY THE FUND?
A: Investors may exchange Shares of the Fund having a value of at least $100
for Shares of any other portfolio offered by Galaxy in which the investor has
an existing account. Galaxy also offers Individual Retirement Accounts
("IRAs"), which can be established by contacting Galaxy's distributor. Shares
are also available for purchase through Simplified Employee Pension Plans
("SEPs"), Multi-Employee Retirement Plans ("MERPs") and Keogh Plan accounts,
which can be established directly with Fleet Brokerage Securities Corporation
or its affiliates. Galaxy offers an Automatic Investment Program which allows
investors to automatically invest in Shares on a monthly basis. See "Investor
Programs."
3
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of (i) the shareholder transaction expenses
imposed by the Fund and (ii) the Fund's operating expenses. Examples based on
the summary are also shown.
<TABLE>
<CAPTION>
CONNECTICUT
MUNICIPAL
MONEY MARKET
SHAREHOLDER TRANSACTION EXPENSES FUND
- -------------------------------- ------------
<S> <C>
Sales Load......................................................... None
Sales Load on Reinvested Dividends................................. None
Deferred Sales Load................................................ None
Redemption Fees/1/................................................. None
Exchange Fees...................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------
<S> <C>
Advisory Fees...................................................... .40%
12b-1 Fees......................................................... None
Other Expenses..................................................... .22%
----
Total Fund Operating Expenses...................................... .62%
====
</TABLE>
- --------
/1/ Direct Investors are charged a $5.00 fee if redemption proceeds are paid by
wire.
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>
Connecticut Municipal Money Market Fund......... $ 6 $19 $34 $76
</TABLE>
The Expense Summary and Example are intended to assist the investor in
understanding the costs and expenses that an investor in 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 current fees that would have
been applicable had they been in effect. 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 included in 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.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The Fund commenced operations on October 4, 1993 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds, which was organized
as a Massachusetts business trust. On December 4, 1995, the Fund was
reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold two series of shares of beneficial interest,
Investment Shares and Trust Shares. The shareholders of both series received
the same series of shares of the Fund. Unlike the Trust Shares, the Investment
Shares of the Predecessor Fund were similar to the Shares of the Fund.
Accordingly, the Trust Shares of the Predecessor Fund have been excluded from
the financial highlights.
The financial highlights set forth certain information concerning the
investment results of the Predecessor Fund's Investment Shares for the six
months ended April 30, 1995, the fiscal year ended October 31, 1994 and the
fiscal period ended October 31, 1993. The information for the fiscal year
ended October 31, 1994 and for the prior fiscal period ended October 31, 1993
was audited by Price Waterhouse LLP, independent accountants for the
Predecessor Fund, whose report thereon appears in the Statement of Additional
Information. Such Financial Highlights should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information. Additional information about the performance of the Predecessor
Fund is contained in The Shawmut Funds' Annual Report, which may be obtained
without charge.
PREDECESSOR CONNECTICUT MUNICIPAL MONEY MARKET FUND
(FOR AN INVESTMENT SHARE OUTSTANDING THROUGHOUT EACH PERIOD.)
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, YEAR ENDED PERIOD ENDED
1995 OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 1993/1/
------------ ---------- ------------
<S> <C> <C> <C>
Net asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Net Investment Income.................. 0.01 0.02 0.001
Total from Investment Operations: 0.01 0.02 0.001
Dividends to shareholders from net in-
vestment income........................ (0.01) (0.02) (0.001)
Total Distributions................... (0.01) (0.02) (0.001)
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return............................ 1.43% 1.83% 0.14%
Expenses/3/............................ 0.81%/2/ 0.78% 0.36%/2/
Net Investment Income/3/............... 2.83%/2/ 1.99% 2.12%/2/
Net Assets, End of Period (000 omit-
ted).................................. $70,018 $80,663 $ 6,582
</TABLE>
- --------
/1/ For the period from October 4, 1993 (date of initial public investment) to
October 31, 1993.
/2/ Computed on an annualized basis.
/3/ Without voluntary expense waivers/reimbursements, the expense and net
investment income ratios shown above would be 1.31% and 3.33%, respectively,
for the period ended April 30, 1995, 1.50% and 2.71%, respectively, for the
year ended October 31, 1994 and 5.82% and 7.58%, respectively, for the
period ended October 31, 1993.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Fleet Investment Advisors, Inc. (the "Investment Adviser" or "Fleet" 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 in the following
paragraph or 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.
The Fund's investment objective is to provide current income exempt from
Federal regular income tax and the CSIT, consistent with stability of
principal and liquidity. The Fund attempts to achieve this objective by
investing in a portfolio of Connecticut Municipal Securities (as defined
below) with remaining maturities of thirteen months or less at the time of
purchase. As a matter of fundamental policy that cannot be changed without
shareholder approval, the Fund invests its assets so that at least 80% of its
annual interest income is exempt from Federal regular income tax or at least
80% of the total value of its assets is invested in obligations the interest
income from which is exempt from Federal regular income tax. The Fund's
investment objective and the investment policy described in the preceding
sentence cannot be changed without approval of shareholders. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, is 90 days or less. The value of the Fund's portfolio
securities will generally vary inversely with changes in prevailing interest
rates.
Under normal circumstances, at least 65% of the value of the Fund's assets
will be invested in debt obligations issued by or on behalf of the State of
Connecticut and its political subdivisions and financing authorities, and
obligations of other states, territories and possessions of the United States,
including the District of Columbia, and any political sub-division, or
financing authority of any of these, the interest income from which is, in the
opinion of qualified legal counsel, exempt from Federal regular income tax and
the CSIT. Debt obligations issued by or on behalf of the State of Connecticut,
its political subdivisions, or any public instrumentality, state or local
authority, district or similar public entity created under Connecticut law and
certain other governmental issuers such as Puerto Rico, the interest on the
obligations of which is exempt from Connecticut personal income tax by virtue
of Federal law, are referred to herein as Connecticut Municipal Securities.
