<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1998
Securities Act File No. 33-4806
Investment Company Act File No. 811-4636
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/x/
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 33
and /x/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/x/
Amendment No. 34
/x/
The Galaxy Fund
(Exact Name of Registrant as Specified in Charter)
4400 Computer Drive
Westboro, Massachusetts 01581-5108
(Address of Principal Executive Officers)
Registrant's Telephone Number:
(800) 628-0414
W. Bruce McConnel, III
DRINKER BIDDLE & REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
(Name and Address of Agent for Service)
Copy to:
Jylanne Dunne, Vice President
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581-5108
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ x ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Class BB, Class CC and Class DD
shares of beneficial interest.
<PAGE>
THIS POST-EFFECTIVE AMENDMENT IS BEING FILED SOLELY IN ORDER TO REGISTER
SHARES OF THREE NEW FUNDS, I.E. PRIME RESERVES, GOVERNMENT RESERVES AND
TAX-EXEMPT RESERVES. ACCORDINGLY, THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL
INFORMATION FOR REGISTRANT'S MONEY MARKET, GOVERNMENT, EQUITY VALUE,
INTERMEDIATE GOVERNMENT INCOME, TAX-EXEMPT, U.S. TREASURY, INTERNATIONAL EQUITY,
EQUITY GROWTH, EQUITY INCOME, HIGH QUALITY BOND, SMALL COMPANY EQUITY,
SHORT-TERM BOND, TAX-EXEMPT BOND, ASSET ALLOCATION, NEW YORK MUNICIPAL BOND,
CONNECTICUT MUNICIPAL BOND, MASSACHUSETTS MUNICIPAL BOND, RHODE ISLAND MUNICIPAL
BOND, INSTITUTIONAL GOVERNMENT MONEY MARKET, CORPORATE BOND, GROWTH AND INCOME,
CONNECTICUT MUNICIPAL MONEY MARKET, MASSACHUSETTS MUNICIPAL MONEY MARKET, SMALL
CAP VALUE, NEW JERSEY MUNICIPAL BOND, MIDCAP EQUITY AND STRATEGIC EQUITY FUNDS
ARE NOT INCLUDED IN THIS FILING.
<PAGE>
THE GALAXY FUND
(Prime Reserves, Government Reserves and
Tax-Exempt Reserves)
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
-----------------------------------------------
Part A
Item No. Prospectus Heading
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1. Cover Page . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . Expense Summary
3. Condensed Financial
Information. . . . . . . . . . Not Applicable
4. General Description of
Registrant . . . . . . . . . . Investment Objectives and Policies;
Investments, Strategies and Risks;
Investment Limitations; Description
of Galaxy and its Shares
5. Management of the Fund . . . . Management of the Funds; Investment
Objectives and Policies; Investment
Adviser; Authority to Act as
Investment Adviser; Administrator;
Custodian and Transfer Agent;
Expenses; Performance Reporting;
Miscellaneous
5A. Management's Discussion of
Fund Performance . . . . . . . Not Applicable
6. Capital Stock and Other
Securities . . . . . . . . . . Dividends and Distributions; Taxes;
Description of Galaxy and Its
Shares; Miscellaneous
7. Purchase of Securities
Being Offered. . . . . . . . . How to Purchase and Redeem Shares;
Distributor; Purchase of Shares;
Other Purchase and Redemption
Information
8. Redemption or
Repurchase. . . . . . . . . How to Purchase and Redeem Shares;
Distributor; Redemption of Shares;
Other Purchase and Redemption
Information
9. Pending Legal
Proceedings . . . . . . . . Not Applicable
-1-
<PAGE>
QUICK ASSETS MANAGEMENT SERVICE
THE GALAXY FUND
Prime Reserves
Government Reserves
Tax-Exempt Reserves
Prospectus
_____________, 1998
Quick & Reilly
Member New York Stock Exchange
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR BY FIRST DATA DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUNDS OR BY FIRST DATA DISTRIBUTORS, INC. IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-------------
TABLE OF CONTENTS
Page
----
EXPENSE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . . . 4
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Quality Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prime Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Government Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax-Exempt Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENTS, STRATEGIES AND RISKS . . . . . . . . . . . . . . . . . . . . . 7
U.S. Government Obligations. . . . . . . . . . . . . . . . . . . . . . 7
Money Market Instruments . . . . . . . . . . . . . . . . . . . . . . . 7
Municipal Securities . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tender Option Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable and Floating Rate Instruments . . . . . . . . . . . . . . . . 10
Repurchase and Reverse Repurchase Agreements . . . . . . . . . . . . . 11
When-Issued and Delayed Settlement Transactions. . . . . . . . . . . . 11
Investment Company Securities. . . . . . . . . . . . . . . . . . . . . 12
Securities Lending -- Prime Reserves and Government Reserves . . . . . 12
Guaranteed Investment Contracts -- Prime Reserves. . . . . . . . . . . 13
Asset-Backed Securities -- Prime Reserves. . . . . . . . . . . . . . . 13
Other Investment Policies of the Tax-Exempt Reserves . . . . . . . . . 13
INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PRICING OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . 18
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Purchase and Redemption Information. . . . . . . . . . . . . . . 20
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20
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<PAGE>
Page
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TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
State and Local. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Authority to Act as Investment Adviser . . . . . . . . . . . . . . . . 23
Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF GALAXY AND ITS SHARES. . . . . . . . . . . . . . . . . . . . 24
Distribution and Services Plan . . . . . . . . . . . . . . . . . . . . 25
CUSTODIAN AND TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . . . 26
EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PERFORMANCE REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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<PAGE>
THE GALAXY FUND
4400 Computer Drive Contact your Quick & Reilly
Westboro, Massachusetts Personal Broker for an
01581-5108 application and information
regarding purchases, redemptions
and other shareholder services.
The Galaxy Fund ("Galaxy") is an open-end management investment company.
This Prospectus describes three series of Galaxy's shares which represent
interests in three separate diversified money market portfolios
(individually, a "Fund," collectively, the "Funds") offered to investors by
Galaxy, each having its own investment objective and policies:
The PRIME RESERVES' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal.
The Fund invests in "money market" instruments with remaining maturities of
397 days or less, such as domestic and foreign bank certificates of deposit,
bankers' acceptances, commercial paper and corporate bonds in addition to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements relating to such obligations.
The GOVERNMENT RESERVES' investment objective is to seek as high a level
of current income as is consistent with liquidity and stability of principal.
The Fund invests in obligations with remaining maturities of 397 days or
less which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements relating to such obligations.
The TAX-EXEMPT RESERVES' investment objective is to seek as high a level
of current interest income exempt from federal income tax as is consistent
with stability of principal. The Fund invests substantially all of its
assets in high quality debt obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia,
and their authorities, agencies, instrumentalities and political
subdivisions, the interest on which, in the opinion of bond counsel or
counsel to the issuer, is exempt from federal income tax ("Municipal
Securities"). The Fund's portfolio securities will generally have remaining
maturities of 397 days or less.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF
<PAGE>
MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE FUNDS, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED. THERE IS NO ASSURANCE THAT THE FUNDS 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.
Each of the Funds is advised by Fleet Investment Advisors Inc. ("Fleet")
and sponsored and distributed by First Data Distributors, Inc., which is
unaffiliated with Fleet and its parent, Fleet Financial Group, Inc., and
affiliates. The shares described in this Prospectus are offered to customers
of Quick & Reilly, Inc. ("Quick & Reilly"), an affiliate of Fleet, who
maintain a Quick Asset-Registered Trademark- account with Quick & Reilly.
See "Management of the Funds," "How to Purchase and Redeem Shares," and
"Description of Galaxy and Its Shares."
This Prospectus sets forth concisely the information about the Funds
that a prospective investor 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 relating to the Funds and 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 writing to
Galaxy at its address shown above or by contacting your Quick & Reilly
Personal Broker. The Statement of Additional Information, as it may be
amended from time to time, is incorporated by reference in its entirety into
this Prospectus.
-----------------------
_________, 1998
-2-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of each Fund's operating expenses.
Examples based on the summary are also shown.
<TABLE>
<CAPTION>
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- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-EXEMPT
(AS A PERCENTAGE OF AVERAGE NET ASSETS) RESERVES RESERVES RESERVES
- -------------------------------------- -------- -------- --------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees .36% .40% .40%
12b-1 Fees(1) .45% .40% .40%
Other Expenses .19% .20% .20%
----- ----- -----
Total Fund Operating Expenses 1.00% 1.00% 1.00%
----- ----- -----
----- ----- -----
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</TABLE>
- ---------------
(1) Long term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc.
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
------ -------
- --------------------------------------------------
<S> <C> <C>
Prime Reserves $10 $31
Government Reserves $10 $31
Tax-Exempt Reserves $10 $31
- --------------------------------------------------
- --------------------------------------------------
</TABLE>
The Expense Summary and Example are intended to assist investors in
understanding the costs and expenses that an investor in the Funds bears
directly or indirectly. The information contained in the Expense Summary and
Example reflects the expenses which each Fund expects to incur during the
current fiscal year. For more complete descriptions of these costs and
expenses, see "Management of the Funds" and "Description of Galaxy and Its
Shares" in this Prospectus. Fees charged by Quick & Reilly for services
related to an investment in the Funds are in addition to and not reflected in
the fees and expenses described above. Such fees will be deducted each month
from your Fund account(s) and will reduce your yield.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OR RATES OF RETURN. THE FUNDS ARE NEW AND ACTUAL EXPENSES
AND RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
-3-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
IN GENERAL
Fleet Investment Advisors Inc. ("Fleet"), the Funds' investment adviser,
will use its best efforts to achieve each Fund's investment objective, although
such achievement cannot be assured. The investment objective of a Fund may not
be changed without the approval of the holders of a majority of its outstanding
shares (as defined under "Miscellaneous"). Except as noted herein under
"Tax-Exempt Reserves" and below under "Investment Limitations," a Fund's
investment policies may be changed without shareholder approval. An investor
should not consider an investment in the Funds to be a complete investment
program. Each Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less in an effort to maintain a stable net asset value per share
of $1.00. The value of the Funds' portfolio securities will generally vary
inversely with changes in prevailing interest rates.
QUALITY REQUIREMENTS
Each Fund will purchase only those instruments which meet the applicable
quality requirements described below. The Prime Reserves will not purchase a
security (other than a U.S. Government security) unless the security or the
issuer with respect to comparable securities (i) is rated by at least two
nationally recognized statistical rating organizations ("Rating Agencies") (such
as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's") or Fitch IBCA, Inc. ("Fitch IBCA")) in the highest category for
short-term debt securities, (ii) is rated by the only Rating Agency that has
issued a rating with respect to such security or issuer in such Rating Agency's
highest category for short-term debt, or (iii) if not rated, the security is
determined to be of comparable quality. The Tax-Exempt Reserves will not
purchase a security (other than a U.S. Government security) unless the security
(i) is rated by at least two such Rating Agencies in one of the two highest
categories for short-term debt securities, (ii) is rated by the only Rating
Agency that has assigned a rating with respect to such security in one of such
Rating Agency's two highest categories for short-term debt, or (iii) if not
rated, the security is determined to be of comparable quality. These rating
categories are determined without regard to sub-categories and gradations. The
Funds will follow applicable regulations in determining whether a security rated
by more than one Rating Agency can be treated as being in the highest or, with
respect to the Tax-Exempt Reserves one of the two highest, short-term rating
categories. See "Investment Limitations" below.
Determinations of comparable quality shall be made in accordance with
procedures established by the Board of Trustees. Generally, if a security has
not been rated by a Rating Agency,
-4-
<PAGE>
Fleet will acquire the security if it determines that the security is of
comparable quality to securities that have received the requisite ratings.
Fleet also considers other relevant information in its evaluation of unrated
short-term securities.
PRIME RESERVES
The Prime Reserves' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in "money market" instruments
that are determined by Fleet to present minimal credit risk and meet certain
rating criteria. Instruments that may be purchased by the Prime Reserves
include obligations of domestic and foreign banks (including negotiable
certificates of deposit, non-negotiable time deposits, savings deposits and
bankers' acceptances); commercial paper (including variable and floating rate
notes); corporate bonds; obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and repurchase agreements issued
by financial institutions such as banks and broker/dealers. These instruments
have remaining maturities of 397 days or less (except for certain variable and
floating rate notes and securities underlying certain repurchase agreements).
For more information, including applicable quality requirements, see "Quality
Requirements" above and "Investments, Strategies and Risks" below.
GOVERNMENT RESERVES
The Government Reserves' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements relating to such
obligations. These instruments have remaining maturities of 397 days or less
(except for certain variable and floating rate notes and securities underlying
certain repurchase agreements). See "Investments, Strategies and Risks" below.
-5-
<PAGE>
TAX-EXEMPT RESERVES
The Tax-Exempt Reserves' investment objective is to seek as high a level of
current interest income exempt from federal income tax as is consistent with
stability of principal by investing substantially all of its assets in Municipal
Securities that present minimal credit risk and meet the rating criteria
described above under "Quality Requirements." The Fund is designed for
investors in higher tax brackets who are seeking a relatively high amount of
tax-free income with stability of principal and less price volatility than would
normally be associated with intermediate-term and longer-term Municipal
Securities.
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Fund will invest, except
during temporary defensive periods, at least 80% of its net assets in Municipal
Securities. However, the Fund may from time to time, during temporary defensive
periods, hold uninvested cash reserves or invest in taxable obligations in such
proportions as, in the opinion of Fleet, prevailing market or economic
conditions warrant. Uninvested cash reserves will not earn income. Such
taxable instruments may include (i) obligations of the U.S. Treasury; (ii)
obligations of agencies or instrumentalities of the U.S. Government; (iii)
"money market" instruments such as certificates of deposit, commercial paper or
bankers' acceptances; (iv) repurchase agreements collateralized by U.S.
Government obligations or other "money market" instruments; or (v) securities
issued by other investment companies that invest in high quality, short-term
Municipal Securities. For more information including applicable quality
requirements, see "Quality Requirements" above and "Investments, Strategies and
Risks" below.
In seeking to achieve its investment objective, the Tax-Exempt Reserves may
invest in "private activity bonds" (see "Investments, Strategies and Risks --
Municipal Securities"), the interest on which may be subject to the federal
alternative minimum tax. Investments in such securities, however, will not be
treated as investments in Municipal Securities for purposes of the 80%
requirement mentioned above and, under normal market conditions, will not exceed
20% of the Fund's net assets when added together with any taxable investments
held by the Fund.
The Fund's portfolio securities will generally have remaining maturities of
397 days or less (except for certain variable and floating rate notes and
securities underlying certain repurchase agreements). See "Investments,
Strategies and Risks" below.
-6-
<PAGE>
INVESTMENTS, STRATEGIES AND RISKS
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and time of issuance: Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial maturities of one to
ten years; and Treasury Bonds generally have initial maturities of more than ten
years. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association, are supported
by the full faith and credit of the U.S. Treasury; others, such as those of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government
to purchase the agency's obligations; still others, such as those of the Federal
Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law. Some U.S. Government obligations may be
issued as variable or floating rate instruments.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal.
However, due to fluctuations in interest rates, the market value of such
securities may vary during the period a shareholder owns shares of the Funds.
MONEY MARKET INSTRUMENTS
"Money market" instruments include bank obligations and corporate
obligations, including commercial paper and corporate bonds with remaining
maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank that is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation
("FDIC"), or by a savings and loan association or savings bank that is insured
by the FDIC. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. Investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. Investments in non-negotiable time
deposits are limited to no more than 5% of the Prime Reserves' total assets at
the time of purchase.
-7-
<PAGE>
Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds to
finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional investment risks,
including future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely affect
the payment of principal and interest on such obligations. In addition, foreign
branches of U.S. banks and U.S. branches of foreign banks may be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and recordkeeping standards than those applicable to domestic branches of U.S.
banks. Investments in the obligations of U.S. branches of foreign banks or
foreign branches of U.S. banks will be made only when Fleet believes that the
credit risk with respect to the instrument is minimal.
Commercial paper may include securities issued by corporations without
registration under the Securities Act of 1933, as amended, (the "1933 Act") in
reliance on the so-called "private placement" exemption in Section 4(2)
("Section 4(2) Paper"). Section 4(2) Paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in
an exempt transaction. Section 4(2) Paper is normally resold to other
institutional investors through or with the assistance of investment dealers
which make a market in Section 4(2) Paper, thus providing liquidity. For
purposes of each Fund's 10% limitation on purchases of illiquid instruments
described below, Section 4(2) Paper will not be considered illiquid if Fleet has
determined, in accordance with guidelines approved by the Board of Trustees,
that an adequate trading market exists for such securities. The Prime Reserves
and Tax-Exempt Reserves may also purchase Rule 144A securities. See "Investment
Limitations."
MUNICIPAL SECURITIES
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. Municipal Securities include private
activity bonds issued by or on behalf of public authorities to provide financing
aid to acquire sites or
-8-
<PAGE>
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.
The two principal classifications of Municipal Securities that may be held
by the Tax-Exempt Reserves are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment, but not a legal obligation, of the state or municipality which
created the issuer. There is no limitation on the amount of moral obligation
securities that may be held by the Fund.
Municipal Securities may include variable rate demand notes, which 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
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. 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.
Municipal Securities purchased by the Tax-Exempt Reserves in some cases may
be insured as to the timely payment of principal and interest. There is no
guarantee, however, that the insurer will meet its obligations in the event of a
default in payment by
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the issuer. In other cases, Municipal Securities may be backed by letters of
credit or guarantees issued by domestic or foreign banks or other financial
institutions which are not subject to federal deposit insurance. Adverse
developments affecting the banking industry generally or a particular bank or
financial institution that has provided its credit or guarantee with respect to
a Municipal Security held by the Tax-Exempt Reserves, including a change in the
credit quality of any such bank or financial institution, could result in a loss
to the Fund and adversely effect the value of its shares. As described above
under "Money Market Instruments," letters of credit and guarantees issued by
foreign banks and financial institutions involve certain risks in addition to
those of similar instruments issued by domestic banks and financial
institutions.
TENDER OPTION BONDS
The Tax-Exempt Reserves 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 securities. 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.
Fleet 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 a tender option bond will adversely affect
the quality and marketability of the security.
VARIABLE AND FLOATING RATE INSTRUMENTS
Securities purchased by the Funds may include variable and floating rate
instruments. Variable rate instruments provide for periodic adjustments in the
interest rate. Floating rate instruments provide for automatic adjustment of
the interest rate whenever some other specified interest rate changes. Some
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, a Fund may demand payment of principal and accrued interest at a time
specified in the instrument or may resell the instrument to a third party. In
the event an issuer of a variable or floating rate obligation defaulted on its
payment obligation, a Fund might be unable to dispose of the note because of the
absence of a
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secondary market and could, for this or other reasons, suffer a loss to the
extent of the default. Variable or floating rate instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities are
similar in form but may have a more active secondary market. Substantial
holdings of variable and floating rate instruments could reduce portfolio
liquidity.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price ("repurchase
agreements"). Repurchase agreements will only be entered into with financial
institutions such as banks and broker/dealers that are deemed to be creditworthy
by Fleet under guidelines approved by Galaxy's Board of Trustees. No Fund will
enter into repurchase agreements with Fleet or any of its affiliates. 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 each Fund's 10%
limitation on purchases of illiquid instruments described below.
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 a Fund at
not less than the agreed upon repurchase price. If the seller defaulted on its
repurchase obligation, the Fund holding such obligation would suffer a loss to
the extent that the proceeds from a sale of the underlying securities (including
accrued interest) were less than the repurchase price (including accrued
interest) under the agreement. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. Income on repurchase agreements is
taxable. The Tax-Exempt Reserves' investment in repurchase agreements will be,
under normal market conditions, subject to the 20% overall limit on taxable
obligations.
The Prime Reserves and Government Reserves may also borrow funds for
temporary purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). A reverse
repurchase agreement involves the risk that the market value of the securities
sold by a Fund may decline below the repurchase price. A Fund would pay
interest on amounts obtained pursuant to a reverse repurchase agreement.
WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS
Each Fund may purchase securities on a "when-issued" or "delayed
settlement" basis. When-issued transactions, which
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involve a commitment by a Fund to purchase 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 intends to
purchase, regardless of future changes in interest rates. Delayed settlement
describes settlement of a securities transaction in the secondary market
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. It is expected that, absent unusual market conditions,
commitments by a Fund to purchase securities on a when-issued or delayed
settlement basis will not exceed 25% of the value of its total assets. These
transactions will not be entered into for speculative purposes, but only in
furtherance of a Fund's investment objective.
INVESTMENT COMPANY SECURITIES
Each Fund may invest in securities issued by other open-end investment
companies that (a) invest in high quality, short-term instruments in which the
Fund may invest directly (limited with respect to the Tax-Exempt Reserves to
high quality short-term Municipal Securities) and that meet the applicable
quality requirements described above under "Quality Requirements" and (b)
determine their net asset value per share based on the amortized cost or
penny-rounding method. Investments in other investment companies will cause a
Fund (and, indirectly, the Fund's shareholders) to bear proportionately the
costs incurred in connection with the investment companies' operations. Such
securities may be acquired by a Fund within the limits prescribed by the
Investment Company Act of 1940, as amended, (the "1940 Act"). Except as
otherwise permitted under the 1940 Act, each Fund currently intends to limit its
investments in other investment companies 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 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. A 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.
SECURITIES LENDING -- PRIME RESERVES AND GOVERNMENT RESERVES
The Prime Reserves and Government Reserves may lend their portfolio
securities to financial institutions such as banks and broker/dealers in
accordance with their investment limitations. Such loans would involve risks of
delay in receiving additional collateral or in recovering the securities loaned
or even loss of
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rights in the collateral should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would also
be subject to possible depreciation. Loans will generally be short-term, and
will be made only to borrowers deemed by Fleet to be of good standing and only
when, in Fleet's judgment, the income to be earned from the loan justifies the
attendant risks. The Funds currently intend to limit the lending of their
portfolio securities so that, at any given time, securities loaned by a Fund
represent not more than one-third of the value of its total assets.
GUARANTEED INVESTMENT CONTRACTS -- PRIME RESERVES
The Prime Reserves may invest in guaranteed investment contracts ("GICs")
issued by United States insurance companies. Pursuant to such contracts, the
Fund makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation of
the issuing insurance company and not a separate account. The purchase price
paid for a GIC becomes part of the general assets of the insurance company, and
the contract is paid from the company's general assets. The Fund will only
purchase GICs that are issued or guaranteed by insurance companies that at the
time of purchase are rated in accordance with the applicable quality
requirements described above under "Quality Requirements." GICs are considered
illiquid securities and will be subject to the Fund's 10% limitation on illiquid
investments, unless there is an active and substantial secondary market for the
particular instrument and market quotations are readily available.
ASSET-BACKED SECURITIES -- PRIME RESERVES
The Prime Reserves may purchase asset-backed securities which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables and credit card receivables. The
Fund will only purchase asset-backed securities that meet the applicable quality
requirements described above under "Quality Requirements." See "Asset-Backed
Securities" in the Statement of Additional Information relating to the Fund.
OTHER INVESTMENT POLICIES OF THE TAX-EXEMPT RESERVES
The Tax-Exempt Reserves may acquire "stand-by commitments" with respect to
Municipal Securities held by it. Under a stand-by commitment, a dealer agrees
to purchase at the Fund's option specified Municipal Securities at a specified
price. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments acquired by the Fund
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would be valued at zero in determining the Fund's net asset value. The default
or bankruptcy of a securities dealer giving such a commitment would not affect
the quality of the Municipal Securities purchased by the Fund. However, without
a stand-by commitment, these securities could be more difficult to sell. The
Fund will enter into stand-by commitments only with those dealers whose credit
Fleet believes to be of high quality.
Although the Fund does not presently intend to do so on a regular basis, it
may invest more than 25% of its assets in Municipal Securities the interest on
which is paid solely from revenues of similar projects. To the extent that the
Fund's assets are concentrated in Municipal Securities payable from revenues on
similar projects, the Fund will be subject to the peculiar risks presented by
such projects to a greater extent than it would be if its assets were not so
invested.
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy and
may not be changed with respect to a Fund without the affirmative vote of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of Additional
Information under "Investment Objectives and Policies."
No Fund may:
1. Make loans, except that (i) each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies, (ii)
each Fund may enter into repurchase agreements with respect to portfolio
securities, and (iii) the Prime Reserves and Government Reserves each may
lend portfolio securities against collateral consisting of cash or
securities that are consistent with the Fund's permitted investments, where
the value of the collateral is equal at all times to at least 100% of the
value of the securities loaned.
2. Purchase securities of any one issuer if immediately after such
purchase more than 5% of the value of its total assets would be invested in
the securities of such issuer (the "5% limitation"), except that up to 25%
of the value of its total assets may be invested without regard to the 5%
limitation; notwithstanding the foregoing restriction, each Fund may invest
without regard to the 5% limitation in U.S. Government obligations and as
otherwise permitted in accordance with Rule 2a-7 under the 1940 Act or any
successor rule.
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3. Borrow money or issue senior securities, except that each Fund
may borrow from banks for temporary purposes, and then in amounts not in
excess of 10% of the value of its total assets at the time of such
borrowing, provided, however, that the Prime Reserves and Government
Reserves may borrow pursuant to reverse repurchase agreements in accordance
with their respective investment policies and in amounts not in excess of
10% of the value of their respective total assets at the time of such
borrowings; or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of a Fund's total
assets at the time of such borrowing. A Fund will not purchase any
portfolio securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
4. Knowingly invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days, restricted securities, non-negotiable time deposits and
other securities which are not readily marketable.
In addition, the Prime Reserves and Government Reserves may not:
5. Purchase securities that would cause 25% or more of the value of
a Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or, with respect to the
Prime Reserves, by domestic banks or U.S. branches of foreign banks that
are subject to the same regulation as domestic banks; (b) with respect to
the Prime Reserves, wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily
related to financing the activities of the parents; and (c) with respect to
the Prime Reserves, utilities will be classified according to their
services (for example, gas, gas transmission, electric and gas, electric
and telephone each will be considered a separate industry).
In addition, the Tax-Exempt Reserves may not:
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6. Purchase any securities that would cause 25% or more of the value
of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that there is no
limitation with respect to securities issued or guaranteed by the United
States, any state, territory or possession of the U.S. Government, the
District of Columbia, or any of their authorities, agencies,
instrumentalities, or political subdivisions.
With respect to Investment Limitation No. 2 above: (a) a security is
considered to be issued by the governmental entity or entities whose assets and
revenues back the security or, with respect to a private activity bond that is
backed only by the assets and revenues of a non-governmental user, such
non-governmental user; (b) in certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee; and (c) securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (including securities backed by the full faith
and credit of the United States) are deemed to be U.S. Government obligations.
With respect to Investment Limitation No. 3 above, each of the Prime
Reserves and Government Reserves intends to limit any borrowings, including
reverse repurchase agreements, to not more than 10% of the value of its total
assets at the time of such borrowing.
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 generally will not constitute a violation of the
limitation.
Each Fund may follow non-fundamental operating policies that are more
restrictive than its fundamental investment limitations, as set forth in this
Prospectus and the Statement of Additional Information relating to the Funds in
order to comply with applicable laws and regulations, including the provisions
of and regulations under the 1940 Act. In particular, each Fund will comply
with the various requirements of Rule 2a-7 under the 1940 Act, which regulates
money market funds. In accordance with Rule 2a-7, each of the Prime Reserves
and Tax-Exempt Reserves is subject to the 5% limitation contained in Investment
Limitation No. 2 above as to all of its assets; however, in accordance with such
Rule, each such Fund will be able to invest more than 5% (but no more than 25%)
of its total assets in the securities of a single issuer, for a period of up to
three business days after the purchase thereof, provided that the Fund may not
hold more than one such investment at any one time. Adherence by a Fund to the
diversification requirements of Rule 2a-7 is deemed to
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constitute adherence to the diversification requirements of Investment
Limitation No. 2 above. Each 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. A Fund may change these operating policies to reflect
changes in the laws and regulations without the approval of its shareholders.
Rule 144A under the 1933 Act allows for a broader institutional trading
market for securities otherwise subject to restrictions on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Investment by the Prime Reserves or Tax-Exempt Reserves
in Rule 144A securities could have the effect of increasing the level of
illiquidity of the Fund during any period that qualified institutional buyers
were no longer interested in purchasing these securities. For purposes of each
Fund's 10% limitation on purchases of illiquid instruments, Rule 144A securities
will not be considered to be illiquid if Fleet has determined, in accordance
with guidelines established by the Board of Trustees, that an adequate trading
market exists for such securities.
PRICING OF SHARES
Net asset value per share of each Fund is determined as of 12:00 Noon
(Eastern Time) and the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 4:00 p.m. (Eastern Time), on each day the
Exchange is open. Currently, the holidays which Galaxy observes are New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset
value per share of a Fund for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets of the Fund,
less the liabilities of the Fund, by the number of outstanding shares of the
Fund.
The assets in each Fund are valued based upon the amortized cost method.
Pursuant to this method, a security is valued by reference to a Fund's
acquisition cost as adjusted for amortization of premium or accretion of
discount. Although Galaxy seeks to maintain the net asset value per share of
each Fund at $1.00, there can be no assurance that the net asset value per share
will not vary.
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HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds are sold on a continuous basis by Galaxy's distributor,
First Data Distributors, Inc. ("FD Distributors"), a wholly-owned subsidiary of
First Data Investor Services Group, Inc. FD Distributors is a registered
broker/dealer with principal offices located at 4400 Computer Drive, Westboro,
Massachusetts 01581-5108.
PURCHASE OF SHARES
Shares of the Funds are offered to customers of Quick & Reilly who maintain
a Quick Asset-Registered Trademark- account with Quick & Reilly.
OPENING A FUND ACCOUNT. Contact your Quick & Reilly Personal Broker to
open a Fund account. The minimum investment requirement is $500. Account
balances will appear on your Quick & Reilly monthly statement.
SUBSEQUENT INVESTMENTS. You may make a subsequent investment to an
existing Fund account using either of the methods described below:
BY CHECK THROUGH QUICK & REILLY. Mail or deliver your check payable to
U.S. Clearing, a division of Fleet Securities, Inc., to your Quick & Reilly
Personal Broker who will deposit it into the Fund(s). Please indicate the
appropriate Fund(s) and indicate your brokerage account number on the check
or draft.
BY SWEEP. Quick & Reilly has available an automatic "sweep" for
customers in the Funds. If you request the sweep arrangement, all cash
balances are moved into one of the Funds on a daily basis by Quick & Reilly
on your behalf. Sales proceeds in total from trades will be swept into the
designated Fund on settlement date.
GENERAL PURCHASE INFORMATION. Quick & Reilly is responsible for
transmitting to FD Distributors orders for purchases of shares of the Funds and
for wiring required funds in payment to Galaxy's custodian on a timely basis.
FD Distributors is responsible for transmitting such orders to Galaxy's transfer
agent for execution. Shares purchased by Quick & Reilly on behalf of its
customers will normally be held of record by Quick & Reilly and beneficial
ownership of shares will be recorded by Quick & Reilly and reflected in the
account statements provided to its customers. Confirmations of share
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purchases and redemptions will be sent directly to Quick & Reilly. Purchases of
shares of the Funds will be effected only on days on which FD Distributors,
Galaxy's custodian and Quick & Reilly are open for business (a "Business Day").
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 of the
Funds is recorded on the books of Galaxy and share certificates will not be
issued. Payment for shares of a Fund in the amount of $1,000,000 or more may be
made, at the discretion of the respective Fund, in the form of securities that
are permissible investments for the Fund. For further information, see the
Statement of Additional Information under "Additional Purchase and Redemption
Information" or contact your Quick & Reilly Personal Broker.
REDEMPTION OF SHARES
You may redeem your Fund shares using any of the methods described below:
BY CONTACTING YOUR QUICK & REILLY PERSONAL BROKER. Instruct your Quick
& Reilly Personal Broker to order a withdrawal from your Fund and issue a
check payable to you.
BY SWEEP. Quick & Reilly's automatic "sweep" moves money automatically
from your Fund for use by your Quick & Reilly brokerage account to cover
security purchases or other charges to your account.
BY CHECKWRITING This service enables you to write checks made payable
to any payee. Checks cannot be written for more than the principal balance
(not including any accrued dividends) in your Fund. To initiate this
service, you must fill out a signature card which can be obtained from your
Quick & Reilly Personal Broker. There is no separate charge for the
checkwriting service and your checks are provided free of charge. THE
CHECKWRITING SERVICE ENABLES YOU TO RECEIVE THE DAILY DIVIDENDS DECLARED ON
THE FUND SHARES TO BE REDEEMED UNTIL THE DAY THAT THE CHECK IS PRESENTED FOR
PAYMENT.
GENERAL REDEMPTION INFORMATION. It is the responsibility of Quick & Reilly
to transmit redemption orders to FD Distributors and credit its customers'
accounts with redemption proceeds on a timely basis. No charge for wiring
redemption payments to Quick & Reilly is imposed by Galaxy, although Quick &
Reilly may charge its customers' accounts for redemption services. Information
relating to such redemption services and charges, if any, is available from
Quick & Reilly.
Galaxy will make payment for all shares redeemed after receipt of a
redemption request in proper form, except as provided by the rules of the
Securities and Exchange Commission
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(the "SEC"). 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" for examples of when such redemptions might
be appropriate. The Funds impose no charge when shares are redeemed.
OTHER PURCHASE AND REDEMPTION INFORMATION
The Funds have two transaction times each Business Day, 12:00 Noon (Eastern
Time) and the close of regular trading hours on the Exchange, currently 4:00
p.m. (Eastern Time). A purchase order for shares of a Fund received and
accepted by FD Distributors prior to 4:00 p.m. (Eastern Time) on a Business Day
will be executed at the net asset value next determined 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 prior to
4:00 p.m. (Eastern Time) that day. Shares do not earn dividends on the day a
redemption is effected regardless of whether the redemption order is effected
before or after 12:00 Noon (Eastern Time).
On a Business Day when the Exchange closes early due to a partial holiday
or otherwise, Galaxy will advance the times at which purchase and redemption
orders must be received in order to be processed on that Business Day.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund is declared daily as a dividend to
the persons who are shareholders of the respective Funds immediately after the
4:00 p.m. pricing of shares on the day of declaration. A Fund's 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. None of the Funds 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 and distributions will be reinvested in additional shares of a
Fund at the net asset value of such shares on the ex-dividend date. The
crediting and payment of dividends to customers will be in accordance with the
procedures governing such customers' accounts at Quick & Reilly.
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TAXES
FEDERAL
IN GENERAL. Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, (the "Code").
Such qualification generally relieves a Fund of liability for federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income. In general, a Fund's investment company taxable income
will be its taxable income (including interest), subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. The Prime Reserves
and Government Reserves intend to distribute substantially all of their
respective investment company taxable income and net exempt-interest income each
year. Such dividends will be taxable as ordinary income to each Fund's
shareholders who are not currently exempt from federal income taxes, whether
such income is 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.) Because all of each Fund's net investment income is
expected to be derived from earned interest, it is anticipated that no part of
any distribution will be eligible for the dividends received deduction for
corporations.
Dividends declared in October, November or December of any year that 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.
THE TAX-EXEMPT RESERVES. The Tax-Exempt Reserves' policy 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 investment company taxable income,
if any. Dividends derived from exempt-interest income ("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 Tax-Exempt Reserves should hold certain "private activity bonds"
issued after August 7, 1986, shareholders must include, as an item of tax
preference, the portion of dividends
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paid by the Fund that is attributable to interest on such bonds in their 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 applicable to corporations. Corporate shareholders must
also take all exempt-interest dividends into account in determining certain
adjustments for federal alternative minimum 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.
Dividends from the Tax-Exempt Reserves 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Tax-Exempt
Reserves 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.
Shareholders should consult their own tax advisers about the status of
distributions from the Funds in their own state.
MISCELLANEOUS
The foregoing summarizes some of the important 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 at least annually as to the federal income tax
consequences of distributions made each year.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of
Galaxy's Board of Trustees. The Statement of Additional Information contains
the names of and general background information concerning the Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at 75 State Street, Boston, Massachusetts
02109, serves as the investment adviser to the Funds. Fleet is an indirect
wholly-owned subsidiary of Fleet Financial Group, Inc., a registered bank
holding company with
-22-
<PAGE>
total assets at December 31, 1997 of approximately $85.5 billion. Fleet, which
commenced operations in 1984, also provides investment management and advisory
services to individual and institutional clients, and manages the other
portfolios of Galaxy: the Money Market, Government, U.S. Treasury, Tax-Exempt,
Connecticut Municipal Money Market, Massachusetts Municipal Money Market,
Institutional Government Money Market, Equity Value, Equity Growth, Equity
Income, International Equity, Small Company Equity, MidCap Equity, Asset
Allocation, Small Cap Value, Growth and Income, Strategic Equity, Short-Term
Bond, Intermediate Government Income, High Quality Bond, Corporate Bond,
Tax-Exempt Bond, New Jersey Municipal Bond, New York Municipal Bond, Connecticut
Municipal Bond, Massachusetts Municipal Bond and Rhode Island Municipal Bond
Funds.
Subject to the general supervision of Galaxy's Board of Trustees, Fleet
manages the Funds, makes decisions with respect to and places orders for all
purchases and sales of their portfolio securities and maintains related records.
For the services provided and expenses assumed, Fleet is entitled to
receive advisory fees, computed daily and paid monthly, at the annual rate of
.40% of the first $750,000,000 of each Fund's average daily net assets, plus
.35% of each Fund's average daily net assets in excess of $750,000,000. Fleet
may from time to time, in its discretion, waive advisory fees payable by the
Funds in order to help maintain competitive expense ratios, and may from time to
time allocate a portion of its advisory fees to Fleet Bank or other subsidiaries
of Fleet Financial Group, Inc. in consideration for administrative and/or
shareholder support services which they provide to beneficial shareholders.
Fleet is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, to the extent permitted
by law or order of the SEC, financial institutions that are affiliated with
Fleet or that have sold shares of the Funds, if Fleet believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
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 such banking laws and regulations do not prohibit such a bank
holding company or affiliate from acting as investment adviser, transfer agent,
or custodian to such an
-23-
<PAGE>
investment company or from purchasing shares of such a company as agent for and
upon the order of customers. Fleet, the custodian and Institutions that are
banks or bank affiliates are subject to such banking laws and regulations.
Should legislative, judicial or administrative action prohibit or restrict the
activities of such companies in connection with their services to the Funds,
Galaxy might be required to alter materially or discontinue its arrangements
with such companies and change its method of operations. It is not anticipated,
however, that any resulting change in the Funds' method of operations would
affect a Fund's net asset value per share or result in financial loss to any
shareholder.
ADMINISTRATOR
First Data Investor Services Group, Inc. ("Investor Services Group"),
located at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as
the Funds' administrator. Investor Services Group is a wholly-owned subsidiary
of First Data Corporation.
Investor Services Group generally assists the Funds in their administration
and operation. Investor Services Group also serves as administrator to the
other portfolios of Galaxy. For the services provided to the Funds, Investor
Services Group is entitled to receive administration fees, computed daily and
paid monthly, at the annual rate of .09% of the first $2.5 billion of combined
average daily net assets of the Funds and the other portfolios offered by Galaxy
(collectively the "Portfolios"), .085% of the next $2.5 billion of combined
average daily net assets and .075% of combined average daily net assets over $5
billion. In addition, Investor Services Group also receives a separate annual
fee from each Portfolio for certain fund accounting services. From time to
time, Investor Services Group may waive voluntarily all or a portion of the
administration fee payable to it by the Funds.
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 the Funds as follows: Class BB shares
representing interests in the Prime Reserves, Class CC shares representing
interests in the Government Reserves and Class DD shares representing interests
in the Tax-Exempt Reserves. Each Fund is classified as a diversified company
under the 1940 Act. The Board of Trustees has also authorized the issuance of
additional classes and series of shares representing interests in other
portfolios of Galaxy. For information
-24-
<PAGE>
regarding the Funds contact FD Distributors at 1-800-628-0414.
Each share of Galaxy (irrespective of series designation) has a par value
of $.001, represents an equal proportionate interest in the related investment
portfolio with other shares of the same class, and is entitled to such dividends
and distributions out of the income earned on the assets belonging to such
investment portfolio as are declared in the discretion of Galaxy's Board of
Trustees.
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by class or series, except as otherwise 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.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Funds. Under the Distribution and
Services Plan, Galaxy may pay (i) FD Distributors or another person for
distribution services provided and expenses assumed and (ii) broker-dealers or
other financial institutions ("Service Organizations") for shareholder
administrative support services provided to shareholders of the Funds.
Payments to FD Distributors are to compensate it for distribution
assistance and expenses assumed and activities primarily intended to result in
the sale of shares, including compensating dealers and other sales personnel
(which may include Quick & Reilly and other affiliates of Fleet), direct
advertising and marketing expenses and expenses incurred in connection with
preparing, printing, mailing and distributing or publishing advertisements and
sales literature, for printing and mailing Prospectuses and Statements of
Additional Information (except those used for regulatory purposes or for
distribution to existing shareholders), and costs associated with implementing
and operating the Distribution and Services Plan.
The servicing agreements adopted under the Distribution and Services
Plan require the Service Organizations receiving such compensation (which may
include Quick & Reilly and other affiliates of Fleet) to perform certain
services, including providing administrative services with respect to the
beneficial owners of shares of the Funds, such as establishing and maintaining
accounts and records for their customers who invest in such shares, assisting
customers in processing purchase,
-25-
<PAGE>
exchange and redemption requests and/or in changing dividend options and account
descriptions, developing, maintaining and supporting systems necessary to
support cash management services, such as sweep arrangements, and responding to
customer inquiries concerning their investments.
Under the Distribution and Services Plan, payments by Galaxy for
distribution expenses may not exceed .75% (annualized) of the average daily net
assets of a Fund and payments for shareholder administrative support services
may not exceed .25% (annualized) of the average daily net asset value of a
Fund's outstanding shares which are owned of record or beneficially by a Service
Organization's customers for whom the Service Organization is the owner of
record or shareholder of record or with whom it has a servicing relationship.
As of the date of this Prospectus, Galaxy intends to limit payments under the
Distribution and Services Plan to an aggregate fee of not more than .45% (on an
annualized basis) of the average daily net assets of the Prime Reserves and not
more than .40% (on an annualized basis) of the average daily net assets of the
Government Reserves and Tax-Exempt Reserves.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, located at One Chase Manhattan Plaza, New York,
New York 10081, a wholly-owned subsidiary of The Chase Manhattan Corporation,
serves as custodian of the Funds' assets, and First Data Investor Services
Group, Inc. ("Investor Services Group"), a wholly-owned subsidiary of First Data
Corporation, serves as Galaxy's transfer and dividend disbursing agent.