Examples of Connecticut Municipal Securities include, but are not limited to:
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
. municipal leases, including certificates of participation in leases;
. tender option bonds; and
. participation, trust, and partnership interests in any of the foregoing
obligations.
INVESTMENTS, STRATEGIES AND RISKS
Variable Rate Demand Notes. Variable rate demand notes are long-term
Municipal Securities that have variable or floating interest rates and provide
the Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
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daily to annually), and is normally based on an applicable interest index or
another published interest rate or interest rate index. Most variable rate
demand notes allow the Fund to demand the repurchase of the security on not
more than seven days prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand notes
as maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
Ratings. The Connecticut Municipal Securities in which the Fund invests must
either be rated in one of the two highest short-term rating categories by one
or more nationally recognized statistical rating organizations ("Rating
Agencies") or be of comparable quality to securities having such ratings.
These rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by Standard &
Poor's Rating Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch Investors Services, Inc.
("Fitch") are all considered to be rated in one of the two highest short-term
rating categories. The Fund will follow applicable regulations in determining
whether a security rated by more than one Rating Agency can be treated as
being in one of the two highest short-term rating categories. See "Investment
Limitations".
If a Municipal Security has not been rated by a Rating Agency, the Fund's
Investment Adviser will acquire the security only if it determines that the
security is of comparable quality to securities that have received the
requisite ratings. In this regard, the adviser will generally treat
Connecticut Municipal Securities as eligible portfolio securities if the
issuer has received long-term bond ratings within the two highest rating
categories by a Rating Agency with respect to other bond issues. The adviser
also considers other relevant information in its evaluation of unrated short-
term securities.
Credit Enhancement. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. The Fund will not treat credit enhanced securities as having been
issued by the credit enhancer for diversification purposes, unless the Fund
has invested more than 10% of its assets in securities issued, guaranteed, or
otherwise credit enhanced by the credit enhancer, in which case the securities
will be treated as having been issued both by the issuer and the credit
enhancer. The bankruptcy, receivership, or default of the credit enhancer may
adversely affect the quality and marketability of the underlying security. The
Fund may have more than 25% of its total assets invested in securities the
credit for which has been enhanced by banks or insurance companies.
Demand Features. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand feature may be
issued by the issuer of the underlying security, a dealer in the securities,
or by another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide liquidity and
not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the
demand feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely affect the
liquidity of the underlying security. Demand features that are exercisable
even after a payment default on the underlying security may be treated as a
form of credit enhancement.
Restricted and Illiquid Securities. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which
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are subject to restrictions on resale under federal securities laws. Pursuant
to criteria established by the Board of Trustees, certain restricted
securities may be considered liquid. To the extent restricted securities are
deemed to be illiquid, the Fund will limit its purchase, together with other
securities not considered to be liquid, to 10% of its net assets.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
eligible securities on a "when-issued" or "delayed settlement" basis. When-
issued 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 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.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
Temporary Investments. From time to time on a temporary basis, when the
Investment Adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Connecticut municipal
tax-exempt obligations or other taxable, temporary investments. All temporary
investments will satisfy the same credit quality standards as Connecticut
Municipal Securities. See "Ratings" above. Temporary investments include:
investments in other mutual funds; notes issued by or on behalf of municipal
or corporate issuers; marketable obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase agreements
(arrangements in which the organization sells the Fund a temporary investment
and agrees at the time of sale to repurchase it at a mutually agreed upon time
and price).
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to Federal regular income
tax or the CSIT.
Investment Company Securities. The Fund may invest in the securities of
other investment companies. 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; and (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund. The Fund will invest in other investment companies primarily for the
purpose of investing its short-term cash which has not as yet been invested in
other portfolio instruments. However, from time to time, on a temporary basis,
the Fund may invest exclusively in one other investment company managed
similarly to the Fund.
Municipal Leases. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form
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of a lease, an installment purchase contract, a conditional sales contract, or
a participation certificate in any of the above.
Participation Interests. The Fund may purchase interests in Connecticut
Municipal Securities from financial institutions such as commercial and
investment banks, savings and loan associations, and insurance companies.
These interests may take the form of participations, beneficial interests in a
trust, partnership interests, or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from Federal
regular income tax. The Fund invests in these participation interests in order
to obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Connecticut Municipal Securities.
Tender Option Bonds. The Fund may purchase tender option bonds and similar
securities. A tender option bond generally has a long maturity and bears
interest at a fixed rate substantially higher than prevailing short-term tax-
exempt rates, and is coupled with an agreement by a third party, such as a
bank, broker-dealer, or other financial institution, pursuant to which such
institution grants the security holders the option, usually upon not more than
seven days notice or at periodic intervals, to tender their securities to the
institution and receive the face value of the security. In providing the
option, the financial institution receives a fee that reduces the fixed rate
of the underlying bond and results in the Fund effectively receiving a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
The Fund's Investment Adviser will monitor, on an ongoing basis, the
creditworthiness of the issuer of the tender option bond, the financial
institution providing the option, and any custodian holding the underlying
long-term bond. The bankruptcy, receivership, or default of any of the parties
to the tender option bond will adversely affect the quality and marketability
of the security.
Non-Diversification. The Fund is a non-diversified investment portfolio. As
such, there is no limit on the percentage of assets which can be invested in
any single issuer. An investment in the Fund, therefore, will entail greater
risk than would exist in a diversified investment portfolio because the higher
percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. Any economic,
political, or regulatory developments affecting the value of the securities in
the Fund's portfolio will have a greater impact on the total value of the
portfolio than would be the case if the portfolio was diversified among more
issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code.