Services performed by both entities for the Funds are described in the Statement
of Additional Information. Communications to Investor Services Group should be
directed to Investor Services Group at P.O. Box 5108, 4400 Computer Drive,
Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and Investor Services Group bear all expenses
in connection with the performance of their advisory and administrative 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 Investor Services Group); SEC fees;
state securities fees; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareholders; advisory,
administration, shareholder servicing, Rule 12b-1 distribution, fund accounting
and custody fees; charges of the transfer agent and dividend disbursing agent;
certain insurance premiums; outside auditing and legal expenses; cost of
independent pricing services; costs
-26-
<PAGE>
of shareholder reports and meetings; and any extraordinary expenses. The Funds
also pay for any brokerage fees and commissions in connection with the purchase
of portfolio securities.
PERFORMANCE REPORTING
From time to time, in advertisements or in reports to shareholders, the
yields of the Funds, as a measure of their performance, may be quoted and
compared to those of other mutual funds with similar investment objectives and
to other relevant indices 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-Registered Trademark-, a widely recognized
independent publication that monitors the performance of mutual funds. Also,
the Funds' yield data may be 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 in publications of a local or regional
nature. The performance of the Prime Reserves and Government Reserves 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 yield of a Fund refers 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. Each 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 Tax-Exempt
Reserves 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 federal income tax rate and adding the product to that
portion, if any, of the Fund's yield which is not tax-exempt.
The Funds' yields will fluctuate and any quotation of yield should not be
considered as representative of the future performance of the Funds. Since
yields fluctuate, yield data cannot necessarily be used to compare an investment
in a Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance is
generally a function of the
-27-
<PAGE>
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged directly by
institutions to accounts of customers that have invested in shares of a Fund
will not be included in calculations of yield.
The portfolio managers of the Funds and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders and
prospective investors. The topics may include but are not limited to the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products; and tax, retirement and investment planning.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of a particular Fund means, with respect to the approval of
an investment advisory agreement or Rule 12b-1 distribution plan or a change in
an investment objective or fundamental investment policy, the affirmative vote
of the holders of the lesser of (a) more than 50% of the outstanding shares of
such Fund, or (b) 67% or more of the shares of such Fund present at a meeting if
more than 50% of the outstanding shares of such Fund are represented at the
meeting in person or by proxy.
YEAR 2000 RISKS. Like other investment companies, financial and business
organizations and individuals around the world, Galaxy could be adversely
affected if the computer systems used by Fleet and Galaxy's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." Fleet is taking steps to address the Year 2000 Problem with respect
to the computer systems that it uses and to obtain assurance that comparable
steps are being taken by Galaxy's other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on Galaxy as a result of the Year 2000 Problem.
-28-
<PAGE>
MONEY MANAGEMENT SERVICES PROGRAM
Featuring...
THE GALAXY FUND
Prime Reserves
Government Reserves
Tax-Exempt Reserves
Prospectus
_____________, 1998
U.S. Clearing,
a division of
Fleet Securities,
Inc.
26 Broadway
New York, NY 10004
Member New York Stock Exchange
Member SIPC
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR BY FIRST DATA DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUNDS OR BY FIRST DATA DISTRIBUTORS, INC. IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
---------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . 4
In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Quality Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 4
Prime Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Government Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax-Exempt Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENTS, STRATEGIES AND RISKS. . . . . . . . . . . . . . . . . . . . . 7
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . 7
Money Market Instruments. . . . . . . . . . . . . . . . . . . . . . . 7
Municipal Securities. . . . . . . . . . . . . . . . . . . . . . . . . 8
Tender Option Bonds . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable and Floating Rate Instruments. . . . . . . . . . . . . . . . 10
Repurchase and Reverse Repurchase Agreements. . . . . . . . . . . . . 11
When-Issued and Delayed Settlement Transactions . . . . . . . . . . . 11
Investment Company Securities . . . . . . . . . . . . . . . . . . . . 12
Securities Lending -- Prime Reserves and Government Reserves. . . . . 12
Guaranteed Investment Contracts -- Prime Reserves . . . . . . . . . . 13
Asset-Backed Securities -- Prime Reserves . . . . . . . . . . . . . . 13
Other Investment Policies of the Tax-Exempt Reserves. . . . . . . . . 13
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PRICING OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
HOW TO PURCHASE AND REDEEM SHARES. . . . . . . . . . . . . . . . . . . . . 18
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Purchase and Redemption Information . . . . . . . . . . . . . . 20
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 20
-i-
<PAGE>
PAGE
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
State and Local . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Investment Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Authority to Act as Investment Adviser. . . . . . . . . . . . . . . . 23
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF GALAXY AND ITS SHARES . . . . . . . . . . . . . . . . . . . 24
Distribution and Services Plan. . . . . . . . . . . . . . . . . . . . 25
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . 26
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PERFORMANCE REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-ii-
<PAGE>
THE GALAXY FUND
4400 Computer Drive Contact your Account
Westboro, Massachusetts Executive for an application
01581-5108 and information regarding
purchases, redemptions and
other shareholder services.
The Galaxy Fund ("Galaxy") is an open-end management investment company.
This Prospectus describes three series of Galaxy's shares which represent
interests in three separate diversified money market portfolios (individually, a
"Fund," collectively, the "Funds") offered to investors by Galaxy, each having
its own investment objective and policies:
The PRIME RESERVES' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in "money market" instruments with remaining maturities of 397 days
or less, such as domestic and foreign bank certificates of deposit, bankers'
acceptances, commercial paper and corporate bonds in addition to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
and repurchase agreements relating to such obligations.
The GOVERNMENT RESERVES' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in obligations with remaining maturities of 397 days or less which
are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements relating to such obligations.
The TAX-EXEMPT RESERVES' investment objective is to seek as high a level of
current interest income exempt from federal income tax as is consistent with
stability of principal. The Fund invests substantially all of its assets in
high quality debt obligations issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia, and their
authorities, agencies, instrumentalities and political subdivisions, the
interest on which, in the opinion of bond counsel or counsel to the issuer, is
exempt from federal income tax ("Municipal Securities"). The Fund's portfolio
securities will generally have remaining maturities of 397 days or less.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF
<PAGE>
MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE FUNDS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT
IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE FUNDS 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.
Each of the Funds is advised by Fleet Investment Advisors Inc. ("Fleet")
and sponsored and distributed by First Data Distributors, Inc., which is
unaffiliated with Fleet and its parent, Fleet Financial Group, Inc., and
affiliates. The shares described in this Prospectus are offered to customers
who maintain qualified accounts with brokerage firms that are clients of U.S.
Clearing, a division of Fleet Securities, Inc. ("U.S. Clearing"). See
"Management of the Funds," "How to Purchase and Redeem Shares," and
"Description of Galaxy and Its Shares."
This Prospectus sets forth concisely the information about the Funds
that a prospective investor 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 relating to the Funds and 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 writing to
Galaxy at its address shown above or by contacting your Account Executive.
The Statement of Additional Information, as it may be amended from time to
time, is incorporated by reference in its entirety into this Prospectus.
----------------------
_________, 1998
-2-
<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of each Fund's operating expenses. Examples
based on the summary are also shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-EXEMPT
(AS A PERCENTAGE OF AVERAGE NET ASSETS) RESERVES RESERVES RESERVES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees .36% .40% .40%
12b-1 Fees(1) .45% .40% .40%
Other Expenses .19% .20% .20%
----- ----- -----
Total Fund Operating Expenses 1.00% 1.00% 1.00%
----- ----- -----
----- ----- -----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the rules of the National
Association of Securities Dealers, Inc.
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
------ -------
- -------------------------------------------------
<S> <C> <C>
Prime Reserves $10 $31
Government Reserves $10 $31
Tax-Exempt Reserves $10 $31
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
The Expense Summary and Example are intended to assist investors in
understanding the costs and expenses that an investor in the Funds bears
directly or indirectly. The information contained in the Expense Summary and
Example reflects the expenses which each Fund expects to incur during the
current fiscal year. For more complete descriptions of these costs and
expenses, see "Management of the Funds" and "Description of Galaxy and Its
Shares" in this Prospectus. Fees charged by U.S. Clearing for services related
to an investment in the Funds are in addition to and not reflected in the fees
and expenses described above. Such fees will be deducted each month from your
Fund account(s) and will reduce your yield.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE FUNDS ARE NEW AND ACTUAL EXPENSES AND
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
-3-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
IN GENERAL
Fleet Investment Advisors Inc. ("Fleet"), the Funds' investment adviser,
will use its best efforts to achieve each Fund's investment objective,
although such achievement cannot be assured. The investment objective of a
Fund may not be changed without the approval of the holders of a majority of
its outstanding shares (as defined under "Miscellaneous"). Except as noted
herein under "Tax-Exempt Reserves" and below under "Investment Limitations,"
a Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Funds to be a complete
investment program. Each Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less in an effort to maintain a stable net
asset value per share of $1.00. The value of the Funds' portfolio securities
will generally vary inversely with changes in prevailing interest rates.
QUALITY REQUIREMENTS
Each Fund will purchase only those instruments which meet the applicable
quality requirements described below. The Prime Reserves will not purchase a
security (other than a U.S. Government security) unless the security or the
issuer with respect to comparable securities (i) is rated by at least two
nationally recognized statistical rating organizations ("Rating Agencies") (such
as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's") or Fitch IBCA, Inc. ("Fitch IBCA")) in the highest category for
short-term debt securities, (ii) is rated by the only Rating Agency that has
issued a rating with respect to such security or issuer in such Rating Agency's
highest category for short-term debt, or (iii) if not rated, the security is
determined to be of comparable quality. The Tax-Exempt Reserves will not
purchase a security (other than a U.S. Government security) unless the security
(i) is rated by at least two such Rating Agencies in one of the two highest
categories for short-term debt securities, (ii) is rated by the only Rating
Agency that has assigned a rating with respect to such security in one of such
Rating Agency's two highest categories for short-term debt, or (iii) if not
rated, the security is determined to be of comparable quality. These rating
categories are determined without regard to sub-categories and gradations. The
Funds will follow applicable regulations in determining whether a security rated
by more than one Rating Agency can be treated as being in the highest or, with
respect to the Tax-Exempt Reserves one of the two highest, short-term rating
categories. See "Investment Limitations" below.
Determinations of comparable quality shall be made in accordance with
procedures established by the Board of Trustees. Generally, if a security has
not been rated by a Rating Agency,
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Fleet will acquire the security if it determines that the security is of
comparable quality to securities that have received the requisite ratings.
Fleet also considers other relevant information in its evaluation of unrated
short-term securities.
PRIME RESERVES
The Prime Reserves' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in "money market" instruments
that are determined by Fleet to present minimal credit risk and meet certain
rating criteria. Instruments that may be purchased by the Prime Reserves
include obligations of domestic and foreign banks (including negotiable
certificates of deposit, non-negotiable time deposits, savings deposits and
bankers' acceptances); commercial paper (including variable and floating rate
notes); corporate bonds; obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and repurchase agreements issued
by financial institutions such as banks and broker/dealers. These instruments
have remaining maturities of 397 days or less (except for certain variable and
floating rate notes and securities underlying certain repurchase agreements).
For more information, including applicable quality requirements, see "Quality
Requirements" above and "Investments, Strategies and Risks" below.
GOVERNMENT RESERVES
The Government Reserves' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities, and repurchase agreements relating to such
obligations. These instruments have remaining maturities of 397 days or less
(except for certain variable and floating rate notes and securities underlying
certain repurchase agreements). See "Investments, Strategies and Risks" below.
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TAX-EXEMPT RESERVES
The Tax-Exempt Reserves' investment objective is to seek as high a level
of current interest income exempt from federal income tax as is consistent
with stability of principal by investing substantially all of its assets in
Municipal Securities that present minimal credit risk and meet the rating
criteria described above under "Quality Requirements." The Fund is designed
for investors in higher tax brackets who are seeking a relatively high amount
of tax-free income with stability of principal and less price volatility than
would normally be associated with intermediate-term and longer-term Municipal
Securities.
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Fund will invest, except
during temporary defensive periods, at least 80% of its net assets in Municipal
Securities. However, the Fund may from time to time, during temporary defensive
periods, hold uninvested cash reserves or invest in taxable obligations in such
proportions as, in the opinion of Fleet, prevailing market or economic
conditions warrant. Uninvested cash reserves will not earn income. Such
taxable instruments may include (i) obligations of the U.S. Treasury; (ii)
obligations of agencies or instrumentalities of the U.S. Government; (iii)
"money market" instruments such as certificates of deposit, commercial paper or
bankers' acceptances; (iv) repurchase agreements collateralized by U.S.
Government obligations or other "money market" instruments; or (v) securities
issued by other investment companies that invest in high quality, short-term
Municipal Securities. For more information including applicable quality
requirements, see "Quality Requirements" above and "Investments, Strategies and
Risks" below.
In seeking to achieve its investment objective, the Tax-Exempt Reserves may
invest in "private activity bonds" (see "Investments, Strategies and Risks --
Municipal Securities"), the interest on which may be subject to the federal
alternative minimum tax. Investments in such securities, however, will not be
treated as investments in Municipal Securities for purposes of the 80%
requirement mentioned above and, under normal market conditions, will not exceed
20% of the Fund's net assets when added together with any taxable investments
held by the Fund.
The Fund's portfolio securities will generally have remaining maturities of
397 days or less (except for certain variable and floating rate notes and
securities underlying certain repurchase agreements). See "Investments,
Strategies and Risks" below.
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INVESTMENTS, STRATEGIES AND RISKS
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities include U.S. Treasury securities, which differ only in
their interest rates, maturities and time of issuance: Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of more than ten years. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks, are supported
by the right of the issuer to borrow from the Treasury; others, such as those
of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated
to do so by law. Some U.S. Government obligations may be issued as variable
or floating rate instruments.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of
principal. However, due to fluctuations in interest rates, the market value
of such securities may vary during the period a shareholder owns shares of
the Funds.
MONEY MARKET INSTRUMENTS
"Money market" instruments include bank obligations and corporate
obligations, including commercial paper and corporate bonds with remaining
maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank that is a member of the Federal
Reserve System or is insured by the Federal Deposit Insurance Corporation
("FDIC"), or by a savings and loan association or savings bank that is insured
by the FDIC. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. Investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. Investments in non-negotiable time
deposits are limited to no more than 5% of the Prime Reserves' total assets at
the time of purchase.
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Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans
and the interest rates that may be charged. In addition, the profitability of
the banking industry is largely dependent upon the availability and cost of
funds to finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional investment risks,
including future political and economic developments, the possible imposition
of withholding taxes on interest income, possible seizure or nationalization
of foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks
may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks. Investments in the
obligations of U.S. branches of foreign banks or foreign branches of U.S.
banks will be made only when Fleet believes that the credit risk with respect
to the instrument is minimal.
Commercial paper may include securities issued by corporations without
registration under the Securities Act of 1933, as amended, (the "1933 Act") in
reliance on the so-called "private placement" exemption in Section 4(2)
("Section 4(2) Paper"). Section 4(2) Paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in
an exempt transaction. Section 4(2) Paper is normally resold to other
institutional investors through or with the assistance of investment dealers
which make a market in Section 4(2) Paper, thus providing liquidity. For
purposes of each Fund's 10% limitation on purchases of illiquid instruments
described below, Section 4(2) Paper will not be considered illiquid if Fleet has
determined, in accordance with guidelines approved by the Board of Trustees,
that an adequate trading market exists for such securities. The Prime Reserves
and Tax-Exempt Reserves may also purchase Rule 144A securities. See "Investment
Limitations."
MUNICIPAL SECURITIES
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. Municipal Securities
include private activity bonds issued by or on behalf of public authorities
to provide financing aid to acquire sites or
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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.
The two principal classifications of Municipal Securities that may be held
by the Tax-Exempt Reserves are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment, but not a legal obligation, of the state or municipality which
created the issuer. There is no limitation on the amount of moral obligation
securities that may be held by the Fund.
Municipal Securities may include variable rate demand notes, which 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
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. 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.
Municipal Securities purchased by the Tax-Exempt Reserves in some cases may
be insured as to the timely payment of principal and interest. There is no
guarantee, however, that the insurer will meet its obligations in the event of a
default in payment by
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the issuer. In other cases, Municipal Securities may be backed by letters of
credit or guarantees issued by domestic or foreign banks or other financial
institutions which are not subject to federal deposit insurance. Adverse
developments affecting the banking industry generally or a particular bank or
financial institution that has provided its credit or guarantee with respect
to a Municipal Security held by the Tax-Exempt Reserves, including a change
in the credit quality of any such bank or financial institution, could result
in a loss to the Fund and adversely effect the value of its shares. As
described above under "Money Market Instruments," letters of credit and
guarantees issued by foreign banks and financial institutions involve certain
risks in addition to those of similar instruments issued by domestic banks
and financial institutions.
TENDER OPTION BONDS
The Tax-Exempt Reserves 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 securities. 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. Fleet 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 a tender option bond will adversely affect the quality and
marketability of the security.
VARIABLE AND FLOATING RATE INSTRUMENTS
Securities purchased by the Funds may include variable and floating rate
instruments. Variable rate instruments provide for periodic adjustments in the
interest rate. Floating rate instruments provide for automatic adjustment of
the interest rate whenever some other specified interest rate changes. Some
variable and floating rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating rate obligations with a demand
feature, a Fund may demand payment of principal and accrued interest at a time
specified in the instrument or may resell the instrument to a third party. In
the event an issuer of a variable or floating rate obligation defaulted on its
payment obligation, a Fund might be unable to dispose of the note because of the
absence of a
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secondary market and could, for this or other reasons, suffer a loss to the
extent of the default. Variable or floating rate instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities are
similar in form but may have a more active secondary market. Substantial
holdings of variable and floating rate instruments could reduce portfolio
liquidity.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price ("repurchase
agreements"). Repurchase agreements will only be entered into with financial
institutions such as banks and broker/dealers that are deemed to be creditworthy
by Fleet under guidelines approved by Galaxy's Board of Trustees. No Fund will
enter into repurchase agreements with Fleet or any of its affiliates. 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 each Fund's 10%
limitation on purchases of illiquid instruments described below.
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 a Fund at
not less than the agreed upon repurchase price. If the seller defaulted on its
repurchase obligation, the Fund holding such obligation would suffer a loss to
the extent that the proceeds from a sale of the underlying securities (including
accrued interest) were less than the repurchase price (including accrued
interest) under the agreement. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. Income on repurchase agreements is
taxable. The Tax-Exempt Reserves' investment in repurchase agreements will be,
under normal market conditions, subject to the 20% overall limit on taxable
obligations.
The Prime Reserves and Government Reserves may also borrow funds for
temporary purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). A reverse
repurchase agreement involves the risk that the market value of the securities
sold by a Fund may decline below the repurchase price. A Fund would pay
interest on amounts obtained pursuant to a reverse repurchase agreement.
WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS
Each Fund may purchase securities on a "when-issued" or "delayed
settlement" basis. When-issued transactions, which
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involve a commitment by a Fund to purchase 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 intends to
purchase, regardless of future changes in interest rates. Delayed settlement
describes settlement of a securities transaction in the secondary market
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. It is expected that, absent unusual
market conditions, commitments by a Fund to purchase securities on a
when-issued or delayed settlement basis will not exceed 25% of the value of
its total assets. These transactions will not be entered into for
speculative purposes, but only in furtherance of a Fund's investment
objective.
INVESTMENT COMPANY SECURITIES
Each Fund may invest in securities issued by other open-end investment
companies that (a) invest in high quality, short-term instruments in which
the Fund may invest directly (limited with respect to the Tax-Exempt Reserves
to high quality short-term Municipal Securities) and that meet the applicable
quality requirements described above under "Quality Requirements" and (b)
determine their net asset value per share based on the amortized cost or
penny-rounding method. Investments in other investment companies will cause
a Fund (and, indirectly, the Fund's shareholders) to bear proportionately the
costs incurred in connection with the investment companies' operations. Such
securities may be acquired by a Fund within the limits prescribed by the
Investment Company Act of 1940, as amended, (the "1940 Act"). Except as
otherwise permitted under the 1940 Act, each Fund currently intends to limit
its investments in other investment companies 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 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. A 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.
SECURITIES LENDING -- PRIME RESERVES AND GOVERNMENT RESERVES
The Prime Reserves and Government Reserves may lend their portfolio
securities to financial institutions such as banks and broker/dealers in
accordance with their investment limitations. Such loans would involve risks of
delay in receiving additional collateral or in recovering the securities loaned
or even loss of
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rights in the collateral should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be
short-term, and will be made only to borrowers deemed by Fleet to be of good
standing and only when, in Fleet's judgment, the income to be earned from the
loan justifies the attendant risks. The Funds currently intend to limit the
lending of their portfolio securities so that, at any given time, securities
loaned by a Fund represent not more than one-third of the value of its total
assets.
GUARANTEED INVESTMENT CONTRACTS -- PRIME RESERVES
The Prime Reserves may invest in guaranteed investment contracts ("GICs")
issued by United States insurance companies. Pursuant to such contracts, the
Fund makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Fund payments at
negotiated, floating or fixed interest rates. A GIC is a general obligation of
the issuing insurance company and not a separate account. The purchase price
paid for a GIC becomes part of the general assets of the insurance company, and
the contract is paid from the company's general assets. The Fund will only
purchase GICs that are issued or guaranteed by insurance companies that at the
time of purchase are rated in accordance with the applicable quality
requirements described above under "Quality Requirements." GICs are considered
illiquid securities and will be subject to the Fund's 10% limitation on illiquid
investments, unless there is an active and substantial secondary market for the
particular instrument and market quotations are readily available.
ASSET-BACKED SECURITIES -- PRIME RESERVES
The Prime Reserves may purchase asset-backed securities which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables and credit card receivables. The
Fund will only purchase asset-backed securities that meet the applicable quality
requirements described above under "Quality Requirements." See "Asset-Backed
Securities" in the Statement of Additional Information relating to the Fund.
OTHER INVESTMENT POLICIES OF THE TAX-EXEMPT RESERVES
The Tax-Exempt Reserves may acquire "stand-by commitments" with respect to
Municipal Securities held by it. Under a stand-by commitment, a dealer agrees
to purchase at the Fund's option specified Municipal Securities at a specified
price. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments acquired by the Fund
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would be valued at zero in determining the Fund's net asset value. The
default or bankruptcy of a securities dealer giving such a commitment would
not affect the quality of the Municipal Securities purchased by the Fund.
However, without a stand-by commitment, these securities could be more
difficult to sell. The Fund will enter into stand-by commitments only with
those dealers whose credit Fleet believes to be of high quality.
Although the Fund does not presently intend to do so on a regular basis, it
may invest more than 25% of its assets in Municipal Securities the interest on
which is paid solely from revenues of similar projects. To the extent that the
Fund's assets are concentrated in Municipal Securities payable from revenues on
similar projects, the Fund will be subject to the peculiar risks presented by
such projects to a greater extent than it would be if its assets were not so
invested.
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy and
may not be changed with respect to a Fund without the affirmative vote of the
holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of Additional
Information under "Investment Objectives and Policies."
No Fund may:
1. Make loans, except that (i) each Fund may purchase or hold
debt instruments in accordance with its investment objective and
policies, (ii) each Fund may enter into repurchase agreements with
respect to portfolio securities, and (iii) the Prime Reserves and
Government Reserves each may lend portfolio securities against
collateral consisting of cash or securities that are consistent with the
Fund's permitted investments, where the value of the collateral is equal
at all times to at least 100% of the value of the securities loaned.
2. Purchase securities of any one issuer if immediately after
such purchase more than 5% of the value of its total assets would be
invested in the securities of such issuer (the "5% limitation"), except
that up to 25% of the value of its total assets may be invested without
regard to the 5% limitation; notwithstanding the foregoing restriction,
each Fund may invest without regard to the 5% limitation in U.S.
Government obligations and as otherwise permitted in accordance with
Rule 2a-7 under the 1940 Act or any successor rule.
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3. Borrow money or issue senior securities, except that each Fund
may borrow from banks for temporary purposes, and then in amounts not in
excess of 10% of the value of its total assets at the time of such
borrowing, provided, however, that the Prime Reserves and Government
Reserves may borrow pursuant to reverse repurchase agreements in
accordance with their respective investment policies and in amounts not
in excess of 10% of the value of their respective total assets at the
time of such borrowings; or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value
of a Fund's total assets at the time of such borrowing. A Fund will not
purchase any portfolio securities while borrowings (including reverse
repurchase agreements) in excess of 5% of its total assets are
outstanding.
4. Knowingly invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days, restricted securities, non-negotiable time
deposits and other securities which are not readily marketable.
In addition, the Prime Reserves and Government Reserves may not:
5. Purchase securities that would cause 25% or more of the value
of a Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or, with respect to the
Prime Reserves, by domestic banks or U.S. branches of foreign banks that
are subject to the same regulation as domestic banks; (b) with respect
to the Prime Reserves, wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c)
with respect to the Prime Reserves, utilities will be classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone each will be considered a
separate industry).
In addition, the Tax-Exempt Reserves may not:
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6. Purchase any securities that would cause 25% or more of the
value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that there is no
limitation with respect to securities issued or guaranteed by the United
States, any state, territory or possession of the U.S. Government, the
District of Columbia, or any of their authorities, agencies,
instrumentalities, or political subdivisions.
With respect to Investment Limitation No. 2 above: (a) a security is
considered to be issued by the governmental entity or entities whose assets
and revenues back the security or, with respect to a private activity bond
that is backed only by the assets and revenues of a non-governmental user,
such non-governmental user; (b) in certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee; and (c) securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including securities backed by
the full faith and credit of the United States) are deemed to be U.S.
Government obligations.
With respect to Investment Limitation No. 3 above, each of the Prime
Reserves and Government Reserves intends to limit any borrowings, including
reverse repurchase agreements, to not more than 10% of the value of its total
assets at the time of such borrowing.
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 generally will not constitute a violation of the
limitation.
Each Fund may follow non-fundamental operating policies that are more
restrictive than its fundamental investment limitations, as set forth in this
Prospectus and the Statement of Additional Information relating to the Funds in
order to comply with applicable laws and regulations, including the provisions
of and regulations under the 1940 Act. In particular, each Fund will comply
with the various requirements of Rule 2a-7 under the 1940 Act, which regulates
money market funds. In accordance with Rule 2a-7, each of the Prime Reserves
and Tax-Exempt Reserves is subject to the 5% limitation contained in Investment
Limitation No. 2 above as to all of its assets; however, in accordance with such
Rule, each such Fund will be able to invest more than 5% (but no more than 25%)
of its total assets in the securities of a single issuer, for a period of up to
three business days after the purchase thereof, provided that the Fund may not
hold more than one such investment at any one time. Adherence by a Fund to the
diversification requirements of Rule 2a-7 is deemed to
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constitute adherence to the diversification requirements of Investment
Limitation No. 2 above. Each 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. A Fund may change these operating policies to reflect
changes in the laws and regulations without the approval of its shareholders.
Rule 144A under the 1933 Act allows for a broader institutional trading
market for securities otherwise subject to restrictions on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Investment by the Prime Reserves or Tax-Exempt Reserves
in Rule 144A securities could have the effect of increasing the level of
illiquidity of the Fund during any period that qualified institutional buyers
were no longer interested in purchasing these securities. For purposes of each
Fund's 10% limitation on purchases of illiquid instruments, Rule 144A securities
will not be considered to be illiquid if Fleet has determined, in accordance
with guidelines established by the Board of Trustees, that an adequate trading
market exists for such securities.
PRICING OF SHARES
Net asset value per share of each Fund is determined as of 12:00 Noon
(Eastern Time) and the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 4:00 p.m. (Eastern Time), on each day the
Exchange is open. Currently, the holidays which Galaxy observes are New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset
value per share of a Fund for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets of the Fund,
less the liabilities of the Fund, by the number of outstanding shares of the
Fund.
The assets in each Fund are valued based upon the amortized cost method.
Pursuant to this method, a security is valued by reference to a Fund's
acquisition cost as adjusted for amortization of premium or accretion of
discount. Although Galaxy seeks to maintain the net asset value per share of
each Fund at $1.00, there can be no assurance that the net asset value per share
will not vary.
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HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds are sold on a continuous basis by Galaxy's distributor,
First Data Distributors, Inc. ("FD Distributors"), a wholly-owned subsidiary of
First Data Investor Services Group, Inc. FD Distributors is a registered
broker/dealer with principal offices located at 4400 Computer Drive, Westboro,
Massachusetts 01581-5108.
PURCHASE OF SHARES
Shares of the Funds are offered to customers who maintain qualified
accounts with brokerage firms that are clients of U.S. Clearing.
OPENING A FUND ACCOUNT. Contact your Account Executive to open a Fund
account. Account balances will appear on your monthly statement.
SUBSEQUENT INVESTMENTS. You may make a subsequent investment to an
existing Fund account using either of the methods described below:
BY CHECK. Mail or deliver your check (minimum $100) payable to U.S.
Clearing to your Account Executive who will deposit it into the Fund(s). Please
indicate the appropriate Fund(s) and indicate your brokerage account number on
the check or draft.
BY SWEEP. U.S. Clearing has available an automatic "sweep" for
customers in the Funds. If you request the sweep arrangement, all cash
balances are moved into one of the Funds on a daily basis by U.S. Clearing on
your behalf. Sales proceeds in total from trades will be swept into the
designated Fund on settlement date.
GENERAL PURCHASE INFORMATION. U.S. Clearing is responsible for
transmitting to FD Distributors orders for purchases of shares of the Funds and
for wiring required funds in payment to Galaxy's custodian on a timely basis.
FD Distributors is responsible for transmitting such orders to Galaxy's transfer
agent for execution. Shares purchased by U.S. Clearing on behalf of customers
of its brokerage firm clients will normally be held of record by U.S. Clearing
and beneficial ownership of shares will be recorded by U.S. Clearing and
reflected in the account statements provided to such customers. Confirmations
of share purchases and redemptions will be sent directly by U.S. Clearing to
customers.
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Purchases of shares of the Funds will be effected only on days on which FD
Distributors, Galaxy's custodian and U.S. Clearing are open for business (a
"Business Day").
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 of the
Funds is recorded on the books of Galaxy and share certificates will not be
issued. Payment for shares of a Fund in the amount of $1,000,000 or more may be
made, at the discretion of the respective Fund, in the form of securities that
are permissible investments for the Fund. For further information, see the
Statement of Additional Information under "Additional Purchase and Redemption
Information" or contact your Account Executive.
REDEMPTION OF SHARES
You may redeem your Fund shares using any of the methods described below:
BY CONTACTING YOUR ACCOUNT EXECUTIVE. Instruct your Account Executive
to order a withdrawal from your Fund and issue a check payable to you.
BY SWEEP. U.S. Clearing's automatic "sweep" moves money automatically
from your Fund for use by your brokerage account to cover security purchases
or other charges to your account.
BY CHECKWRITING This service enables you to write checks made payable
to any payee. Checks cannot be written for more than the principal balance
(not including any accrued dividends) in your Fund. To initiate this
service, you must fill out a signature card which can be obtained from your
Account Executive. There is no separate charge for the checkwriting service
and your checks are provided free of charge. THE CHECKWRITING SERVICE ENABLES
YOU TO RECEIVE THE DAILY DIVIDENDS DECLARED ON THE FUND SHARES TO BE REDEEMED
UNTIL THE DAY THAT THE CHECK IS PRESENTED FOR PAYMENT.
GENERAL REDEMPTION INFORMATION. It is the responsibility of U.S.
Clearing to transmit redemption orders to FD Distributors and credit
customers' accounts with redemption proceeds on a timely basis. No charge
for wiring redemption payments to U.S. Clearing is imposed by Galaxy,
although U.S. Clearing may charge customers' accounts for redemption
services. Information relating to such redemption services and charges, if
any, is available from your Account Executive.
Galaxy will make payment for all shares redeemed after receipt of a
redemption request in proper form, except as provided by the rules of the
Securities and Exchange Commission (the "SEC"). Galaxy may redeem shares
involuntarily or make
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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" for examples of when such
redemptions might be appropriate. The Funds impose no charge when shares are
redeemed.
OTHER PURCHASE AND REDEMPTION INFORMATION
The Funds have two transaction times each Business Day, 12:00 Noon (Eastern
Time) and the close of regular trading hours on the Exchange, currently 4:00
p.m. (Eastern Time). A purchase order for shares of a Fund received and
accepted by FD Distributors prior to 4:00 p.m. (Eastern Time) on a Business Day
will be executed at the net asset value next determined 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 prior to
4:00 p.m. (Eastern Time) that day. Shares do not earn dividends on the day a
redemption is effected regardless of whether the redemption order is effected
before or after 12:00 Noon (Eastern Time).
On a Business Day when the Exchange closes early due to a partial holiday
or otherwise, Galaxy will advance the times at which purchase and redemption
orders must be received in order to be processed on that Business Day.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund is declared daily as a dividend to
the persons who are shareholders of the respective Funds immediately after the
4:00 p.m. pricing of shares on the day of declaration. A Fund's 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. None of the Funds 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 and distributions will be reinvested in additional shares of a
Fund at the net asset value of such shares on the ex-dividend date. The
crediting and payment of dividends to customers will be in accordance with U.S.
Clearing's procedures. Contact your Account Executive for additional
information.
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TAXES
FEDERAL
IN GENERAL. Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, (the "Code").
Such qualification generally relieves a Fund of liability for federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income. In general, a Fund's investment company taxable income
will be its taxable income (including interest), subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. The Prime Reserves
and Government Reserves intend to distribute substantially all of their
respective investment company taxable income and net exempt-interest income each
year. Such dividends will be taxable as ordinary income to each Fund's
shareholders who are not currently exempt from federal income taxes, whether
such income is 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.) Because all of each Fund's net investment income is
expected to be derived from earned interest, it is anticipated that no part of
any distribution will be eligible for the dividends received deduction for
corporations.
Dividends declared in October, November or December of any year that 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.
THE TAX-EXEMPT RESERVES. The Tax-Exempt Reserves' policy 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 investment company taxable income,
if any. Dividends derived from exempt-interest income ("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 Tax-Exempt Reserves should hold certain "private activity bonds"
issued after August 7, 1986, shareholders must include, as an item of tax
preference, the portion of dividends
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paid by the Fund that is attributable to interest on such bonds in their
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 applicable to corporations. Corporate
shareholders must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum 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.
Dividends from the Tax-Exempt Reserves 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Tax-Exempt
Reserves 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.
Shareholders should consult their own tax advisers about the status of
distributions from the Funds in their own state.
MISCELLANEOUS
The foregoing summarizes some of the important 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 at least annually as to the federal income tax
consequences of distributions made each year.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of
Galaxy's Board of Trustees. The Statement of Additional Information contains
the names of and general background information concerning the Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at 75 State Street, Boston, Massachusetts
02109, serves as the investment adviser to the Funds. Fleet is an indirect
wholly-owned subsidiary of Fleet Financial Group, Inc., a registered bank
holding company with
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total assets at December 31, 1997 of approximately $85.5 billion. Fleet,
which commenced operations in 1984, also provides investment management and
advisory services to individual and institutional clients, and manages the
other portfolios of Galaxy: the Money Market, Government, U.S. Treasury,
Tax-Exempt, Connecticut Municipal Money Market, Massachusetts Municipal Money
Market, Institutional Government Money Market, Equity Value, Equity Growth,
Equity Income, International Equity, Small Company Equity, MidCap Equity,
Asset Allocation, Small Cap Value, Growth and Income, Strategic Equity,
Short-Term Bond, Intermediate Government Income, High Quality Bond, Corporate
Bond, Tax-Exempt Bond, New Jersey Municipal Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond and Rhode Island
Municipal Bond Funds.
Subject to the general supervision of Galaxy's Board of Trustees, Fleet
manages the Funds, makes decisions with respect to and places orders for all
purchases and sales of their portfolio securities and maintains related records.
For the services provided and expenses assumed, Fleet is entitled to
receive advisory fees, computed daily and paid monthly, at the annual rate of
.40% of the first $750,000,000 of each Fund's average daily net assets, plus
.35% of each Fund's average daily net assets in excess of $750,000,000. Fleet
may from time to time, in its discretion, waive advisory fees payable by the
Funds in order to help maintain competitive expense ratios, and may from time to
time allocate a portion of its advisory fees to Fleet Bank or other subsidiaries
of Fleet Financial Group, Inc. in consideration for administrative and/or
shareholder support services which they provide to beneficial shareholders.
Fleet is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, to the extent permitted
by law or order of the SEC, financial institutions that are affiliated with
Fleet or that have sold shares of the Funds, if Fleet believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.
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 such banking laws and regulations do not prohibit such a bank
holding company or affiliate from acting as investment adviser, transfer agent,
or custodian to such an
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investment company or from purchasing shares of such a company as agent for
and upon the order of customers. Fleet, the custodian and Institutions that
are banks or bank affiliates are subject to such banking laws and
regulations. Should legislative, judicial or administrative action prohibit
or restrict the activities of such companies in connection with their
services to the Funds, Galaxy might be required to alter materially or
discontinue its arrangements with such companies and change its method of
operations. It is not anticipated, however, that any resulting change in the
Funds' method of operations would affect a Fund's net asset value per share
or result in financial loss to any shareholder.
ADMINISTRATOR
First Data Investor Services Group, Inc. ("Investor Services Group"),
located at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as
the Funds' administrator. Investor Services Group is a wholly-owned subsidiary
of First Data Corporation.
Investor Services Group generally assists the Funds in their administration
and operation. Investor Services Group also serves as administrator to the
other portfolios of Galaxy. For the services provided to the Funds, Investor
Services Group is entitled to receive administration fees, computed daily and
paid monthly, at the annual rate of .09% of the first $2.5 billion of combined
average daily net assets of the Funds and the other portfolios offered by Galaxy
(collectively the "Portfolios"), .085% of the next $2.5 billion of combined
average daily net assets and .075% of combined average daily net assets over $5
billion. In addition, Investor Services Group also receives a separate annual
fee from each Portfolio for certain fund accounting services. From time to
time, Investor Services Group may waive voluntarily all or a portion of the
administration fee payable to it by the Funds.
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 the Funds as follows: Class BB shares
representing interests in the Prime Reserves, Class CC shares representing
interests in the Government Reserves and Class DD shares representing interests
in the Tax-Exempt Reserves. Each Fund is classified as a diversified company
under the 1940 Act. The Board of Trustees has also authorized the issuance of
additional classes and series of shares representing interests in other
portfolios of Galaxy. For information
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regarding the Funds contact FD Distributors at 1-800-628-0414.
Each share of Galaxy (irrespective of series designation) has a par value
of $.001, represents an equal proportionate interest in the related investment
portfolio with other shares of the same class, and is entitled to such dividends
and distributions out of the income earned on the assets belonging to such
investment portfolio as are declared in the discretion of Galaxy's Board of
Trustees.
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by class or series, except as otherwise 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.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the 1940 Act with respect to the Funds. Under the Distribution
and Services Plan, Galaxy may pay (i) FD Distributors or another person for
distribution services provided and expenses assumed and (ii) broker-dealers
or other financial institutions ("Service Organizations") for shareholder
administrative support services provided to shareholders of the Funds.
Payments to FD Distributors are to compensate it for distribution
assistance and expenses assumed and activities primarily intended to result
in the sale of shares, including compensating dealers and other sales
personnel (which may include U.S. Clearing and other affiliates of Fleet),
direct advertising and marketing expenses and expenses incurred in connection
with preparing, printing, mailing and distributing or publishing
advertisements and sales literature, for printing and mailing Prospectuses
and Statements of Additional Information (except those used for regulatory
purposes or for distribution to existing shareholders), and costs associated
with implementing and operating the Distribution and Services Plan.
The servicing agreements adopted under the Distribution and Services
Plan require the Service Organizations receiving such compensation (which may
include U.S. Clearing and other affiliates of Fleet) to perform certain
services, including providing administrative services with respect to the
beneficial owners of shares of the Funds, such as establishing and maintaining
accounts and records for their customers who invest in such shares, assisting
customers in processing purchase,
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exchange and redemption requests and/or in changing dividend options and
account descriptions, developing, maintaining and supporting systems
necessary to support cash management services, such as sweep arrangements,
and responding to customer inquiries concerning their investments.
Under the Distribution and Services Plan, payments by Galaxy for
distribution expenses may not exceed .75% (annualized) of the average daily net
assets of a Fund and payments for shareholder administrative support services
may not exceed .25% (annualized) of the average daily net asset value of a
Fund's outstanding shares which are owned of record or beneficially by a Service
Organization's customers for whom the Service Organization is the owner of
record or shareholder of record or with whom it has a servicing relationship.
As of the date of this Prospectus, Galaxy intends to limit payments under the
Distribution and Services Plan to an aggregate fee of not more than .45% (on an
annualized basis) of the average daily net assets of the Prime Reserves and not
more than .40% (on an annualized basis) of the average daily net assets of the
Government Reserves and Tax-Exempt Reserves.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, located at One Chase Manhattan Plaza, New York,
New York 10081, a wholly-owned subsidiary of The Chase Manhattan Corporation,
serves as custodian of the Funds' assets, and First Data Investor Services
Group, Inc. ("Investor Services Group"), a wholly-owned subsidiary of First Data
Corporation, serves as Galaxy's transfer and dividend disbursing agent.
Services performed by both entities for the Funds are described in the Statement
of Additional Information. Communications to Investor Services Group should be
directed to Investor Services Group at P.O. Box 5108, 4400 Computer Drive,
Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and Investor Services Group bear all
expenses in connection with the performance of their advisory and
administrative 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 Investor
Services Group); SEC fees; state securities fees; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders; advisory, administration, shareholder servicing, Rule 12b-1
distribution, fund accounting and custody fees; charges of the transfer agent
and dividend disbursing agent; certain insurance premiums; outside auditing
and legal expenses; cost of independent pricing services; costs
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of shareholder reports and meetings; and any extraordinary expenses. The
Funds also pay for any brokerage fees and commissions in connection with the
purchase of portfolio securities.
PERFORMANCE REPORTING
From time to time, in advertisements or in reports to shareholders, the
yields of the Funds, as a measure of their performance, may be quoted and
compared to those of other mutual funds with similar investment objectives and
to other relevant indices 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-Registered Trademark-, a widely recognized
independent publication that monitors the performance of mutual funds. Also,
the Funds' yield data may be 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 in publications of a local or regional
nature. The performance of the Prime Reserves and Government Reserves 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 yield of a Fund refers 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. Each 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
Tax-Exempt Reserves 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 federal income tax rate and
adding the product to that portion, if any, of the Fund's yield which is not
tax-exempt.
The Funds' yields will fluctuate and any quotation of yield should not be
considered as representative of the future performance of the Funds. Since
yields fluctuate, yield data cannot necessarily be used to compare an investment
in a Fund's shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance is
generally a function of the
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kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged directly by
institutions to accounts of customers that have invested in shares of a Fund
will not be included in calculations of yield.