This undertaking requires that at the end of each quarter of the taxable year,
with regard to at least 50% of its total assets, no more than 5% of its total
assets are invested in the securities of a single issuer; beyond that, no more
than 25% of its total assets are invested in the securities of a single
issuer.
Connecticut Municipal Securities. Connecticut Municipal Securities are
generally issued to finance public works, such as airports, bridges, highways,
housing, health-related entities, transportation-related projects, educational
programs, water and pollution control, and sewer works. They are also issued
to repay outstanding obligations, to raise funds for general operating
expenses, and to make loans to other public institutions and for other
facilities.
Connecticut Municipal Securities include industrial development bonds issued
by or on behalf of public authorities to provide financing aid to acquire
sites or construct and equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these corporations
to locate within the sponsoring communities and thereby increases local
employment.
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The two principal classifications of Connecticut Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed
by the bond or other specified sources of revenue. Revenue bonds do not
represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority. Industrial development
bonds are typically classified as revenue bonds.
Standby Commitments. Some securities dealers are willing to sell Connecticut
Municipal Securities to the Fund accompanied by their commitments to
repurchase the Connecticut Municipal Securities prior to maturity, at the
Fund's option, for the amortized cost of the Connecticut Municipal Securities
at the time of repurchase. These arrangements are not used to protect against
changes in the market value of Connecticut Municipal Securities. They permit
the Fund, however, to remain fully invested and still provide liquidity to
satisfy redemptions. The cost of Connecticut Municipal Securities accompanied
by these standby commitments could be greater than the cost of Connecticut
Municipal Securities without such commitments. Standby commitments are not
marketable or otherwise assignable and have value only to the Fund. The
default or bankruptcy of a securities dealer giving such a commitment would
not affect the quality of the Connecticut Municipal Securities purchased.
However, without a standby commitment, these securities could be more
difficult to sell. The Fund enters into standby commitments only with those
dealers whose credit the Investment Adviser believes to be of high quality.
Connecticut Investment Risks. Yields on Connecticut Municipal Securities
depend on a variety of factors, including: the general conditions of the
short-term municipal note market and of the municipal bond market; the size
and maturity of the particular offering; the maturity of the obligations; and
the rating of the issue. Further, any adverse economic conditions or
developments affecting the State of Connecticut or its municipalities could
impact the Fund's portfolio. The ability of the Fund to achieve its investment
objective also depends on the continuing ability of the issuers of Connecticut
Municipal Securities and demand features, or the credit enhancers of either,
to meet their obligations for the payment of interest and principal when due.
Investing in Connecticut Municipal Securities which meet the Fund's quality
standards may not be possible if the State of Connecticut or its
municipalities do not maintain their current credit ratings. An expanded
discussion of the current economic risks associated with the purchase of
Connecticut Municipal Securities is contained in the Statement of Additional
Information.
Fiscal stress is reflected in the State's economic and revenue forecasts, a
rising debt burden that reflects a significant increase in bond activity since
fiscal 1987-88, a cumulative general fund deficit for fiscal 1990-91 of over
$965 million, and uncertainty concerning the solutions for these imbalances.
Accumulated surpluses in a budget stabilization fund created in 1983 to
protect against future deficit problems were exhausted in 1990. The lack of a
contingency fund balance, combined with reduced revenue-raising flexibility in
the near term, places additional constraints on managing these financial
problems and any others that may arise. As a result of the recent recurring
budgetary problems, Connecticut's general obligation bonds were downgraded by
S&P from AA+ to AA in April 1990 and, in September 1991, to AA-; by Moody's
from Aa1 to Aa in April 1990; and by Fitch from AA+ to AA in March 1995.
Certain Connecticut municipalities have experienced severe fiscal
difficulties and have reported operating and accumulated deficits in recent
years. The most notable of them is the City of Bridgeport, which filed a
bankruptcy petition on June 7, 1991. The State opposed the petition. The
United States Bankruptcy Court for the District of Connecticut has held that
Bridgeport had authority to file such a petition but that its petition should
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be dismissed on the grounds that Bridgeport was not insolvent when the
petition was filed. Regional economic difficulties, reductions in revenues,
and increased expenses could lead to further fiscal problems for the State and
its political subdivisions, authorities, and agencies. This could result in
declines in the value of their outstanding obligations, increases in their
future borrowing costs, and impairment of their ability to pay debt service on
their obligations.
INVESTMENT LIMITATIONS
The following investment limitation is a matter 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."
1. The Fund will not borrow money directly or pledge securities except,
under certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge up to 10% of the value of its total
assets to secure such borrowings.
The following investment limitation may be changed by Galaxy's Board of
Trustees without shareholder approval. Shareholders will be notified before
any material change in this limitation becomes effective:
2. The Fund will not invest more than 5% of its total assets in
industrial development bonds or other Connecticut Municipal Securities when
the payment of principal and interest is the responsibility of companies
(or guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor.
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.
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitation, as set forth in this
Prospectus and the Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the 1940 Act. In particular, the Fund will comply with the
various requirements of Rule 2a-7 which regulates money market mutual funds.
The Fund will determine the effective maturity of its respective investments,
as well as its ability to consider a security as having received the requisite
short-term ratings by Rating Agencies, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
PRICING OF SHARES
Net asset value per Share of the Fund is determined as of 11:00 a.m.
(Eastern Time) and 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, 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 by dividing the value of all securities and other
assets attributable to the Fund, less the liabilities attributable to the
Fund, by the number of outstanding shares of the Fund.
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The assets in the Fund are valued based upon the amortized cost method.
Pursuant to this method, a security is valued by reference to the Fund's
acquisition cost as adjusted for amortization of premium or accretion of
discount, regardless of the impact of fluctuating interests rates on the
market value of the security. Although Galaxy seeks to maintain the net asset
value per share of the Fund at $1.00, there can be no assurance that the net
asset value per share will not vary.
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 Distributor has established several procedures to enable different types
of investors to purchase Shares of the Fund. Shares may be purchased by 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 ("Institutions") on behalf of
their customers ("Customers"). Shares may also be purchased by individuals or
corporations, who submit a purchase application to Galaxy, purchasing directly
either for their own accounts or for the accounts of others ("Direct
Investors"). Purchases may take place only on days on which the Distributor,
Galaxy's custodian and Galaxy's transfer agent are open for business
("Business Days"). If an Institution accepts a purchase order from a 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
Distributor's procedures. Shares of the Fund will be issued only in exchange
for monetary consideration as described below.
PURCHASE PROCEDURES--CUSTOMERS OF INSTITUTIONS
Purchase orders for Shares are placed by Customers of Institutions through
their Institution. The Institution is responsible for transmitting Customer
purchase orders to the Distributor 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. Shares
purchased by Institutions on behalf of their Customers will normally be held
of record by the Institutions and beneficial ownership of Shares will be
recorded by the Institutions and reflected in the account statements provided
to their Customers. Galaxy's transfer agent may establish an account of record
for each Customer of an Institution reflecting beneficial ownership of Shares.
Depending on the terms of the arrangement between a particular Institution and
Galaxy's transfer agent, confirmations of Share purchases and redemptions and
pertinent account statements will either be sent by Galaxy's transfer agent
directly to a Customer with a copy to the Institution, or will be furnished
directly to the Customer by the Institution. Other procedures for the purchase
of Shares established by Institutions in connection with the requirements of
their Customer accounts may apply. Customers wishing to purchase Shares
through their Institution should contact such entity directly for appropriate
purchase instructions.
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PURCHASE PROCEDURES--DIRECT INVESTORS
Purchases by Mail. Shares may be purchased by completing a purchase
application and mailing it, together with a check payable to the Fund, to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
All purchase orders placed by mail must be accompanied by a purchase
application. Applications may be obtained by calling the Distributor at (800)
628-0414.
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check for a minimum of $100 payable to the Fund in which the
additional investment is being made to Galaxy at the address above along with
either (a) the detachable form that regularly accompanies confirmation of a
prior transaction, (b) a subsequent order form that may be obtained from the
Distributor, or (c) a letter stating the amount of the investment, the name of
the Fund and the account number in which the investment is to be made. If a
Direct Investor's check does not clear, the purchase will be cancelled.
Purchases by Wire. Investors may also purchase Shares by arranging to
transmit Federal funds by wire to Fleet Bank of Massachusetts, N.A. as agent
for First Data Investor Services Group, Inc. (formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial ("First Data"), Galaxy's
transfer agent. Prior to making any purchase by wire, an investor must
telephone (800) 628-0413 to place an order and for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve
System to:
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
ABA # 0110-0013-8
DDA # 79673-5702
Ref: The Galaxy Fund
Shareholder Name
Shareholder Account Number
Direct Investors making initial investments by wire must promptly complete a
purchase application and forward it to The Galaxy Fund, Box 7, 440 Lincoln
Street, Worcester, Massachusetts 01653-0007. Applications may be obtained by
calling the Distributor at (800) 628-0414. Redemptions will not be processed
until the application in proper form has been received by 440 Financial.
Direct Investors making subsequent investments by wire should follow the
instructions above.
OTHER PURCHASE INFORMATION.
Investment Minimums. Except as provided in "Investor Programs" below, the
minimum initial investment by a Direct Investor, or initial aggregate
investment by an Institution investing on behalf of its Customers, is $2,500.
The minimum investment for subsequent purchases is $100. There are no minimum
investment requirements for investors participating in the Automatic
Investment Program described below. Customers may agree with a particular
Institution to varying minimum initial and minimum subsequent purchase
requirements with respect to their accounts.
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Galaxy reserves the right to reject any purchase order, in whole or in part,
or to waive any minimum investment requirement. The issuance of Shares to
Direct Investors and Institutions is recorded on the books of Galaxy and Share
certificates will not be issued.
Effective Time of Purchases. A purchase order for Shares received and
accepted by the Distributor on a Business Day will be executed at the net
asset value per share next determined after receipt of the order and will
receive the dividend declared on the day of purchase if Galaxy's custodian
receives the purchase price in Federal funds or other immediately available
funds by 11:00 a.m. (Eastern Time) that day. Purchase orders received after
11:00 a.m. (Eastern Time) and prior to 4:00 p.m. (Eastern Time) on a Business
Day for which such funds have been received by 4:00 p.m. will be effective as
of 4:00 p.m, and investors will begin receiving dividends the following day.
Purchase orders made by Direct Investors are not effective until the amount to
be invested has been converted to Federal funds. In those cases in which a
Director Investor pays for Shares by check, Federal funds will generally
become available two business days after a purchase order is received. In
certain circumstances, Galaxy may not require that amounts invested by
Institutions on behalf of their Customers be converted into Federal funds. If
an Institution accepts a purchase order from a 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 above procedures.
REDEMPTION PROCEDURES--CUSTOMERS OF INSTITUTIONS
Customers of Institutions may redeem all or part of their Shares in
accordance with procedures governing their accounts at Institutions. It is the
responsibility of the Institutions to transmit redemption orders to the
Distributor and credit their Customers' accounts with the redemption proceeds
on a timely basis. No charge for wiring redemption payments to Institutions is
imposed by Galaxy, although Institutions may charge a Customer's account for
redemption services. Information relating to such redemption services and
charges, if any, is available from the Institutions.