The portfolio managers of the Funds and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders and
prospective investors. The topics may include but are not limited to the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products; and tax, retirement and investment planning.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of a particular Fund means, with respect to the approval of
an investment advisory agreement or Rule 12b-1 distribution plan or a change in
an investment objective or fundamental investment policy, the affirmative vote
of the holders of the lesser of (a) more than 50% of the outstanding shares of
such Fund, or (b) 67% or more of the shares of such Fund present at a meeting if
more than 50% of the outstanding shares of such Fund are represented at the
meeting in person or by proxy.
YEAR 2000 RISKS. Like other investment companies, financial and business
organizations and individuals around the world, Galaxy could be adversely
affected if the computer systems used by Fleet and Galaxy's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." Fleet is taking steps to address the Year 2000 Problem with respect
to the computer systems that it uses and to obtain assurance that comparable
steps are being taken by Galaxy's other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on Galaxy as a result of the Year 2000 Problem.
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MONEY MANAGEMENT SERVICES PROGRAM
Featuring...
THE GALAXY FUND
Prime Reserves
Government Reserves
Tax-Exempt Reserves
Prospectus
_____________, 1998
Ziegler Thrift Trading, Inc.
Member NASD - SIPC
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR BY FIRST DATA DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUNDS OR BY FIRST DATA DISTRIBUTORS, INC. IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
--------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . 4
In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Quality Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 4
Prime Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Government Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax-Exempt Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENTS, STRATEGIES AND RISKS. . . . . . . . . . . . . . . . . . . . . 7
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . 7
Money Market Instruments. . . . . . . . . . . . . . . . . . . . . . . 7
Municipal Securities. . . . . . . . . . . . . . . . . . . . . . . . . 8
Tender Option Bonds . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable and Floating Rate Instruments. . . . . . . . . . . . . . . . 10
Repurchase and Reverse Repurchase Agreements. . . . . . . . . . . . . 11
When-Issued and Delayed Settlement Transactions . . . . . . . . . . . 11
Investment Company Securities . . . . . . . . . . . . . . . . . . . . 12
Securities Lending -- Prime Reserves and Government Reserves. . . . . 12
Guaranteed Investment Contracts -- Prime Reserves . . . . . . . . . . 13
Asset-Backed Securities -- Prime Reserves . . . . . . . . . . . . . . 13
Other Investment Policies of the Tax-Exempt Reserves. . . . . . . . . 13
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PRICING OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
HOW TO PURCHASE AND REDEEM SHARES. . . . . . . . . . . . . . . . . . . . . 18
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Purchase and Redemption Information . . . . . . . . . . . . . . 20
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 20
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PAGE
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
State and Local . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Investment Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Authority to Act as Investment Adviser. . . . . . . . . . . . . . . . 23
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF GALAXY AND ITS SHARES . . . . . . . . . . . . . . . . . . . 24
Distribution and Services Plan. . . . . . . . . . . . . . . . . . . . 25
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . 26
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PERFORMANCE REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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<PAGE>
THE GALAXY FUND
4400 Computer Drive Contact your Account
Westboro, Massachusetts Executive for an application
01581-5108 and information regarding
purchases, redemptions and
other shareholder services.
The Galaxy Fund ("Galaxy") is an open-end management investment company.
This Prospectus describes three series of Galaxy's shares which represent
interests in three separate diversified money market portfolios (individually, a
"Fund," collectively, the "Funds") offered to investors by Galaxy, each having
its own investment objective and policies:
The PRIME RESERVES' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in "money market" instruments with remaining maturities of 397 days
or less, such as domestic and foreign bank certificates of deposit, bankers'
acceptances, commercial paper and corporate bonds in addition to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
and repurchase agreements relating to such obligations.
The GOVERNMENT RESERVES' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in obligations with remaining maturities of 397 days or less which
are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements relating to such obligations.
The TAX-EXEMPT RESERVES' investment objective is to seek as high a level of
current interest income exempt from federal income tax as is consistent with
stability of principal. The Fund invests substantially all of its assets in
high quality debt obligations issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia, and their
authorities, agencies, instrumentalities and political subdivisions, the
interest on which, in the opinion of bond counsel or counsel to the issuer, is
exempt from federal income tax ("Municipal Securities"). The Fund's portfolio
securities will generally have remaining maturities of 397 days or less.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF
<PAGE>
MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE FUNDS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT
IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE FUNDS 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.
Each of the Funds is advised by Fleet Investment Advisors Inc. ("Fleet")
and sponsored and distributed by First Data Distributors, Inc., which is
unaffiliated with Fleet and its parent, Fleet Financial Group, Inc., and
affiliates. The shares described in this Prospectus are offered to customers
who maintain qualified accounts with Ziegler Thrift Trading, Inc., a client
of U.S. Clearing, a division of Fleet Securities, Inc. ("U.S. Clearing").
See "Management of the Funds," "How to Purchase and Redeem Shares," and
"Description of Galaxy and Its Shares."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor 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 relating
to the Funds and 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 writing to Galaxy at its address shown
above or by contacting your Account Executive. The Statement of Additional
Information, as it may be amended from time to time, is incorporated by
reference in its entirety into this Prospectus.
____________________
_________, 1998
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<PAGE>
EXPENSE SUMMARY
Set forth below is a summary of each Fund's operating expenses.
Examples based on the summary are also shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-EXEMPT
(AS A PERCENTAGE OF AVERAGE NET ASSETS) RESERVES RESERVES RESERVES
- --------------------------------------- -------- -------- --------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fees .36% .40% .40%
12b-1 Fees(1) .45% .40% .40%
Other Expenses .19% .20% .20%
------ ------ ------
Total Fund Operating Expenses 1.00% 1.00% 1.00%
------ ------ ------
------ ------ ------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the rules of the National
Association of Securities Dealers, Inc.
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
------ -------
- -------------------------------------------------
<S> <C> <C>
Prime Reserves $10 $31
Government Reserves $10 $31
Tax-Exempt Reserves $10 $31
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
The Expense Summary and Example are intended to assist investors in
understanding the costs and expenses that an investor in the Funds bears
directly or indirectly. The information contained in the Expense Summary and
Example reflects the expenses which each Fund expects to incur during the
current fiscal year. For more complete descriptions of these costs and
expenses, see "Management of the Funds" and "Description of Galaxy and Its
Shares" in this Prospectus. Fees charged by U.S. Clearing for services related
to an investment in the Funds are in addition to and not reflected in the fees
and expenses described above. Such fees will be deducted each month from your
Fund account(s) and will reduce your yield.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE FUNDS ARE NEW AND ACTUAL EXPENSES AND
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
IN GENERAL
Fleet Investment Advisors Inc. ("Fleet"), the Funds' investment adviser,
will use its best efforts to achieve each Fund's investment objective,
although such achievement cannot be assured. The investment objective of a
Fund may not be changed without the approval of the holders of a majority of
its outstanding shares (as defined under "Miscellaneous"). Except as noted
herein under "Tax-Exempt Reserves" and below under "Investment Limitations,"
a Fund's investment policies may be changed without shareholder approval. An
investor should not consider an investment in the Funds to be a complete
investment program. Each Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less in an effort to maintain a stable net
asset value per share of $1.00. The value of the Funds' portfolio securities
will generally vary inversely with changes in prevailing interest rates.
QUALITY REQUIREMENTS
Each Fund will purchase only those instruments which meet the applicable
quality requirements described below. The Prime Reserves will not purchase a
security (other than a U.S. Government security) unless the security or the
issuer with respect to comparable securities (i) is rated by at least two
nationally recognized statistical rating organizations ("Rating Agencies")
(such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service,
Inc. ("Moody's") or Fitch IBCA, Inc. ("Fitch IBCA")) in the highest category
for short-term debt securities, (ii) is rated by the only Rating Agency that
has issued a rating with respect to such security or issuer in such Rating
Agency's highest category for short-term debt, or (iii) if not rated, the
security is determined to be of comparable quality. The Tax-Exempt Reserves
will not purchase a security (other than a U.S. Government security) unless
the security (i) is rated by at least two such Rating Agencies in one of the
two highest categories for short-term debt securities, (ii) is rated by the
only Rating Agency that has assigned a rating with respect to such security
in one of such Rating Agency's two highest categories for short-term debt, or
(iii) if not rated, the security is determined to be of comparable quality.
These rating categories are determined without regard to sub-categories and
gradations. The Funds will follow applicable regulations in determining
whether a security rated by more than one Rating Agency can be treated as
being in the highest or, with respect to the Tax-Exempt Reserves one of the
two highest, short-term rating categories. See "Investment Limitations"
below.
Determinations of comparable quality shall be made in accordance with
procedures established by the Board of Trustees. Generally, if a security has
not been rated by a Rating Agency,
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<PAGE>
Fleet will acquire the security if it determines that the security is of
comparable quality to securities that have received the requisite ratings.
Fleet also considers other relevant information in its evaluation of unrated
short-term securities.
PRIME RESERVES
The Prime Reserves' investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing in "money market" instruments
that are determined by Fleet to present minimal credit risk and meet certain
rating criteria. Instruments that may be purchased by the Prime Reserves
include obligations of domestic and foreign banks (including negotiable
certificates of deposit, non-negotiable time deposits, savings deposits and
bankers' acceptances); commercial paper (including variable and floating rate
notes); corporate bonds; obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and repurchase agreements issued
by financial institutions such as banks and broker/dealers. These instruments
have remaining maturities of 397 days or less (except for certain variable and
floating rate notes and securities underlying certain repurchase agreements).
For more information, including applicable quality requirements, see "Quality
Requirements" above and "Investments, Strategies and Risks" below.
GOVERNMENT RESERVES
The Government Reserves' investment objective is to seek as high a level
of current income as is consistent with liquidity and stability of principal.
The Fund seeks to achieve its objective by investing in obligations issued
or guaranteed as to payment of principal and interest by the U.S. Government,
its agencies or instrumentalities, and repurchase agreements relating to such
obligations. These instruments have remaining maturities of 397 days or less
(except for certain variable and floating rate notes and securities
underlying certain repurchase agreements). See "Investments, Strategies and
Risks" below.
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<PAGE>
TAX-EXEMPT RESERVES
The Tax-Exempt Reserves' investment objective is to seek as high a level
of current interest income exempt from federal income tax as is consistent
with stability of principal by investing substantially all of its assets in
Municipal Securities that present minimal credit risk and meet the rating
criteria described above under "Quality Requirements." The Fund is designed
for investors in higher tax brackets who are seeking a relatively high amount
of tax-free income with stability of principal and less price volatility than
would normally be associated with intermediate-term and longer-term Municipal
Securities.
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Fund will invest, except
during temporary defensive periods, at least 80% of its net assets in
Municipal Securities. However, the Fund may from time to time, during
temporary defensive periods, hold uninvested cash reserves or invest in
taxable obligations in such proportions as, in the opinion of Fleet,
prevailing market or economic conditions warrant. Uninvested cash reserves
will not earn income. Such taxable instruments may include (i) obligations
of the U.S. Treasury; (ii) obligations of agencies or instrumentalities of
the U.S. Government; (iii) "money market" instruments such as certificates of
deposit, commercial paper or bankers' acceptances; (iv) repurchase agreements
collateralized by U.S. Government obligations or other "money market"
instruments; or (v) securities issued by other investment companies that
invest in high quality, short-term Municipal Securities. For more
information including applicable quality requirements, see "Quality
Requirements" above and "Investments, Strategies and Risks" below.
In seeking to achieve its investment objective, the Tax-Exempt Reserves
may invest in "private activity bonds" (see "Investments, Strategies and
Risks -- Municipal Securities"), the interest on which may be subject to the
federal alternative minimum tax. Investments in such securities, however,
will not be treated as investments in Municipal Securities for purposes of
the 80% requirement mentioned above and, under normal market conditions, will
not exceed 20% of the Fund's net assets when added together with any taxable
investments held by the Fund.
The Fund's portfolio securities will generally have remaining maturities
of 397 days or less (except for certain variable and floating rate notes and
securities underlying certain repurchase agreements). See "Investments,
Strategies and Risks" below.
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<PAGE>
INVESTMENTS, STRATEGIES AND RISKS
U.S. GOVERNMENT OBLIGATIONS
Obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities include U.S. Treasury securities, which differ only in
their interest rates, maturities and time of issuance: Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of more than ten years. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks, are supported
by the right of the issuer to borrow from the Treasury; others, such as those
of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated
to do so by law. Some U.S. Government obligations may be issued as variable
or floating rate instruments.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of
principal. However, due to fluctuations in interest rates, the market value
of such securities may vary during the period a shareholder owns shares of
the Funds.
MONEY MARKET INSTRUMENTS
"Money market" instruments include bank obligations and corporate
obligations, including commercial paper and corporate bonds with remaining
maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits issued for a definite period of
time and earning a specified return by a U.S. bank that is a member of the
Federal Reserve System or is insured by the Federal Deposit Insurance
Corporation ("FDIC"), or by a savings and loan association or savings bank
that is insured by the FDIC. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations.
Investments in bank obligations are limited to the obligations of financial
institutions having more than $1 billion in total assets at the time of
purchase. Investments in non-negotiable time deposits are limited to no more
than 5% of the Prime Reserves' total assets at the time of purchase.
-7-
<PAGE>
Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans
and the interest rates that may be charged. In addition, the profitability of
the banking industry is largely dependent upon the availability and cost of
funds to finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional investment risks,
including future political and economic developments, the possible imposition
of withholding taxes on interest income, possible seizure or nationalization
of foreign deposits, the possible establishment of exchange controls, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks
may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks. Investments in the
obligations of U.S. branches of foreign banks or foreign branches of U.S.
banks will be made only when Fleet believes that the credit risk with respect
to the instrument is minimal.
Commercial paper may include securities issued by corporations without
registration under the Securities Act of 1933, as amended, (the "1933 Act")
in reliance on the so-called "private placement" exemption in Section 4(2)
("Section 4(2) Paper"). Section 4(2) Paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made
in an exempt transaction. Section 4(2) Paper is normally resold to other
institutional investors through or with the assistance of investment dealers
which make a market in Section 4(2) Paper, thus providing liquidity. For
purposes of each Fund's 10% limitation on purchases of illiquid instruments
described below, Section 4(2) Paper will not be considered illiquid if Fleet
has determined, in accordance with guidelines approved by the Board of
Trustees, that an adequate trading market exists for such securities. The
Prime Reserves and Tax-Exempt Reserves may also purchase Rule 144A
securities. See "Investment Limitations."
MUNICIPAL SECURITIES
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. Municipal Securities
include private activity bonds issued by or on behalf of public authorities
to provide financing aid to acquire sites or
-8-
<PAGE>
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.
The two principal classifications of Municipal Securities that may be
held by the Tax-Exempt Reserves are "general obligation" securities and
"revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue securities are payable only from the
revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise tax or other specific
revenue source such as the user of the facility being financed. Private
activity bonds are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. Consequently, the credit quality of
private activity bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" securities,
which are normally issued by special purpose public authorities. If the
issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment, but not a legal obligation, of
the state or municipality which created the issuer. There is no limitation
on the amount of moral obligation securities that may be held by the Fund.
Municipal Securities may include variable rate demand notes, which 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 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. 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.
Municipal Securities purchased by the Tax-Exempt Reserves in some cases
may be insured as to the timely payment of principal and interest. There is
no guarantee, however, that the insurer will meet its obligations in the
event of a default in payment by
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<PAGE>
the issuer. In other cases, Municipal Securities may be backed by letters of
credit or guarantees issued by domestic or foreign banks or other financial
institutions which are not subject to federal deposit insurance. Adverse
developments affecting the banking industry generally or a particular bank or
financial institution that has provided its credit or guarantee with respect
to a Municipal Security held by the Tax-Exempt Reserves, including a change
in the credit quality of any such bank or financial institution, could result
in a loss to the Fund and adversely effect the value of its shares. As
described above under "Money Market Instruments," letters of credit and
guarantees issued by foreign banks and financial institutions involve certain
risks in addition to those of similar instruments issued by domestic banks
and financial institutions.
TENDER OPTION BONDS
The Tax-Exempt Reserves 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 securities. 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. Fleet 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 a tender option bond will adversely affect the quality and
marketability of the security.
VARIABLE AND FLOATING RATE INSTRUMENTS
Securities purchased by the Funds may include variable and floating rate
instruments. Variable rate instruments provide for periodic adjustments in
the interest rate. Floating rate instruments provide for automatic
adjustment of the interest rate whenever some other specified interest rate
changes. Some variable and floating rate obligations are direct lending
arrangements between the purchaser and the issuer and there may be no active
secondary market. However, in the case of variable and floating rate
obligations with a demand feature, a Fund may demand payment of principal and
accrued interest at a time specified in the instrument or may resell the
instrument to a third party. In the event an issuer of a variable or
floating rate obligation defaulted on its payment obligation, a Fund might be
unable to dispose of the note because of the absence of a
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<PAGE>
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default. Variable or floating rate instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities are
similar in form but may have a more active secondary market. Substantial
holdings of variable and floating rate instruments could reduce portfolio
liquidity.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price
("repurchase agreements"). Repurchase agreements will only be entered into
with financial institutions such as banks and broker/dealers that are deemed
to be creditworthy by Fleet under guidelines approved by Galaxy's Board of
Trustees. No Fund will enter into repurchase agreements with Fleet or any of
its affiliates. 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 each Fund's 10% limitation on purchases of illiquid
instruments described below.
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 a Fund
at not less than the agreed upon repurchase price. If the seller defaulted
on its repurchase obligation, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from a sale of the underlying securities
(including accrued interest) were less than the repurchase price (including
accrued interest) under the agreement. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by a Fund might be delayed pending court action. Income on
repurchase agreements is taxable. The Tax-Exempt Reserves' investment in
repurchase agreements will be, under normal market conditions, subject to the
20% overall limit on taxable obligations.
The Prime Reserves and Government Reserves may also borrow funds for
temporary purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a
mutually specified date and price ("reverse repurchase agreements"). A
reverse repurchase agreement involves the risk that the market value of the
securities sold by a Fund may decline below the repurchase price. A Fund
would pay interest on amounts obtained pursuant to a reverse repurchase
agreement.
WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS
Each Fund may purchase securities on a "when-issued" or "delayed
settlement" basis. When-issued transactions, which
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<PAGE>
involve a commitment by a Fund to purchase 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 intends to
purchase, regardless of future changes in interest rates. Delayed settlement
describes settlement of a securities transaction in the secondary market
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. It is expected that, absent unusual
market conditions, commitments by a Fund to purchase securities on a
when-issued or delayed settlement basis will not exceed 25% of the value of
its total assets. These transactions will not be entered into for
speculative purposes, but only in furtherance of a Fund's investment
objective.
INVESTMENT COMPANY SECURITIES
Each Fund may invest in securities issued by other open-end investment
companies that (a) invest in high quality, short-term instruments in which
the Fund may invest directly (limited with respect to the Tax-Exempt Reserves
to high quality short-term Municipal Securities) and that meet the applicable
quality requirements described above under "Quality Requirements" and (b)
determine their net asset value per share based on the amortized cost or
penny-rounding method. Investments in other investment companies will cause
a Fund (and, indirectly, the Fund's shareholders) to bear proportionately the
costs incurred in connection with the investment companies' operations. Such
securities may be acquired by a Fund within the limits prescribed by the
Investment Company Act of 1940, as amended, (the "1940 Act"). Except as
otherwise permitted under the 1940 Act, each Fund currently intends to limit
its investments in other investment companies 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 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. A 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.
SECURITIES LENDING -- PRIME RESERVES AND GOVERNMENT RESERVES
The Prime Reserves and Government Reserves may lend their portfolio
securities to financial institutions such as banks and broker/dealers in
accordance with their investment limitations. Such loans would involve risks
of delay in receiving additional collateral or in recovering the securities
loaned or even loss of
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<PAGE>
rights in the collateral should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would
also be subject to possible depreciation. Loans will generally be
short-term, and will be made only to borrowers deemed by Fleet to be of good
standing and only when, in Fleet's judgment, the income to be earned from the
loan justifies the attendant risks. The Funds currently intend to limit the
lending of their portfolio securities so that, at any given time, securities
loaned by a Fund represent not more than one-third of the value of its total
assets.
GUARANTEED INVESTMENT CONTRACTS -- PRIME RESERVES
The Prime Reserves may invest in guaranteed investment contracts
("GICs") issued by United States insurance companies. Pursuant to such
contracts, the Fund makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company then credits to
the Fund payments at negotiated, floating or fixed interest rates. A GIC is
a general obligation of the issuing insurance company and not a separate
account. The purchase price paid for a GIC becomes part of the general
assets of the insurance company, and the contract is paid from the company's
general assets. The Fund will only purchase GICs that are issued or
guaranteed by insurance companies that at the time of purchase are rated in
accordance with the applicable quality requirements described above under
"Quality Requirements." GICs are considered illiquid securities and will be
subject to the Fund's 10% limitation on illiquid investments, unless there is
an active and substantial secondary market for the particular instrument and
market quotations are readily available.
ASSET-BACKED SECURITIES -- PRIME RESERVES
The Prime Reserves may purchase asset-backed securities which represent
a participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables and credit card receivables. The
Fund will only purchase asset-backed securities that meet the applicable
quality requirements described above under "Quality Requirements." See
"Asset-Backed Securities" in the Statement of Additional Information relating
to the Fund.