REDEMPTION PROCEDURES--DIRECT INVESTORS
Direct Investors may redeem all or part of their Shares in accordance with
any of the procedures described below.
Redemption by Mail. Shares may be redeemed by a Direct Investor by
submitting a written request for redemption to:
The Galaxy Fund
Box 7
440 Lincoln Street
Worcester, MA 01653-0007
A written redemption request must (i) state the number of Shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the Shares are
registered. A redemption request for an amount in excess of $50,000, or for
any amount where (i) the proceeds are to be sent elsewhere than the address of
record (excluding the transfer of assets to a successor custodian), (ii) the
proceeds are to be sent to an address of record which has changed in the
preceding 90 days, or (iii) the check is to be made payable to someone other
than the registered owner(s), must be accompanied by signature guarantees. The
guarantor of a signature must be a bank which is a member of the FDIC, a trust
company, a member firm of a national securities exchange or any other eligible
guarantor institution. First Data will not accept guarantees from notaries
public. First Data may require additional supporting documents for
14
<PAGE>
redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received
until First Data receives all required documents in proper form. The Fund
ordinarily will make payment for Shares redeemed by mail within three Business
Days after proper receipt by First Data of the redemption request. Questions
with respect to the proper form for redemption requests should be directed to
First Data at (800) 628-0413.
Redemption by Telephone. Direct Investors may redeem Shares by calling (800)
628-0413 and instructing the Distributor to mail a check for redemption
proceeds of up to $50,000 to the address of record. A redemption request for
an amount in excess of $50,000, or for any amount where (i) the proceeds are
to be sent elsewhere than the address of record (excluding the transfer of
assets to a successor custodian, (ii) the proceeds are to be sent to an
address of record which has changed in the preceding 90 days, or (iii) the
check is to be made payable to someone other than the registered owner(s),
must be accompanied by signature guarantees. (See "Redemption by Mail.")
Redemption by Wire. Direct Investors who have so indicated on the
application, or have subsequently arranged in writing to do so, may redeem
Shares by instructing First Data by wire or telephone to wire the redemption
proceeds of $1,000 or more directly to a Direct Investor's account at any
commercial bank in the United States. First Data charges a $5.00 fee for each
wire redemption and the fee is deducted from the redemption proceeds. The
redemption proceeds must be paid to the same bank and account as designated on
the application or in written instructions subsequently received by First
Data.
Direct Investors may request that Shares be redeemed and redemption proceeds
be wired on the same day if telephone redemption instructions are received by
First Data by 11:00 a.m. (Eastern Time) on the day of redemption. Shares
redeemed and wired on the same day will not receive the dividend declared on
the day of redemption. Redemption requests made after 11:00 a.m. (Eastern
Time) will receive the dividend declared on the day of redemption, and
redemption proceeds will be wired the following Business Day. To request
redemption of Shares by wire, Director Investors should call the Distributor
at (800) 628-0418.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to Galaxy at the address listed above
under "Redemption by Mail." Such requests must be signed by the investor and
accompanied by a signature guarantee (see "Redemption by Mail" above for
details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees, or
guardians. If, due to temporary adverse conditions, Direct Investors are
unable to effect telephone transactions, Direct Investors are encouraged to
follow the procedures for transactions by wire or mail which are described
above.
Galaxy reserves the right to refuse a wire or telephone redemption if it
believes it is advisable to do so. Procedures for redeeming Shares by wire or
telephone may be modified or terminated at any time by Galaxy or First Data.
In attempting to confirm that telephone instructions are genuine, Galaxy will
use such procedures as are considered reasonable, including recording those
instructions and requesting information as to account registration (such as
the name in which an account is registered, the account number, recent
transactions in the account, and the account holder's social security number,
address and/or bank). If Galaxy fails to follow established procedures for the
authentication of telephone transactions, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
No redemption by a Direct Investor in the Fund will be processed until
Galaxy has received a completed application with respect to the Direct
Investor's account.
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If any portion of the Shares to be redeemed represents an investment made by
personal check, Galaxy reserves the right to delay payment of proceeds until
First Data is reasonably satisfied that the check has been collected, which
could take up to 15 days from the purchase date. A Direct Investor who
anticipates the need for more immediate access to his or her investment should
purchase Shares by Federal funds or bank wire or by certified or cashier's
check. Banks normally impose a charge in connection with the use of bank
wires, as well as certified checks, cashier's checks and Federal funds.
OTHER REDEMPTION INFORMATION
Galaxy reserves the right to redeem accounts (other than retirement plan
accounts) involuntarily, upon 60 days' written notice, if the account's net
asset value falls below $250 as a result of redemptions. In addition, if an
investor has agreed with a particular Institution to maintain a minimum
balance in his or her account at the Institution with respect to Fund Shares,
and the balance in such account falls below that minimum, the Customer may be
obliged by the Institution to redeem all of his or her Shares.