OTHER INVESTMENT POLICIES OF THE TAX-EXEMPT RESERVES
The Tax-Exempt Reserves may acquire "stand-by commitments" with respect to
Municipal Securities held by it. Under a stand-by commitment, a dealer agrees
to purchase at the Fund's option specified Municipal Securities at a specified
price. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments acquired by the Fund
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would be valued at zero in determining the Fund's net asset value. The
default or bankruptcy of a securities dealer giving such a commitment would
not affect the quality of the Municipal Securities purchased by the Fund.
However, without a stand-by commitment, these securities could be more
difficult to sell. The Fund will enter into stand-by commitments only with
those dealers whose credit Fleet believes to be of high quality.
Although the Fund does not presently intend to do so on a regular basis,
it may invest more than 25% of its assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects. To the
extent that the Fund's assets are concentrated in Municipal Securities
payable from revenues on similar projects, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would
be if its assets were not so invested.
INVESTMENT LIMITATIONS
The following investment limitations are matters of fundamental policy
and may not be changed with respect to a Fund without the affirmative vote of
the holders of a majority of its outstanding shares (as defined under
"Miscellaneous"). Other investment limitations that also cannot be changed
without such a vote of shareholders are contained in the Statement of
Additional Information under "Investment Objectives and Policies."
No Fund may:
1. Make loans, except that (i) each Fund may purchase or hold
debt instruments in accordance with its investment objective and
policies, (ii) each Fund may enter into repurchase agreements with
respect to portfolio securities, and (iii) the Prime Reserves and
Government Reserves each may lend portfolio securities against
collateral consisting of cash or securities that are consistent with
the Fund's permitted investments, where the value of the collateral is
equal at all times to at least 100% of the value of the securities
loaned.
2. Purchase securities of any one issuer if immediately after
such purchase more than 5% of the value of its total assets would be
invested in the securities of such issuer (the "5% limitation"), except
that up to 25% of the value of its total assets may be invested without
regard to the 5% limitation; notwithstanding the foregoing restriction,
each Fund may invest without regard to the 5% limitation in U.S.
Government obligations and as otherwise permitted in accordance with
Rule 2a-7 under the 1940 Act or any successor rule.
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3. Borrow money or issue senior securities, except that each Fund
may borrow from banks for temporary purposes, and then in amounts not
in excess of 10% of the value of its total assets at the time of such
borrowing, provided, however, that the Prime Reserves and Government
Reserves may borrow pursuant to reverse repurchase agreements in
accordance with their respective investment policies and in amounts not
in excess of 10% of the value of their respective total assets at the
time of such borrowings; or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value
of a Fund's total assets at the time of such borrowing. A Fund will
not purchase any portfolio securities while borrowings (including
reverse repurchase agreements) in excess of 5% of its total assets are
outstanding.
4. Knowingly invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days, restricted securities, non-negotiable time
deposits and other securities which are not readily marketable.
In addition, the Prime Reserves and Government Reserves may not:
5. Purchase securities that would cause 25% or more of the value
of a Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that (a) there is
no limitation with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or, with respect to
the Prime Reserves, by domestic banks or U.S. branches of foreign banks
that are subject to the same regulation as domestic banks; (b) with
respect to the Prime Reserves, wholly-owned finance companies will be
considered to be in the industries of their parents if their activities
are primarily related to financing the activities of the parents; and
(c) with respect to the Prime Reserves, utilities will be classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone each will be considered a
separate industry).
In addition, the Tax-Exempt Reserves may not:
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6. Purchase any securities that would cause 25% or more of the
value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry; provided, however, that there is no
limitation with respect to securities issued or guaranteed by the United
States, any state, territory or possession of the U.S. Government, the
District of Columbia, or any of their authorities, agencies,
instrumentalities, or political subdivisions.
With respect to Investment Limitation No. 2 above: (a) a security is
considered to be issued by the governmental entity or entities whose assets
and revenues back the security or, with respect to a private activity bond
that is backed only by the assets and revenues of a non-governmental user,
such non-governmental user; (b) in certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee; and (c) securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including securities backed by
the full faith and credit of the United States) are deemed to be U.S.
Government obligations.
With respect to Investment Limitation No. 3 above, each of the Prime
Reserves and Government Reserves intends to limit any borrowings, including
reverse repurchase agreements, to not more than 10% of the value of its total
assets at the time of such borrowing.
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 generally will not constitute a violation of the
limitation.
Each Fund may follow non-fundamental operating policies that are more
restrictive than its fundamental investment limitations, as set forth in this
Prospectus and the Statement of Additional Information relating to the Funds
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the 1940 Act. In particular, each Fund
will comply with the various requirements of Rule 2a-7 under the 1940 Act,
which regulates money market funds. In accordance with Rule 2a-7, each of
the Prime Reserves and Tax-Exempt Reserves is subject to the 5% limitation
contained in Investment Limitation No. 2 above as to all of its assets;
however, in accordance with such Rule, each such Fund will be able to invest
more than 5% (but no more than 25%) of its total assets in the securities of
a single issuer, for a period of up to three business days after the purchase
thereof, provided that the Fund may not hold more than one such investment at
any one time. Adherence by a Fund to the diversification requirements of
Rule 2a-7 is deemed to
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constitute adherence to the diversification requirements of Investment
Limitation No. 2 above. Each 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. A Fund may change these operating policies to reflect
changes in the laws and regulations without the approval of its shareholders.
Rule 144A under the 1933 Act allows for a broader institutional trading
market for securities otherwise subject to restrictions on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Investment by the Prime Reserves or Tax-Exempt
Reserves in Rule 144A securities could have the effect of increasing the
level of illiquidity of the Fund during any period that qualified
institutional buyers were no longer interested in purchasing these
securities. For purposes of each Fund's 10% limitation on purchases of
illiquid instruments, Rule 144A securities will not be considered to be
illiquid if Fleet has determined, in accordance with guidelines established
by the Board of Trustees, that an adequate trading market exists for such
securities.
PRICING OF SHARES
Net asset value per share of each Fund is determined as of 12:00 Noon
(Eastern Time) and the close of regular trading hours on the New York Stock
Exchange (the "Exchange"), currently 4:00 p.m. (Eastern Time), on each day
the Exchange is open. Currently, the holidays which Galaxy observes are New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Net asset value per share of a Fund for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund, less the liabilities of the Fund, by the number of
outstanding shares of the Fund.
The assets in each Fund are valued based upon the amortized cost method.
Pursuant to this method, a security is valued by reference to a Fund's
acquisition cost as adjusted for amortization of premium or accretion of
discount. Although Galaxy seeks to maintain the net asset value per share of
each Fund at $1.00, there can be no assurance that the net asset value per share
will not vary.
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HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds are sold on a continuous basis by Galaxy's
distributor, First Data Distributors, Inc. ("FD Distributors"), a
wholly-owned subsidiary of First Data Investor Services Group, Inc. FD
Distributors is a registered broker/dealer with principal offices located at
4400 Computer Drive, Westboro, Massachusetts 01581-5108.
PURCHASE OF SHARES
Shares of the Funds are offered to customers who maintain qualified
accounts with Ziegler Thrift Trading, Inc., a client of U.S. Clearing.
OPENING A FUND ACCOUNT. Contact your Account Executive to open a Fund
account. Account balances will appear on your monthly statement.
SUBSEQUENT INVESTMENTS. You may make a subsequent investment to an
existing Fund account using either of the methods described below:
BY CHECK. Mail or deliver your check payable to U.S. Clearing to your
Account Executive who will deposit it into the Fund(s). Please indicate the
appropriate Fund(s) and indicate your brokerage account number on the check
or draft.
BY SWEEP. Your brokerage firm has available an automatic "sweep" for
customers in the Funds. If you request the sweep arrangement, all cash
balances are moved into one of the Funds on a daily basis by your brokerage
firm on your behalf. Sales proceeds in total from trades will be swept into
the designated Fund on settlement date.
GENERAL PURCHASE INFORMATION. U.S. Clearing is responsible for
transmitting to FD Distributors orders for purchases of shares of the Funds
and for wiring required funds in payment to Galaxy's custodian on a timely
basis. FD Distributors is responsible for transmitting such orders to
Galaxy's transfer agent for execution. Shares purchased by U.S. Clearing on
behalf of customers of its brokerage firm clients will normally be held of
record by U.S. Clearing and beneficial ownership of shares will be recorded
by U.S. Clearing and reflected in the account statements provided to such
customers. Confirmations of share purchases and redemptions will be sent
directly by U.S. Clearing to customers.
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Purchases of shares of the Funds will be effected only on days on which FD
Distributors, Galaxy's custodian and U.S. Clearing are open for business (a
"Business Day").
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
of the Funds is recorded on the books of Galaxy and share certificates will
not be issued. Payment for shares of a Fund in the amount of $1,000,000 or
more may be made, at the discretion of the respective Fund, in the form of
securities that are permissible investments for the Fund. For further
information, see the Statement of Additional Information under "Additional
Purchase and Redemption Information" or contact your Account Executive.
REDEMPTION OF SHARES
You may redeem your Fund shares using any of the methods described below:
BY CONTACTING YOUR ACCOUNT EXECUTIVE. Instruct your Account Executive
to order a withdrawal from your Fund and issue a check payable to you.
BY SWEEP. Your brokerage firm's automatic "sweep" moves money
automatically from your Fund for use by your brokerage account to cover
security purchases or other charges to your account.
BY CHECKWRITING This service enables you to write checks made payable
to any payee. Checks cannot be written for more than the principal balance
(not including any accrued dividends) in your Fund. To initiate this service,
you must fill out a signature card which can be obtained from your Account
Executive. There is no separate charge for the checkwriting service and your
checks are provided free of charge. THE CHECKWRITING SERVICE ENABLES YOU TO
RECEIVE THE DAILY DIVIDENDS DECLARED ON THE FUND SHARES TO BE REDEEMED UNTIL
THE DAY THAT THE CHECK IS PRESENTED FOR PAYMENT.
GENERAL REDEMPTION INFORMATION. It is the responsibility of U.S.
Clearing to transmit redemption orders to FD Distributors and credit
customers' accounts with redemption proceeds on a timely basis. No charge
for wiring redemption payments to U.S. Clearing is imposed by Galaxy,
although U.S. Clearing may charge customers' accounts for redemption
services. Information relating to such redemption services and charges, if
any, is available from your Account Executive.
Galaxy will make payment for all shares redeemed after receipt of a
redemption request in proper form, except as provided by the rules of the
Securities and Exchange Commission (the "SEC"). Galaxy may redeem shares
involuntarily or make
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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" for examples of when such
redemptions might be appropriate. The Funds impose no charge when shares are
redeemed.
OTHER PURCHASE AND REDEMPTION INFORMATION
The Funds have two transaction times each Business Day, 12:00 Noon
(Eastern Time) and the close of regular trading hours on the Exchange,
currently 4:00 p.m. (Eastern Time). A purchase order for shares of a Fund
received and accepted by FD Distributors prior to 4:00 p.m. (Eastern Time) on
a Business Day will be executed at the net asset value next determined 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 prior to 4:00 p.m. (Eastern Time) that day. Shares do not
earn dividends on the day a redemption is effected regardless of whether the
redemption order is effected before or after 12:00 Noon (Eastern Time).
On a Business Day when the Exchange closes early due to a partial
holiday or otherwise, Galaxy will advance the times at which purchase and
redemption orders must be received in order to be processed on that Business
Day.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund is declared daily as a dividend
to the persons who are shareholders of the respective Funds immediately after
the 4:00 p.m. pricing of shares on the day of declaration. A Fund's 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. None of the Funds 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 and distributions will be reinvested in additional shares of a
Fund at the net asset value of such shares on the ex-dividend date. The
crediting and payment of dividends to customers will be in accordance with
U.S. Clearing's procedures. Contact your Account Executive for additional
information.
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TAXES
FEDERAL
IN GENERAL. Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, (the "Code").
Such qualification generally relieves a Fund of liability for federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income. In general, a Fund's investment company taxable
income will be its taxable income (including interest), subject to certain
adjustments and excluding the excess of any net long-term capital gain for
the taxable year over the net short-term capital loss, if any, for such year.
The Prime Reserves and Government Reserves intend to distribute
substantially all of their respective investment company taxable income and
net exempt-interest income each year. Such dividends will be taxable as
ordinary income to each Fund's shareholders who are not currently exempt from
federal income taxes, whether such income is 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.) Because all of each
Fund's net investment income is expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.
Dividends declared in October, November or December of any year that 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.
THE TAX-EXEMPT RESERVES. The Tax-Exempt Reserves' policy 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 investment company taxable
income, if any. Dividends derived from exempt-interest income
("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 Tax-Exempt Reserves should hold certain "private activity bonds"
issued after August 7, 1986, shareholders must include, as an item of tax
preference, the portion of dividends
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paid by the Fund that is attributable to interest on such bonds in their
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 applicable to corporations. Corporate
shareholders must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum 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.
Dividends from the Tax-Exempt Reserves 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Tax-Exempt
Reserves 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.
Shareholders should consult their own tax advisers about the status of
distributions from the Funds in their own state.
MISCELLANEOUS
The foregoing summarizes some of the important 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 at least annually as to the
federal income tax consequences of distributions made each year.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of
Galaxy's Board of Trustees. The Statement of Additional Information contains
the names of and general background information concerning the Trustees.
INVESTMENT ADVISER
Fleet, with principal offices at 75 State Street, Boston, Massachusetts
02109, serves as the investment adviser to the Funds. Fleet is an indirect
wholly-owned subsidiary of Fleet Financial Group, Inc., a registered bank
holding company with
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total assets at December 31, 1997 of approximately $85.5 billion. Fleet,
which commenced operations in 1984, also provides investment management and
advisory services to individual and institutional clients, and manages the
other portfolios of Galaxy: the Money Market, Government, U.S. Treasury,
Tax-Exempt, Connecticut Municipal Money Market, Massachusetts Municipal Money
Market, Institutional Government Money Market, Equity Value, Equity Growth,
Equity Income, International Equity, Small Company Equity, MidCap Equity,
Asset Allocation, Small Cap Value, Growth and Income, Strategic Equity,
Short-Term Bond, Intermediate Government Income, High Quality Bond, Corporate
Bond, Tax-Exempt Bond, New Jersey Municipal Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond and Rhode Island
Municipal Bond Funds.
Subject to the general supervision of Galaxy's Board of Trustees, Fleet
manages the Funds, makes decisions with respect to and places orders for all
purchases and sales of their portfolio securities and maintains related
records.
For the services provided and expenses assumed, Fleet is entitled to
receive advisory fees, computed daily and paid monthly, at the annual rate of
.40% of the first $750,000,000 of each Fund's average daily net assets, plus
.35% of each Fund's average daily net assets in excess of $750,000,000.
Fleet may from time to time, in its discretion, waive advisory fees payable
by the Funds in order to help maintain competitive expense ratios, and may
from time to time allocate a portion of its advisory fees to Fleet Bank or
other subsidiaries of Fleet Financial Group, Inc. in consideration for
administrative and/or shareholder support services which they provide to
beneficial shareholders.
Fleet is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, to the extent
permitted by law or order of the SEC, financial institutions that are
affiliated with Fleet or that have sold shares of the Funds, if Fleet
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.
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 such banking laws and regulations do not prohibit
such a bank holding company or affiliate from acting as investment adviser,
transfer agent, or custodian to such an
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investment company or from purchasing shares of such a company as agent for
and upon the order of customers. Fleet, the custodian and Institutions that
are banks or bank affiliates are subject to such banking laws and
regulations. Should legislative, judicial or administrative action prohibit
or restrict the activities of such companies in connection with their
services to the Funds, Galaxy might be required to alter materially or
discontinue its arrangements with such companies and change its method of
operations. It is not anticipated, however, that any resulting change in the
Funds' method of operations would affect a Fund's net asset value per share
or result in financial loss to any shareholder.
ADMINISTRATOR
First Data Investor Services Group, Inc. ("Investor Services Group"),
located at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as
the Funds' administrator. Investor Services Group is a wholly-owned
subsidiary of First Data Corporation.
Investor Services Group generally assists the Funds in their
administration and operation. Investor Services Group also serves as
administrator to the other portfolios of Galaxy. For the services provided
to the Funds, Investor Services Group is entitled to receive administration
fees, computed daily and paid monthly, at the annual rate of .09% of the
first $2.5 billion of combined average daily net assets of the Funds and the
other portfolios offered by Galaxy (collectively the "Portfolios"), .085% of
the next $2.5 billion of combined average daily net assets and .075% of
combined average daily net assets over $5 billion. In addition, Investor
Services Group also receives a separate annual fee from each Portfolio for
certain fund accounting services. From time to time, Investor Services Group
may waive voluntarily all or a portion of the administration fee payable to
it by the Funds.
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 the Funds as
follows: Class BB shares representing interests in the Prime Reserves, Class
CC shares representing interests in the Government Reserves and Class DD
shares representing interests in the Tax-Exempt Reserves. Each Fund is
classified as a diversified company under the 1940 Act. The Board of
Trustees has also authorized the issuance of additional classes and series of
shares representing interests in other portfolios of Galaxy. For information
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regarding the Funds contact FD Distributors at 1-800-628-0414.
Each share of Galaxy (irrespective of series designation) has a par
value of $.001, represents an equal proportionate interest in the related
investment portfolio with other shares of the same class, and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to such investment portfolio as are declared in the discretion of
Galaxy's Board of Trustees.
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate
and not by class or series, except as otherwise 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.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the 1940 Act with respect to the Funds. Under the Distribution
and Services Plan, Galaxy may pay (i) FD Distributors or another person for
distribution services provided and expenses assumed and (ii) broker-dealers
or other financial institutions ("Service Organizations") for shareholder
administrative support services provided to shareholders of the Funds.
Payments to FD Distributors are to compensate it for distribution
assistance and expenses assumed and activities primarily intended to result
in the sale of shares, including compensating dealers and other sales
personnel (which may include U.S. Clearing and other affiliates of Fleet),
direct advertising and marketing expenses and expenses incurred in connection
with preparing, printing, mailing and distributing or publishing
advertisements and sales literature, for printing and mailing Prospectuses
and Statements of Additional Information (except those used for regulatory
purposes or for distribution to existing shareholders), and costs associated
with implementing and operating the Distribution and Services Plan.
The servicing agreements adopted under the Distribution and
Services Plan require the Service Organizations receiving such compensation
(which may include U.S. Clearing and other affiliates of Fleet) to perform
certain services, including providing administrative services with respect to
the beneficial owners of shares of the Funds, such as establishing and
maintaining accounts and records for their customers who invest in such
shares, assisting customers in processing purchase,
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exchange and redemption requests and/or in changing dividend options and
account descriptions, developing, maintaining and supporting systems
necessary to support cash management services, such as sweep arrangements,
and responding to customer inquiries concerning their investments.
Under the Distribution and Services Plan, payments by Galaxy for
distribution expenses may not exceed .75% (annualized) of the average daily
net assets of a Fund and payments for shareholder administrative support
services may not exceed .25% (annualized) of the average daily net asset
value of a Fund's outstanding shares which are owned of record or
beneficially by a Service Organization's customers for whom the Service
Organization is the owner of record or shareholder of record or with whom it
has a servicing relationship. As of the date of this Prospectus, Galaxy
intends to limit payments under the Distribution and Services Plan to an
aggregate fee of not more than .45% (on an annualized basis) of the average
daily net assets of the Prime Reserves and not more than .40% (on an
annualized basis) of the average daily net assets of the Government Reserves
and Tax-Exempt Reserves.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, located at One Chase Manhattan Plaza, New
York, New York 10081, a wholly-owned subsidiary of The Chase Manhattan
Corporation, serves as custodian of the Funds' assets, and First Data
Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation, serves as Galaxy's transfer and
dividend disbursing agent. Services performed by both entities for the Funds
are described in the Statement of Additional Information. Communications to
Investor Services Group should be directed to Investor Services Group at P.O.
Box 5108, 4400 Computer Drive, Westboro, Massachusetts 01581-5108.
EXPENSES
Except as noted below, Fleet and Investor Services Group bear all
expenses in connection with the performance of their advisory and
administrative 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 Investor
Services Group); SEC fees; state securities fees; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders; advisory, administration, shareholder servicing, Rule 12b-1
distribution, fund accounting and custody fees; charges of the transfer agent
and dividend disbursing agent; certain insurance premiums; outside auditing
and legal expenses; cost of independent pricing services; costs
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of shareholder reports and meetings; and any extraordinary expenses. The
Funds also pay for any brokerage fees and commissions in connection with the
purchase of portfolio securities.
PERFORMANCE REPORTING
From time to time, in advertisements or in reports to shareholders, the
yields of the Funds, as a measure of their performance, may be quoted and
compared to those of other mutual funds with similar investment objectives
and to other relevant indices 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-Registered Trademark-, a
widely recognized independent publication that monitors the performance of
mutual funds. Also, the Funds' yield data may be 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 in publications
of a local or regional nature. The performance of the Prime Reserves and
Government Reserves 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 yield of a Fund refers 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. Each 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
Tax-Exempt Reserves 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 federal income tax rate and
adding the product to that portion, if any, of the Fund's yield which is not
tax-exempt.
The Funds' yields will fluctuate and any quotation of yield should not
be considered as representative of the future performance of the Funds.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance is generally a function of the
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<PAGE>
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged directly by
institutions to accounts of customers that have invested in shares of a Fund
will not be included in calculations of yield.
The portfolio managers of the Funds and other investment professionals
may from time to time discuss in advertising, sales literature or other
material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include but are not
limited to the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and capital markets; investment
strategies and techniques; investment products; and tax, retirement and
investment planning.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent certified public accountants.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of a particular Fund means, with respect to the approval
of an investment advisory agreement or Rule 12b-1 distribution plan or a
change in an investment objective or fundamental investment policy, the
affirmative vote of the holders of the lesser of (a) more than 50% of the
outstanding shares of such Fund, or (b) 67% or more of the shares of such
Fund present at a meeting if more than 50% of the outstanding shares of such
Fund are represented at the meeting in person or by proxy.
YEAR 2000 RISKS. Like other investment companies, financial and
business organizations and individuals around the world, Galaxy could be
adversely affected if the computer systems used by Fleet and Galaxy's other
service providers do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem." Fleet is taking steps to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
assurance that comparable steps are being taken by Galaxy's other major
service providers. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on Galaxy as a
result of the Year 2000 Problem.
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<PAGE>
THE GALAXY FUND
(Prime Reserves, Government Reserves and
Tax-Exempt Reserves)
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
-----------------------------------------------
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
10. Cover Page . . . . . . . . . . Cover Page
11. Table of Contents. . . . . . . Table of Contents
12. General Information and
History. . . . . . . . . . . . Not Applicable
13. Investment Objectives and
Policies . . . . . . . . . . . Investment Objectives and Policies;
Net Asset Value
14. Management of the Fund . . . . Trustees and Officers;
Miscellaneous
15. Control Persons and Principal
Holders of Securities. . . . . See Prospectus - "Management of the
Funds"
16. Investment Advisory and
Other Services . . . . . . . . Advisory, Administration, Custodian
and Transfer Agency Agreements;
Distribution and Services Plan;
Distributor; Auditors; Counsel
17. Brokerage Allocation and
Other Practices. . . . . . . . Portfolio Transactions
18. Capital Stock and Other
Securities . . . . . . . . . . Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered. . . . . . . . . Additional Purchase and Redemption
Information; Description of Shares
20. Tax Status . . . . . . . . . . Additional Information Concerning
Taxes
21. Underwriters . . . . . . . . . Portfolio Transactions
22. Calculation of
Performance Data . . . . . . . Performance and Yield Calculation
23. Financial Statements . . . . . Auditors
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<PAGE>
THE GALAXY FUND
Statement of Additional Information
Prime Reserves
Government Reserves
Tax-Exempt Reserves
____________________, 1998
<PAGE>
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectuses (collectively, the
"Prospectus") for the Prime Reserves, Government Reserves and Tax-Exempt
Reserves, dated _____________, 1998, of The Galaxy Fund ("Galaxy"), as it may
from time to time be supplemented or revised. This Statement of Additional
Information is incorporated by reference in its entirety into the Prospectus.
No investment in the Funds should be made without reading the Prospectus.
Copies of the Prospectus may be obtained by writing Galaxy c/o First Data
Distributors, Inc., 4400 Computer Drive, Westboro, Massachusetts 01581-5180 or
by calling Galaxy at 1-800-628-0414.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, FLEET
INVESTMENT ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES
OF THE FUNDS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
PAGE
THE GALAXY FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . 1
Variable and Floating Rate Obligations . . . . . . . . . . . . . . . . . 1
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Asset-Backed Securities. . . . . . . . . . . . . . . . . . . . . . . . . 2
Municipal Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 2
When-Issued and Delayed Settlement Transactions. . . . . . . . . . . . . 5
Stand-By Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Repurchase Agreements; Reverse Repurchase Agreements;
Loans of Portfolio Securities . . . . . . . . . . . . . . . . . . . . 6
U.S. Government Securities . . . . . . . . . . . . . . . . . . . . . . . 6
Portfolio Securities Generally . . . . . . . . . . . . . . . . . . . . . 7
Additional Investment Limitations. . . . . . . . . . . . . . . . . . . . 7
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . 9
Special Procedures Of In-Kind Payments . . . . . . . . . . . . . . . . . 10
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ADDITIONAL INFORMATION CONCERNING TAXES. . . . . . . . . . . . . . . . . 12
In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax-Exempt Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
State Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Shareholder and Trustee Liability. . . . . . . . . . . . . . . . . . . . 4
ADVISORY, ADMINISTRATION, CUSTODIAN AND TRANSFER AGENCY AGREEMENTS . . . 5
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . 6
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
DISTRIBUTION AND SERVICES PLAN . . . . . . . . . . . . . . . . . . . . . 8
DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PERFORMANCE AND YIELD INFORMATION. . . . . . . . . . . . . . . . . . . . 10
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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<PAGE>
THE GALAXY FUND
The Galaxy Fund ("Galaxy") is an open-end management investment company
currently offering shares of beneficial interest in thirty investment
portfolios.
This Statement of Additional Information relates to three of those
investment portfolios: the Prime Reserves, Government Reserves and Tax-Exempt
Reserves (the "Funds"). This Statement of Additional Information provides
additional investment information with respect to the Funds and should be read
in conjunction with the current Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
VARIABLE AND FLOATING RATE OBLIGATIONS
The Funds may purchase variable and floating rate instruments as described
in their Prospectus. If such an instrument is not rated, Fleet Investment
Advisors Inc. ("Fleet"), the investment adviser to the Funds, must determine
that such instrument is comparable to rated instruments eligible for purchase by
the Funds and will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such notes and will continuously monitor
their financial status in order to meet payment on demand. In determining
average weighted portfolio maturity of each of these Funds, a variable or
floating rate instrument issued or guaranteed by the U.S. Government or an
agency or instrumentality thereof will be deemed to have a maturity equal to the
period remaining until the obligation's next interest rate adjustment.
Long-term variable and floating rate obligations held by the Funds may have
maturities of more than 397 days, provided the Funds are entitled to payment of
principal upon not more than 30 days' notice or at specified intervals not
exceeding one year (upon not more than 30 days' notice).
Variable and floating rate obligations with a demand feature held by the
Funds will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand notice period.
BANK OBLIGATIONS
For purposes of the Prime Reserves's investment policy with respect to bank
obligations, the assets of a bank or savings institution will be deemed to
include the assets of its U.S. and foreign branches.
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<PAGE>
ASSET-BACKED SECURITIES
The Prime Reserves may purchase asset-backed securities. Asset-backed
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in an underlying pool of assets, or as
debt instruments, which are also known as collateralized obligations, and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Asset-backed
securities are often backed by a pool of assets representing the obligations of
a number of different parties.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected prepayments, will
decrease, yield to maturity.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. Like other fixed income securities, when interest rates rise, the
value of an asset-backed security generally will decline; however, when interest
rates decline, the value of an asset-backed security with prepayment features
may not increase as much as that of other fixed income securities.
Asset-backed securities are subject to greater risk of default during
periods of economic downturn. Also, the secondary market for certain
asset-backed securities may not be as liquid as the market for other types of
securities, which could result in the Fund's experiencing difficulty in valuing
or liquidating such securities. For these reasons, under certain
circumstances, asset-backed securities may be considered illiquid securities.
MUNICIPAL SECURITIES
Municipal Securities acquired by the Tax-Exempt Reserves include debt
obligations issued by governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating
-2-
<PAGE>
expenses, and the extension of loans to public institutions and facilities.
Private activity bonds that are issued by or on behalf of public authorities to
finance various privately operated facilities are "Municipal Securities" if the
interest paid thereon is exempt from regular federal income tax and not treated
as a specific tax preference item under the federal alternative minimum tax.
The two principal categories of Municipal Securities include "general
obligation" and "revenue" issues. The Tax-Exempt Reserves's portfolio may also
include "moral obligation" issues, which are normally issued by special purpose
authorities. There are, of course, variations in the quality of Municipal
Securities, both within a particular category and between categories, and the
yields on Municipal Securities depend upon a variety of factors, including
general market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of a
nationally recognized statistical rating organization ("Rating Agency"), such as
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P") and Fitch IBCA, Inc. ("Fitch IBCA"), described in the Prospectus and in
Appendix A hereto, represent such Rating Agencies' opinion as to the quality of
Municipal Securities. It should be emphasized that these ratings are general
and are not absolute standards of quality. Municipal Securities with the same
maturity, interest rate and rating may have different yields. Municipal
Securities of the same maturity and interest rate with different ratings may
have the same yield.
The payment of principal and interest on most securities purchased by the
Tax-Exempt Reserves will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities and each multi-state
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Prospectus. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer." An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of its
Municipal Securities may be materially adversely affected by litigation or other
conditions.
Among other instruments, the Tax-Exempt Reserves may purchase short-term
general obligation notes, tax anticipation
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<PAGE>
notes, bond anticipation notes, revenue anticipation notes, tax-exempt
commercial paper, construction loan notes and other forms of short-term loans.
Such instruments are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements or other revenues. In
addition, the Tax-Exempt Reserves may invest in long-term tax-exempt
instruments, such as municipal bonds and private activity bonds to the extent
consistent with the limitations set forth in the Prospectus including applicable
maturity restrictions.
Private activity bonds are or have been issued to obtain funds to provide,
among other things, privately operated housing facilities, pollution control
facilities, convention or trade show facilities, mass transit, airport, port or
parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Private activity bonds are also
issued to privately held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local governments are authorized
in most states to issue private activity bonds for such purposes in order to
encourage corporations to locate within their communities. The principal and
interest on these obligations may be payable from the general revenues of the
users of such facilities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Securities. For example, under the Tax Reform Act of
1986, interest on certain private activity bonds must be included in an
investor's federal alternative minimum taxable income, and corporate investors
must include all tax-exempt interest in their federal alternative minimum
taxable income. Galaxy cannot, of course, predict what legislation may be
proposed in the future regarding the income tax status of interest on Municipal
Securities, or which proposals, if any, might be enacted. Such proposals, while
pending or if enacted, might materially and adversely affect the availability of
Municipal Securities for investment by the Tax-Exempt Reserves and the liquidity
and value of their respective portfolios. In such an event, the Fund would
re-evaluate its investment objective and policies and consider possible changes
in its structure or possible dissolution.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the
Tax-Exempt Reserves nor Fleet will review the proceedings relating to the
issuance of Municipal Securities or the bases for such opinions.
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<PAGE>
WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS
When a Fund agrees to purchase securities on a "when-issued" or "delayed
settlement" basis, the Fund's custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account. In the
event of a decline in the value of the securities that the custodian has set
aside, the Fund may be required to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. A Fund's net assets may fluctuate to a greater
degree if it sets aside portfolio securities to cover such purchase commitments
than if it sets aside cash. Because a Fund sets aside liquid assets to satisfy
its purchase commitments in the manner described, its liquidity and ability to
manage its portfolio might be affected in the event its commitments to purchase
securities on a when-issued or delayed settlement basis exceeded 25% of the
value of its assets.
When a Fund engages in when-issued or delayed settlement transactions, it
relies on the seller to consummate the trade. Failure of the seller to do so may
result in the Fund's incurring a loss or missing an opportunity to obtain a
price considered to be advantageous for a security. For purposes of determining
the average weighted maturity of a Fund's portfolio, the maturity of securities
purchased on a when-issued or delayed settlement basis is calculated from the
date of settlement of the purchase to the maturity date.
STAND-BY COMMITMENTS
The Tax-Exempt Reserves may acquire "stand-by commitments" with respect to
Municipal Securities held by it. Under a stand-by commitment, a dealer agrees
to purchase from the Fund, at the Fund's option, specified Municipal Securities
at a specified price. Stand-by commitments are exercisable by the Fund at any
time before the maturity of the underlying Municipal Security, and may be sold,
transferred or assigned by the Fund only with respect to the underlying
instruments.
Although stand-by commitments are often available without the payment of
any direct or indirect consideration, if necessary or advisable, the Fund may
pay for a stand-by commitment either separately in cash or by paying a higher
price for securities acquired subject to the commitment. Where the Fund pays
any consideration directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and
broker/dealers that present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, Fleet will review
periodically the issuer's assets,
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<PAGE>
liabilities, contingent claims and other relevant financial information.
The Fund will acquire stand-by commitments solely to facilitate liquidity
and does not intend to exercise its rights thereunder for trading purposes.
Stand-by commitments will be valued at zero in determining the Fund's net asset
value.
REPURCHASE AGREEMENTS; REVERSE REPURCHASE AGREEMENTS; LOANS OF PORTFOLIO
SECURITIES
Each Fund may enter into repurchase agreements. The repurchase price under
a repurchase agreement generally equals the price paid by a Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreements).
Securities subject to repurchase agreements will be held by a Fund's custodian
or sub-custodian in a segregated account or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the Investment Company Act of 1940, as amended, (the "1940 Act").
The Prime Reserves and Government Reserves may enter into reverse
repurchase agreements. Whenever a Fund enters into a reverse repurchase
agreement, the Fund will place in a segregated custodial account liquid assets
such as cash or liquid securities equal to the repurchase price (including
accrued interest). The Fund will monitor the account to ensure such equivalent
values are maintained. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
A Fund that loans portfolio securities would continue to accrue interest on
the securities loaned and would also earn income on the loans. Any cash
collateral received by the Government Reserves in connection with such loans
would be invested in short-term obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; cash collateral received by the
Prime Reserves would be invested in high quality, short-term "money market"
instruments.
U.S. GOVERNMENT SECURITIES
Examples of the types of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (hereinafter, "U.S. Government
obligations") that may be held by the Funds include, without limitation, direct
obligations of the U.S. Treasury, and securities issued or guaranteed by the
Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Central Bank for Cooperatives, Federal Home Loan Mortgage
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<PAGE>
Corporation, Federal Intermediate Credit Banks, Resolution Trust Corporation and
Maritime Administration.
PORTFOLIO SECURITIES GENERALLY
Subsequent to its purchase by a Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or Fleet, pursuant to guidelines
established by the Board, will promptly consider such an event in determining
whether the Fund involved should continue to hold the obligation. The Board of
Trustees or Fleet may determine that it is appropriate for the Fund to continue
to hold the obligation if retention is in accordance with the interests of the
Fund and applicable regulations of the Securities and Exchange Commission.
ADDITIONAL INVESTMENT LIMITATIONS
In addition to the investment limitations disclosed in their Prospectus,
the Funds are subject to the following investment limitations, which may be
changed with respect to a particular Fund only by a vote of the holders of a
majority of such Fund's outstanding shares (as defined under "Miscellaneous" in
the Prospectus).
Each Fund may not:
1. Purchase securities on margin (except such short-term credits as
may be necessary for the clearance of purchases), make short
sales of securities, or maintain a short position.
2. Act as an underwriter within the meaning of the Securities Act of
1933, as amended; except insofar as a Fund might be deemed to be
an underwriter upon disposition of restricted portfolio
securities; and except to the extent that the purchase of
securities directly from the issuer thereof in accordance with a
Fund's investment objective, policies and limitations may be
deemed to be underwriting.
3. Purchase or sell real estate; except that each taxable Fund may
purchase securities that are secured by real estate, and the
Prime Reserves may purchase securities of issuers which deal in
real estate or interests therein; and except that the Tax-Exempt
Reserves may invest in Municipal Securities secured by real
estate or interests therein; however the Funds will not purchase
or sell interests in real estate limited partnerships.
-7-
<PAGE>
4. Purchase or sell commodities or commodity contracts or invest in
oil, gas or other mineral exploration or development programs or
mineral leases.
5. Invest in or sell put options, call options, straddles, spreads,
or any combination thereof.
6. Invest in companies for the purpose of exercising management or
control.
NET ASSET VALUE
Galaxy uses the amortized cost method of valuation to value shares of the
Funds. In order to use the amortized cost method, the Funds comply with the
various quality and maturity restrictions specified in Rule 2a-7 ("Rule 2a-7")
promulgated under the 1940 Act. Pursuant to this method, a security is valued
at its initial acquisition cost, as adjusted for amortization of premium or
accretion of discount, regardless of the impact of fluctuating interest rates on
the market value of the security. Where it is not appropriate to value a
security by the amortized cost method, the security will be valued either by
market quotations or by fair value as determined by or under the direction of
Galaxy's Board of Trustees. This method may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the security. The value of securities in each Fund can
be expected to vary inversely with changes in prevailing interest rates. Thus,
if interest rates have increased from the time a security was purchased, such
security, if sold, might be sold at a price less than its cost. Similarly, if
interest rates have declined from the time a security was purchased, such
security, if sold, might be sold at a price greater than its purchase cost. In
either instance, if the security is held to maturity, no gain or loss will be
realized.
The Funds invest only in instruments that meet the applicable quality
requirements of Rule 2a-7 and maintain a dollar-weighted average portfolio
maturity appropriate to their objective of maintaining a stable net asset value
per share, provided that none of the Funds will purchase any security deemed to
have a remaining maturity (as defined in the 1940 Act) of more than 397 days nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days.
Galaxy's Board of Trustees has established procedures reasonably designed,
taking into account current market conditions and each Fund's investment
objective, to stabilize the net asset value per share of each Fund for purposes
of sales and redemptions at $1.00. These procedures include review by the Board
of Trustees, at such intervals as it deems appropriate, to determine the extent,
if any, to which the net asset value per share of each Fund, calculated by using
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<PAGE>
available market quotations, deviates from $1.00 per share. In the event such
deviation exceeds one-half of one percent, the Board of Trustees will promptly
consider what action, if any, should be initiated. If the Board of Trustees
believes that the extent of any deviation from a Fund's $1.00 amortized cost
price per share may result in material dilution or other unfair results to new
or existing investors, it has agreed to take such steps as it considers
appropriate to eliminate or reduce, to the extent reasonably practicable, any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the average portfolio maturity;
withholding or reducing dividends; redeeming shares in kind; reducing the number
of a Fund's outstanding shares without monetary consideration; or utilizing a
net asset value per share determined by using available market quotations.
DIVIDENDS
As stated, Galaxy uses its best efforts to maintain the net asset value per
share of each Fund at $1.00. As a result of a significant expense or realized
or unrealized loss incurred by any of the Funds, it is possible that a Fund's
net asset value per share may fall below $1.00. Should Galaxy incur or
anticipate any unusual or unexpected significant expense or loss which would
affect disproportionately the income of a Fund for a particular period, the
Board of Trustees would at that time consider whether to adhere to the present
dividend policy with respect to the Funds or to revise it in order to ameliorate
to the extent possible the disproportionate effect of such expense or loss on
the income of the Fund experiencing such effect. Such expense or loss may
result in a shareholder's receiving no dividends for the period in which it
holds shares of a Fund and in its receiving upon redemption a price per share
lower than that which it paid.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds are sold on a continuous basis by First Data
Distributors, Inc. ("FD Distributors"), and FD Distributors has agreed to use
appropriate efforts to solicit all purchase orders. As described in the
Prospectus, shares are sold without a sales charge.
If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, Galaxy may
make payment wholly or partly in securities or other property. Such redemptions
will only be made in "readily marketable" securities. In such an event, a
shareholder would incur transaction costs in selling the securities or other
property.
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<PAGE>
Galaxy may suspend the right of redemption or postpone the date of payment
for shares for more than seven days during any period when (a) trading in the
markets the Funds normally utilize is restricted, or an emergency, as defined by
the rules and regulations of the Securities and Exchange Commission (the "SEC")
exists making disposal of a Fund's investments or determination of its net asset
value not reasonably practicable; (b) the New York Stock Exchange is closed
(other than customary weekend and holiday closings); or (c) the SEC by order has
permitted such suspension.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
SPECIAL PROCEDURES OF IN-KIND PAYMENTS
Payments for shares of a Fund may, in the discretion of the respective
Fund, be made in the form of securities that are permissable investments for the
Fund as described in the Prospectus. For further information about this form of
payment, contact your broker-dealer representative. In connection with an
in-kind securities segment, a Fund will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
procedures used by the Fund; that the Fund receive satisfactory assurances that
it will have good and marketable title to the securities received by it; that
the securities be in proper form for transfer of the Fund; that adequate
information be provided to the Fund concerning the basis and other tax matters
relating to the securities; and that the amount of the purchase be at least
$1,000,000.
DESCRIPTION OF SHARES
Galaxy is a Massachusetts business trust. Galaxy's Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of shares and to
classify or reclassify any unissued shares into one or more additional classes
by setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of thirty
classes of shares, each class representing interests in one of thirty separate
investment portfolios: Money Market Fund, Government Fund, U.S. Treasury Fund,
Tax-Exempt Fund, Prime Reserves, Government Reserves, Tax-Exempt Reserves,
Connecticut Municipal Money Market Fund, Massachusetts Municipal Money Market
Fund, Institutional Government Money Market Fund, Equity Value Fund, Equity
Growth Fund, Equity Income Fund, International Equity Fund, Small Company Equity
Fund, MidCap Equity Fund, Asset Allocation Fund, Small Cap Value Fund, Growth
and Income Fund,
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Strategic Equity Fund, Short-Term Bond Fund, Intermediate Government Income
Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt Bond Fund, New
Jersey Municipal Bond Fund, New York Municipal Bond Fund, Connecticut Municipal
Bond Fund, Massachusetts Municipal Bond Fund and Rhode Island Municipal Bond
Fund.
Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectus, shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of Galaxy or an
individual Fund, shareholders of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative asset values of Galaxy's
respective Funds, of any general assets of Galaxy not belonging to any
particular Fund, which are available for distribution. Shareholders of a Fund
are entitled to participate in the net distributable assets of the Fund involved
in liquidation, based on the number of shares of the Fund held by each
shareholder.