Redemption orders are effected at the net asset value per share next
determined after receipt and acceptance of the order. 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 redeem Shares involuntarily or make payment for redemption in
securities if it appears appropriate to do so in light of Galaxy's
responsibilities under the 1940 Act. See the Statement of Additional
Information under "Net Asset Value--Connecticut Municipal Money Market and
Massachusetts Municipal Money Market Funds," for example of when such
redemptions might be appropriate.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Direct Investors and Customers of Institutions may, after appropriate prior
authorization, exchange Shares of the Fund having a value of at least $100 for
Shares of any of the other portfolios offered by Galaxy or otherwise advised
by Fleet or its affiliates in which the Direct Investor or Customer maintains
an existing account, provided that such other shares may legally be sold in
the state of the investor's residence. The minimum initial investment to
establish an account in another portfolio offered by Galaxy or otherwise
advised by Fleet or its affiliates, except for the Institutional Treasury
Money Market Fund, by exchange is $2,500, unless with respect to Direct
Investors, at the time of the exchange the Direct Investor elects, with
respect to the portfolio into which the exchange is being made, to participate
in the Automatic Investment Program described below, in which event there is
no minimum initial investment requirement. The minimum initial investment to
establish an account by exchange in the Institutional Treasury Money Market
Fund is $2 million.
An exchange involves a redemption of all or a portion of the Shares of the
Fund and the investment of the redemption proceeds in shares of another
portfolio offered by Galaxy or otherwise advised by Fleet or its affiliates.
When Shares of the Fund are exchanged for Retail Shares of another portfolio
of Galaxy which is sold with a sales charge, the applicable sales charge, if
any, will be deducted. Shares of any investment portfolio of Galaxy acquired
by a previous exchange transaction involving shares on which a sales charge
has been paid, as well as additional shares acquired through reinvestment of
dividends or distributions on such shares, may be redeemed and the proceeds
used to purchase, without a sales charge, Retail Shares of any other
investment portfolio offered by Galaxy.
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Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in the Fund. For
further information regarding Galaxy's exchange privilege, Direct Investors
should call First Data at (800) 628-0413. Customers of Institutions should
call their Institution for such information. Customers exercising the exchange
privilege with the Money Market, Government, Tax-Exempt, U.S. Treasury,
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 and High Quality Bond Funds should
request and review these Funds' prospectuses prior to making an exchange (call
(800) 628-0414 for a prospectus). Telephone all exchanges to (800) 628-0413.
See "How to Purchase and Redeem Shares--Redemption Procedures--Direct
Investors--Redemption by Wire" above for a description of Galaxy's policies
regarding telephone instructions.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy reserves the right to terminate the exchange privilege of
any shareholder who requests more than three exchanges a year. Galaxy will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has
requested and the time period over which their exchange requests have been
made, together with the level of expense to Galaxy which will result from
effecting additional exchange requests. The exchange privilege may be modified
or terminated at any time. At least 60 days' notice of any material
modification or termination will be given to shareholders except where notice
is not required under the regulations of the Securities and Exchange
Commission.
Galaxy does not charge any exchange fee. However, Institutions may charge
such fees with respect to either all exchange requests or with respect to any
request which exceeds the permissible number of free exchanges during a
particular period. Customers of Institutions should contact their Institution
for applicable information.
For Federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor.
Before making an exchange request, the Customer should consult a tax or other
financial adviser to determine the tax consequences.
AUTOMATIC INVESTMENT PROGRAM AND SYSTEMATIC WITHDRAWAL PLAN
The Automatic Investment Program permits a Direct Investor to purchase Fund
Shares (minimum of $50 per transaction) each month. Provided the Direct
Investor's financial institution allows automatic withdrawals, Fund shares are
purchased by transferring funds from a Direct Investor's checking, bank money
market, NOW or savings account designated by the Direct Investor. The account
designated will be debited in the specified amount, and Fund shares will be
purchased on a monthly or quarterly basis, on any Business Day designated by a
Direct Investor. If the designated day falls on a weekend or holiday, the
purchase will be made on the Business Day closest to the designated day. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated.
The Systematic Withdrawal Plan permits a Direct Investor to automatically
redeem Fund Shares on a monthly, quarterly, semi-annual, or annual basis on
any Business Day designated by a Direct Investor, if the account has a
starting value of at least $10,000. If the designated day falls on a weekend
or holiday, the redemption will be made on the Business Day closest to the
designated day. Proceeds of the redemption will be sent to the shareholder's
address of record or financial institution within three Business Days of the
redemption. If redemptions exceed purchases and dividends, the number of
shares in the account will be reduced. Investors may terminate the Systematic
Withdrawal Plan at any time upon written notice to the Transfer Agent (but not
less than five days before a payment date). There is no charge for this
service.
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COLLEGE INVESTMENT PROGRAM
The College Investment Program (the "College Program") permits an investor
to open an account with Galaxy and purchase Shares of the Fund with a minimum
amount of $100 for initial or subsequent investments, except that if the
investor purchases Shares through the Automatic Investment Program, the
minimum per transaction is $50. The College Program is designed to assist
investors who want to finance a college savings plan. See "Investor Programs--
Automatic Investment Program and Systematic Withdrawal Plan" for information
on the Automatic Investment Program. Galaxy reserves the right to redeem
accounts participating in the College Program involuntarily, upon 60 days'
written notice, if the account's net asset value falls below the applicable
minimum initial investment as a result of redemptions. See "How to Purchase
and Redeem Shares--Other Redemption Information" above for further
information.
Investors in the College Program will receive consolidated monthly
statements of their accounts. Detailed information concerning College Program
accounts and applications may be obtained from Galaxy's distributor (call
(800)628-0413).
CHECKWRITING
Checkwriting is available for Direct Investors with respect to the Fund. A
charge for use of the checkwriting privilege may be imposed by Galaxy. There
is no limit to the number of checks a Direct Investor may write per month in
an amount per check of $250 or more. To obtain checks, a Direct Investor must
complete the signature card that accompanies the account application. To
establish this checkwriting service after opening an account in the Fund,
Direct Investors must contact the Distributor by telephone (1-800-628-0414) or
mail to obtain a signature card. A signature guarantee may be required. A
DIRECT INVESTOR WILL RECEIVE THE DAILY DIVIDENDS DECLARED ON THE SHARES TO BE
REDEEMED UP TO THE DAY THAT A CHECK IS PRESENTED TO THE CUSTODIAN FOR PAYMENT.
Upon 30 days' written notice to Direct Investors, the checkwriting privilege
may be modified or terminated. An account in the Fund may not be closed by
writing a check.
DIRECT DEPOSIT PROGRAM
Direct Investors receiving social security benefits are eligible for the
Direct Deposit Program. This Program enables a Director Investor to purchase
Shares of the Fund by having social security payments automatically deposited
into his or her Fund account. There is no minimum deposit requirement. For
instructions on how to enroll in the Direct Deposit Program, Direct Investors
should call the Distributor at 1-800-628-0413. Death or legal incapacity will
terminate a Direct Investor's participation in the Program. A Direct Investor
may elect at any time to terminate his or her participation by notifying in
writing the Social Security Administration. Further, Galaxy may terminate a
Direct Investor's participation upon 30 days' notice to the Direct Investor.
INFORMATION SERVICES
GALAXY INFORMATION CENTER--24 HOUR INFORMATION SERVICE. The Galaxy Information
Center provides Fund performance and investment information 24 hours a day, 7
days a week. To access the Galaxy Information Center just call 1-800-628-0414.
VOICE RESPONSE SYSTEM. The Voice Response System provides Direct Investors
automated access to Fund and account information as well as the ability to
make telephone exchanges and redemptions. These transactions are subject to
the terms and conditions described under Investor Programs. To access the
Voice Response System, just call 1-800-FOR-GLXY (367-4599) from any touch-tone
telephone and follow the recorded instructions.
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GALAXY SHAREHOLDER SERVICES. For account information and recent exchange
transactions, Direct Investors can call Galaxy Shareholder Services Monday
through Friday, between the hours of 9:00 a.m. to 5:00 p.m. (Eastern Time) at
1-800-628-0413.
Galaxy also offers a TDD service for the hearing impaired. Just call 1-800-
696-6515, 24 hours a day, 7 days a week.
Direct Investors residing outside the United States can contact Galaxy by
calling 1-508-855-5237.
The Fund's yields reflect any fee waivers in effect, represent past
performance and will vary. If fee waivers are in effect and fees are not
waived, yields would be reduced. Past performance is no guarantee of future
results. Current yield refers to income earned by the Fund's investments over
a 7-day period. It is then annualized and stated as a percentage of the
investment. Effective yield is the same as current yield except that it
assumes the income earned by an investment in the Fund will be reinvested. An
investment in the Fund is neither insured nor guaranteed by the U.S.
Government nor is there any assurance the Fund will be able to maintain a
stable net asset value of $1.00 per share.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of the Fund is declared daily as a dividend to the
persons who are shareholders of the Fund immediately after the 11:00 a.m.
pricing of shares on the day of declaration. Net income for dividend purposes
consists of all accrued income, whether taxable or tax-exempt, plus discount
earned on the Fund's assets, less amortization of premium on such assets and
accrued expenses attributable to the Fund. The Fund does not expect to realize
net capital gains. However, if any such gains are realized, they will be paid
out to shareholders no less frequently than annually.
Dividends are paid monthly within five Business Day after the end of each
calendar month or within five Business Day after a shareholder's complete
redemption of Shares in the Fund. Institutions, unless they request otherwise,
will automatically receive dividends and distributions in cash. Institutions
may pay dividends to Customers in cash or reinvest such cash distributions in
additional shares. Direct Investors will have the option as provided on the
application of electing to (a) automatically receive dividends and
distributions in additional Shares of the Fund at the net asset value of such
Shares on the payment date or (b) receive dividends and distributions in cash.
Any revocation of such election must be made in writing to First Data and will
become effective with respect to dividends paid after its receipt.
TAXES
FEDERAL
It is intended that the Fund will 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.
The policy of the Fund is to pay dividends with respect to each taxable year
equal to at least the sum of 90% of its net exempt interest income and 90% of
its net investment company taxable income, if any. Dividends derived from
interest on Municipal Securities (known as exempt-interest dividends) may be
treated by the Fund's shareholders as items of interest excludable from their
gross income under Section 103(a) of the Code, unless
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under the circumstances applicable to a particular shareholder, exclusion
would be disallowed. (See the Statement of Additional Information under
"Additional Information Concerning Taxes.")
If the Fund should hold certain "private activity bonds" issued after August
7, 1986, shareholders must include, as an item of tax preference, the portion
of dividends paid by the Fund that is attributable to interest on such bonds
in its federal alternative minimum taxable income for purposes of determining
liability (if any) for the 26% to 28% alternative minimum tax for individuals
and the 20% alternative minimum tax and the environmental tax applicable to
corporations. Corporate shareholders must also take all exempt-interest
dividends into account in determining certain adjustments for federal
alternative minimum and environmental tax purposes. Shareholders receiving
Social Security benefits should note that all exempt-interest dividends will
be taken into account in determining the taxability of such benefits. Interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
generally is not deductible for federal income tax purposes.
Dividends from the Fund which are derived from taxable income or from long-
term or short-term capital gains will be subject to federal income tax,
whether such dividends are paid in the form of cash or additional Shares of
the Fund.
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 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Fund may be
taxable to shareholders under state or local law as dividend income, even
though all or a portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Dividends paid by the Connecticut Municipal Money Market Fund that qualify
as exempt-interest dividends for Federal income tax purposes will not be
subject to the Connecticut personal income tax, on individuals, trusts and
estates, to the extent that they are derived from Connecticut Municipal
Securities. Other Fund dividends and distributions, whether received in cash
or additional shares, are subject to this tax, except that capital gain
dividends derived from obligations issued by or on behalf of the State of
Connecticut or its political subdivisions are not subject to the tax.
Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the Federal alternative minimum tax, other than any
derived from Connecticut Municipal Securities, could cause liability for the
net Connecticut minimum tax, applicable to investors subject to the
Connecticut personal income tax who are required to pay the Federal
alternative minimum tax.
Dividends paid by the Fund, including those that qualify as exempt-interest
dividends for Federal income tax purposes, are taxable for purposes of the
Connecticut Corporation Business Tax; however, 70% (100% if the investor owns
at least 20% of the total voting power and value of the Fund's shares) of
amounts that are treated as dividends and not as exempt-interest dividends or
capital gain dividends for Federal income tax purposes are
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deductible for purposes of this tax, but no deduction is allowed for expenses
related thereto. Shares of the Fund are not subject to property tax by the
State of Connecticut or its political subdivisions.
MISCELLANEOUS
The foregoing summarizes some of the important 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 and Connecticut personal income tax consequences of distributions
made each year.
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, 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, 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 subsidiary of Fleet Financial Group, Inc., a registered
bank holding company with total assets of approximately $25 billion at June
30, 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.
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 the annual rate of .40% of the first $750,000,000 of the
average daily net assets of the Fund plus .35% of the average daily net assets
of the Fund in excess of $750,000,000. 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.
The Predecessor Fund bore advisory fees during the most recent fiscal year
pursuant to the investment advisory agreement then in effect with Shawmut
Bank, N.A., its former adviser, at the effective annual rate of
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.42% of its average daily net assets after fee waivers. Without fee waivers,
the Predecessor Fund would have borne advisory fees at the annual rate of .50
of 1% of its 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 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 their net asset value per share or result
in financial losses 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, 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.
The Predecessor Fund bore administration fees during its most recent fiscal
year pursuant to the administration agreement then in effect with Federated
Administrative Services, its prior administrator, at the effective annual rate
of .121% of its average daily net assets after fee waivers. Without fee
waivers, the Predecessor Fund would have borne administration fees at the
annual rate of .126% of its 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
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of shares in the Fund, Class V shares. 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 these other portfolios, which are offered through separate
prospectuses, contact the Distributor at (800) 628-0414. The Fund is
classified as a non-diversified company under the 1940 Act.
Each share of Galaxy (irrespective of series designation) has a par value of
$.001, 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 has adopted a Shareholder Services Plan pursuant to which the Fund
may pay up to .25% (on an annualized basis) of the average daily net asset
value of the Fund to Institutions (including Fleet Bank and its affiliates) in
consideration for certain support services enumerated below. Such services
will be provided to Customers who are the beneficial owners of shares. These
services supplement the services provided by 440 Financial as administrator
and transfer agent, and are described more fully in the Statement of
Additional Information under "Shareholder Services Plan." Services under the
Shareholder Services Plan may include: aggregating and processing purchase and
redemption requests and placing net purchase and redemption orders with the
Distributor; processing dividend payments from the Fund; providing Customers
with information as to their positions in shares; providing sub-accounting
with respect to shares or the information necessary for sub-accounting; and
providing periodic mailings to Customers.
As of the date of this Prospectus, Galaxy will enter into servicing
agreements under the Shareholder Services Plan and intends to limit the
payment under these servicing agreements for the Fund to no more than .10% (on
an annualized basis) of the average daily net asset value of the Shares of the
Fund beneficially owned by Customers of Institutions. Galaxy understands that
Institutions may charge fees to their Customers who are owners of 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 Shares.
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
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of Additional Information. Communications to First Data should be directed to
First Data at P.O. Box 15108, 4400 Computer Drive, Westboro, Massachusetts
01581.
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 includes 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 other relevant
indexes or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, such data is reported in national financial publications such as
Donoghue's Money Fund Report(R), a widely recognized independent publication
that monitors the performance of mutual funds. Also, the Fund's yield data may
be reported to national financial publications including, but not limited to,
Money Magazine, Forbes, Barron's, The Wall Street Journal, and The New York
Times, or in publications of a local or regional nature. The Fund's
performance may also be compared to the average yields reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical
areas.
The yields of the Fund will refer to the income generated over a seven-day
period identified in the advertisement. This income is annualized, i.e., the
income during a particular week is assumed to be generated each week over a
52-week period, and is shown as a percentage of the investment. The Fund may
also advertise its "effective yield" which is calculated similarly but, when
annualized, the income from an investment in the Fund is assumed to be
reinvested. Consequently, the "effective yield" will be slightly higher
because of the compounding effect of the assumed reinvestment. Also, the Fund
may from time to time advertise a "tax-equivalent yield" to demonstrate the
level of taxable yield necessary to produce an after-tax yield equivalent to
that achieved by the Fund. The "tax-equivalent yield" will be computed by
dividing the tax-exempt portion of the Fund's yield by a denominator
consisting of one minus a stated combined Federal and state income tax rate
and adding the product to that portion, if any, of the Fund's yield which is
not tax-exempt.
The Fund's yields will fluctuate and any quotation of yield should not be
considered as representative of future performance of the Fund. 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 is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses, and market conditions. Any
fees charged by Institutions with respect to accounts of Customers that have
invested in Shares of the Fund will not be included in calculations of yield.
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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.
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 Galaxy, the Fund or a particular investment portfolio
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 the Fund or portfolio (irrespective of series
designation), or (b) 67% or more of the shares of Galaxy or the Fund or
portfolio (irrespective of series designation) present at a meeting if more
than 50% of the outstanding shares of Galaxy or the Fund or portfolio
(irrespective of series designation) are represented at the meeting in person
or by proxy.
Inquiries regarding the Fund 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).
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