Holders of all outstanding shares of a particular Fund will vote together
in the aggregate on all matters. Further, shareholders of all of the Funds, as
well as those of any other investment portfolio now or hereafter offered by
Galaxy, will vote together in the aggregate and not separately on a Fund-by-Fund
basis, except as otherwise required by law or when permitted by the Board of
Trustees. Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as Galaxy shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
Fund affected by the matter. A particular Fund is deemed to be affected by a
matter unless it is clear that the interests of each Fund in the matter are
substantially identical or that the matter does not affect any interest of the
Fund. Under the Rule, the approval of an investment advisory agreement or a
Rule 12b-1 distribution plan or any change in an investment objective or
fundamental investment policy would be effectively acted upon with respect to a
Fund only if approved by a majority of the outstanding shares of such Fund.
However, the Rule also provides that the ratification of the appointment of
independent public accountants, the approval of principal underwriting
contracts, and the election of trustees may be effectively acted upon by
shareholders of Galaxy voting without regard to class or series.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, accordingly, the holders of more than 50% in the aggregate of Galaxy's
outstanding shares may elect all of the trustees, irrespective of the votes of
other shareholders.
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<PAGE>
Galaxy does not intend to hold annual shareholder meetings except as may be
required by the 1940 Act. Galaxy's Declaration of Trust provides that a meeting
of shareholders shall be called by the Board of Trustees upon a written request
of shareholders owning at least 10% of the outstanding shares of Galaxy entitled
to vote.
Galaxy's Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of a Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of the Fund involved to be
redeemed at a price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a Fund's assets into
money and, in connection therewith, to cause all outstanding shares of the Fund
involved to be redeemed at their net asset value; or (c) combine the assets
belonging to a Fund with the assets belonging to another Fund of Galaxy and, in
connection therewith, to cause all outstanding shares of any Fund to be redeemed
at their net asset value or converted into shares of another class of Galaxy's
shares at the net asset value. In the event that shares are redeemed in cash at
their net asset value, a shareholder may receive in payment for such shares, due
to changes in the market prices of the Fund's portfolio securities, an amount
that is more or less than the original investment. The exercise of such
authority by the Board of Trustees will be subject to the provisions of the 1940
Act, and the Board of Trustees will not take any action described in this
paragraph unless the proposed action has been disclosed in writing to the Fund's
shareholders at least 30 days prior thereto.
ADDITIONAL INFORMATION CONCERNING TAXES
IN GENERAL
The following summarizes certain additional tax considerations generally
affecting the Funds and their shareholders that are not described in the Funds'
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisers with specific reference to their own
tax situation.
Each Fund is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended, (the "Code"), and each Fund intends to qualify
as a "regulated investment company" under the Code. By following this policy,
each Fund expects to
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eliminate or reduce to a nominal amount the federal income taxes to which it may
be subject. If for any taxable year a Fund does not qualify for the special
federal tax treatment afforded regulated investment companies, all of the Fund's
taxable income would be subject to tax at regular corporate rates without any
deduction for distributions to shareholders. In such event, a Fund's
distributions to shareholders (including amounts derived from interest on
Municipal Securities) would be taxable as ordinary income, to the extent of the
current and accumulated earnings and profits of the Fund, and would be eligible
for the dividends received deduction in the case of corporate shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its tax-exempt interest income, if any, net of
certain deductions for such year (the "Distribution Requirement"). In addition,
each Fund must satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign
currencies, and other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies (the "Income Requirement").
The Treasury Department may, by regulation, exclude from qualifying income
foreign currency gains which are not directly related to a Fund's principal
business of investing in stock or securities, or options and futures with
respect to stock or securities. Any income derived by a Fund from a partnership
or trust is treated for this purpose as derived with respect to the Fund's
business of investing in stock, securities or currencies, only to the extent
that such income is attributable to items of income which would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
Substantially all of each Fund's net realized long-term capital gains, if
any, will be distributed at least annually to Fund shareholders. A Fund will
generally have no tax liability with respect to such gains and the distributions
will be taxable to Fund shareholders who are not currently exempt from federal
income taxes as long-term capital gains (20% or 28% rate gains depending upon
the underlying Fund's holding period for the assets the sale of which generated
the capital gains), regardless of how long the shareholders have held Fund
shares and whether such gains are received in cash or reinvested in additional
shares.
Each Fund will designate the tax status of any distributions in a written
notice mailed to shareholders within 60 days after the close of its taxable
year. Shareholders should note that,
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upon the sale or exchange of Fund shares, if the shareholder has not held such
shares for more than six months, any loss on the sale or exchange of those
shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares.
Ordinary income of individuals is taxable at a maximum nominal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. An individual's long-term capital gains on
stocks and securities are taxable at a maximum nominal rate of 20% (for gains on
capital assets held more than 18 months), or 28% (for gains on capital assets
held more than 12 months, but not more than 18 months). For corporations,
long-term capital gains and ordinary income are both taxable at a maximum
average rate of 35% (a maximum effective marginal rate of 39% applies in the
case of corporations having taxable income between $100,000 and $335,000).
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and capital gain net income (excess of capital gains over capital
losses). Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
prior to the end of each calendar year to avoid liability for this excise tax.
The Funds will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or gross sale proceeds paid to
any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to backup withholding by the Internal Revenue Service
for failure to properly include on his or her return payments of taxable
interest or dividends, or (iii) has failed to certify to the Funds that he or
she is not subject to backup withholding when required to do so or that he or
she is an "exempt recipient."
TAX-EXEMPT RESERVES
As stated in the Prospectus, an investment in the Tax-Exempt Reserves is
not intended to constitute a balanced investment program. Shares of the Fund
would not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
individual retirement accounts because such plans and accounts are generally
tax-exempt and, therefore, not only would the shareholder not gain any
additional benefit from the Fund's dividends being tax-exempt, but such
dividends would be ultimately taxable to the beneficiaries when distributed.
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<PAGE>
In order for the Tax-Exempt Reserves to pay exempt-interest dividends for
any taxable year, at the close of each taxable quarter, at least 50% of the
aggregate value of the Fund's portfolio must consist of exempt-interest
obligations. Within 60 days after the close of its taxable year, the Fund will
notify its shareholders of the portion of the dividends paid by the Fund which
constitutes exempt-interest dividends with respect to such taxable year.
However, the aggregate amount of dividends so designated by the Fund cannot
exceed the excess of the amount of interest exempt from tax under Section 103 of
the Code received by the Fund over any amounts disallowed as deductions under
Sections 265 and 171(a)(2) of the Code. The percentage of total dividends paid
by the Fund with respect to any taxable year that qualifies as federal
exempt-interest dividends will be the same for all shareholders receiving
dividends from the Fund for such year.
Shareholders should note that, upon the sale or exchange of Fund shares, if
the shareholder has not held such shares for more than six months, any loss on
the sale or exchange of those shares will be disallowed to the extent of the
exempt dividends received with respect to the shares.
STATE TAXATION
Depending upon the extent of Galaxy's activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located, or in which it is otherwise deemed to be conducting
business, each Fund may be subject to the tax laws of such states or localities.
In addition, in those states and localities that have income tax laws, the
treatment of a Fund and its shareholders under such laws may differ from their
treatment under federal income tax laws. Under state or local law,
distributions of net investment income may be taxable to shareholders as
dividend income even though a substantial portion of such distributions may be
derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from such income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
TRUSTEES AND OFFICERS
The trustees and executive officers of Galaxy, their addresses, principal
occupations during the past five years, and other affiliations are as follows:
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Positions Principal Occupation
With The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
----------------- ----------- ----------------------
Dwight E. Vicks, Jr. Chairman & President & Director, Vicks
Vicks Lithograph & Printing Trustee Lithograph & Printing Corporation
Corporation (book manufacturing and
Commercial Drive commercial printing); Director,
P.O. Box 270 Utica Fire Insurance Company;
Yorkville, NY 13495 Trustee, Savings Bank of Utica;
Age 64 Director, Monitor Life Insurance
Company; Director, Commercial
Travelers Mutual Insurance
Company; Trustee, The Galaxy VIP
Fund; Trustee, Galaxy Fund II.
John T. O'Neill(1) President, Executive Vice President and CFO,
Hasbro, Inc. Treasurer & Hasbro, Inc. (toy and game
1027 Newport Avenue Trustee manufacturer); Trustee, The
Pawtucket, RI 02862 Galaxy VIP Fund; Trustee, Galaxy
Age 53 Fund II.
Louis DeThomasis Trustee President, Saint Mary's College
Saint Mary's College of of Minnesota; Director, Bright
Minnesota Day Travel, Inc.; Trustee,
Winona, MN 55987 Religious Communities Trust;
Age 57 Trustee, The Galaxy VIP Fund;
Trustee, Galaxy Fund II.
Donald B. Miller Trustee Chairman, Horizon Media, Inc.
10725 Quail Covey Road (broadcast services);
Boynton Beach, FL 33436 Director/Trustee, Lexington
Age 72 Funds; Chairman, Executive
Committee, Compton International,
Inc. (advertising agency);
Trustee, Keuka College; Trustee,
The Galaxy VIP Fund; Trustee,
Galaxy Fund II
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<PAGE>
Positions Principal Occupation
With The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
---------------- ----------- ----------------------
James M. Seed
The Astra Ventures,Inc. Trustee Chairman and President, The Astra
One Citizens Plaza Projects, Incorporated (land
Providence, RI 02903 development); President, The
Age 56 Astra Ventures, Incorporated
(previously, Buffinton Box
Company - manufacturer of
cardboard boxes); Commissioner,
Rhode Island Investment
Commission; Trustee, The Galaxy
VIP Fund; Trustee, Galaxy Fund
II.
Bradford S. Wellman(1) Trustee Private Investor; Vice President
2468 Ohio Street and Director, Acadia Management
Bangor, ME 04401 Company (investment services);
Age 66 from 1974 until 1990; Director,
Essex County Gas Company, until
January 1994; Director, Maine
Mutual Fire Insurance Co.;
Member, Maine Finance Authority;
Trustee, The Galaxy VIP Fund;
Trustee, Galaxy Fund II.
W. Bruce McConnel, III Secretary Partner of the law firm Drinker
Philadelphia National Bank Biddle & Reath LLP, Philadelphia,
Building Pennsylvania.
1345 Chestnut Street
Philadelphia, PA 19107
Age 54
Jylanne Dunne Vice Vice President, First Data
First Data Investor President and Investor Services Group, Inc.,
Services Group, Inc. Assistant 1990 to present.
4400 Computer Drive Treasurer
Westboro, MA 01581
Age 38
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(1) An interested person within the definition set forth in Section 2(a)(19) of
the 1940 Act.
Effective March 5, 1998, each trustee receives an annual aggregate fee of
$40,000 for his services as a trustee of Galaxy,
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The Galaxy VIP Fund ("Galaxy VIP") and Galaxy Fund II ("Galaxy II")
(collectively, the "Trusts"), plus an additional $2,500 for each in-person
Galaxy Board meeting attended and $1,500 for each in-person Galaxy VIP or Galaxy
II Board meeting attended not held concurrently with an in-person Galaxy
meeting, and is reimbursed for expenses incurred in attending all meetings.
Each trustee also receives $750 for each telephone Board meeting in which the
trustee participates, $1,000 for each in-person Board committee meeting attended
and $500 for each telephone Board committee meeting in which the trustee
participates. The Chairman of the Boards of the Trusts is entitled to an
additional annual aggregate fee in the amount of $4,000, and the President and
Treasurer of the Trusts is entitled to an additional annual aggregate fee of
$2,500 for their services in these respective capacities. The foregoing
trustees' and officers' fees are allocated among the portfolios of the Trusts
based on their relative net assets. Prior to March , 1998, (i) each trustee
received an annual aggregate fee of $29,000 for his services as a trustee of the
Trusts, plus an additional $2,250 for each in-person Galaxy Board meeting
attended and $1,500 for each in-person Galaxy VIP or Galaxy II Board meeting
attended not held concurrently with an in-person Galaxy Board meeting, and (ii)
the President and Treasurer of the Trusts received the same fees as they are
currently paid for their services in these capacities.
Effective March 1, 1996, each trustee became entitled to participate in The
Galaxy Fund, The Galaxy VIP Fund and Galaxy Fund II Deferred Compensation Plans
(the "Original Plans"). Effective January , 1997, the Original Plans were
merged into The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II Deferred
Compensation Plan (together with the Original Plans, the "Plan"). Under the
Plan, a trustee may elect to have his deferred fees treated as if they had been
invested by the Trusts in the shares of one or more portfolios in the Trusts, or
other types of investment options, and the amount paid to the trustees under the
Plan will be determined based upon the performance of such investments.
Deferral of trustees' fees will have no effect on a portfolio's assets,
liabilities, and net income per share, and will not obligate the Trusts to
retain the services of any trustee or obligate a portfolio to any level of
compensation to the trustee. The Trusts may invest in underlying securities
without shareholder approval.
No employee of First Data Investor Services Group, Inc., ("Investor
Services Group") receives any compensation from Galaxy for acting as an officer.
No person who is an officer, director or employee of Fleet, or any of its
affiliates, serves as a trustee, officer or employee of Galaxy. The trustees
and officers of Galaxy own less than 1% of its outstanding shares.
The following chart provides certain information about the fees received by
Galaxy's trustees in the most recently completed fiscal year:
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<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From Galaxy
Aggregate Accrued as and Fund
Name of Compensation Part of Fund Complex* Paid
Person/Position from Galaxy Expenses to Trustees
------------------- ------------ ------------ -------------
<S> <C> <C> <C>
Bradford S. Wellman $34,591 None $38,500
Trustee
Dwight E. Vicks, Jr. $38,184 None $42,500
Chairman & Trustee
Donald B. Miller** $34,574 None $38,500
Trustee
Rev. Louis DeThomasis $34,591 None $38,500
Trustee
John T. O'Neill $36,837 None $41,000
President, Treasurer
& Trustee
James M. Seed** $34,574 None $38,500
Trustee
</TABLE>
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* The "Fund Complex" consists of Galaxy, The Galaxy VIP Fund and Galaxy
Fund II.
** Deferred compensation (including interest) in the amounts of $35,777 and
$40,992 accrued during Galaxy's fiscal year ended October 31, 1997 for Messrs.
Miller and Seed, respectively.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, Galaxy's Declaration of Trust provides that shareholders
shall not be subject to any personal liability for the acts or obligations of
Galaxy, and that every note, bond, contract, order or other undertaking made by
Galaxy shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and not
because of his or her acts or omissions outside such capacity or some other
reason. The Declaration of Trust also provides that Galaxy shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of Galaxy, and shall satisfy any judgment thereon. Thus, the risk of
shareholder liability is limited to circumstances in which Galaxy itself would
be unable to meet its obligations.
The Declaration of Trust states further that no trustee, officer or agent
of Galaxy shall be personally liable for or on
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account of any contract, debt, claim, damage, judgment or decree arising out of
or connected with the administration or preservation of the trust estate or the
conduct of any business of Galaxy; nor shall any trustee be personally liable to
any person for any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence or reckless disregard of his duties
as trustee. The Declaration of Trust also provides that all persons having any
claim against the trustees or Galaxy shall look solely to the trust property for
payment.
With the exceptions stated, the Declaration of Trust provides that a
trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a trustee, and that the Board of Trustees
shall indemnify representatives and employees of Galaxy to the same extent to
which they themselves are entitled to indemnification.
ADVISORY, ADMINISTRATION,
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS
Fleet serves as investment adviser to the Funds. In its advisory
agreement, Fleet has agreed to provide investment advisory services to the Funds
as described in the Prospectus. Fleet has also agreed to pay all expenses
incurred by it in connection with its activities under the advisory agreement
other than the cost of securities (including brokerage commissions) purchased
for the Funds. See "Expenses" in the Prospectus.
The advisory agreement provides that Fleet shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of its duties under the advisory agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Fleet in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. Unless sooner terminated, the advisory agreement will
continue in effect with respect to a particular Fund until August 10, 1999, and
thereafter from year to year as long as such continuance is approved at least
annually (i) by the vote of a majority of trustees who are not parties to such
advisory agreement or interested persons (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval; and (ii) by Galaxy's Board of Trustees, or by a vote of a majority of
the outstanding shares of such Fund. The term "majority of the outstanding
shares of such Fund" means, with respect to approval of an advisory agreement,
the
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vote of the lesser of (i) 67% or more of the shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Fund. The advisory agreement may be terminated by Galaxy or by
Fleet on sixty days' written notice, and will terminate immediately in the event
of its assignment.
Investor Services Group serves as Galaxy's administrator. Under the
administration agreement, Investor Services Group has agreed to maintain office
facilities for Galaxy, furnish Galaxy with statistical and research data,
clerical, accounting, and bookkeeping services, certain other services such as
internal auditing services required by Galaxy, and compute the net asset value
and net income of the Funds. Investor Services Group prepares the Funds' annual
and semi-annual reports to the SEC, federal and state tax returns, and filings
with state securities commissions, arranges for and bears the cost of processing
share purchase and redemption orders, maintains the Funds' financial accounts
and records, and generally assists in all aspects of Galaxy's operations.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank ("Chase Manhattan") serves as custodian to the
Funds pursuant to a Global Custody Agreement. Under its custody agreement,
Chase Manhattan has agreed to: (i) maintain a separate account or accounts in
the name of each Fund; (ii) hold and disburse portfolio securities on account
of each Fund; (iii) collect and make disbursements of money on behalf of each
Fund; (iv) collect and receive all income and other payments and
distributions on account of each Fund's portfolio securities; (v) respond to
correspondence from security brokers and others relating to its duties; and
(vi) make periodic reports to the Board of Trustees concerning the Funds'
operations. Chase Manhattan is authorized to select one or more banks or
trust companies to serve as sub-custodian for the Funds, provided that Chase
Manhattan shall remain responsible for the performance of all of its duties
under the custodian agreement and shall be liable to the Funds for any loss
which shall occur as a result of the failure of a sub-custodian to exercise
reasonable care with respect to the safekeeping of the Funds' assets. The
assets of the Funds are held under bank custodianship in compliance with the
1940 Act.
Investor Services Group also serves as Galaxy's transfer agent and dividend
disbursing agent pursuant to a Transfer Agency and Services Agreement ("Transfer
Agency Agreement"). Under the Transfer Agency Agreement, Investor Services
Group has agreed to: (i) issue and redeem shares of each Fund; (ii) transmit all
communications by each Fund to its shareholders of record, including reports to
shareholders, dividend and distribution notices and proxy materials for meetings
of shareholders; (iii)
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<PAGE>
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning Galaxy's operations.
PORTFOLIO TRANSACTIONS
Debt securities purchased or sold by the Funds are generally traded in the
over-the-counter market on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, Fleet will normally deal directly with the dealers who make a
market in the securities involved except in those circumstances where better
prices and execution are available elsewhere or as described below.
The Funds do not intend to seek profits from short-term trading. Their
annual portfolio turnover will be relatively high, but since brokerage
commissions are normally not paid on money market instruments, it should not
have a material effect on the net income of any of these Funds.
In purchasing or selling securities for the Funds, Fleet will seek to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one broker/dealer are
comparable, Fleet may effect transactions in portfolio securities with
broker/dealers who provide research, advice or other services such as market
investment literature.
Except as permitted by the SEC or applicable law, the Funds will not
acquire portfolio securities from, make savings deposits in, enter into
repurchase or reverse repurchase agreements with, or sell securities to, Fleet,
Investor Services Group, or their affiliates, and will not give preference to
affiliates and correspondent banks of Fleet with respect to such transactions.
Investment decisions for each Fund are made independently from those for
the other Funds and portfolios of Galaxy and for any other investment companies
and accounts advised or managed by Fleet. When a purchase or sale of the same
security is made at
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substantially the same time on behalf of a Fund, another portfolio of Galaxy,
and/or another investment company or account, the transaction will be averaged
as to price, and available investments allocated as to amount, in a manner which
Fleet believes to be equitable to the Fund and such other portfolio, investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or sold by such Fund. To the extent permitted by law, Fleet may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for Galaxy's other Funds or portfolios, or other investment companies or
accounts in order to obtain best execution.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan (the "12b-1 Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds. The 12b-1
Plan is described in the Prospectus.
Under the 12b-1 Plan, payments by Galaxy (i) for distribution expenses may
not exceed .75% (annualized) of each Fund's average daily net assets, and (ii)
to a broker-dealer or other financial institution ("Service Organization") for
shareholder administrative support services may not exceed .25% (annualized) of
the average daily net assets attributable to each Fund's outstanding shares
which are owned of record or beneficially by that Service Organization's
customers for whom the Service Organization is the dealer of record or
shareholder of record or with whom it has a servicing relationship. As of the
date of this Statement of Additional Information, Galaxy intends to limit the
payments under the 12b-1 Plan to an aggregate fee of not more than .45% (on an
annualized basis) of the average daily net assets of the Prime Reserves and .40%
(on an annualized basis) of the average daily net assets of the Government
Reserves and Tax-Exempt Reserves. In addition, Fleet may make payments for
distribution assistance and for shareholder administrative support services from
its own resources, which may include the advisory fee paid by each Fund.
Payments for distribution expenses under the 12b-1 Plan are subject to Rule
12b-1 (the "Rule") under the 1940 Act. The Rule defines distribution expenses
to include the cost of "any activity which is primarily intended to result in
the sale of fund shares." The Rule provides, among other things, that an
investment company may bear such expenses only pursuant to a plan adopted in
accordance with the Rule. In accordance with the Rule, the 12b-1 Plan provides
that a report of the amounts expended under the 12b-1 Plan, and the purposes for
which such expenditures were incurred, will be made to the Board of Trustees for
its review at least quarterly. The 12b-1 Plan provides that
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<PAGE>
it may not be amended to increase materially the costs which shares of the Funds
may bear for distribution pursuant to the 12b-1 Plan without shareholder
approval, and that any other type of material amendment must be approved by a
majority of the Board of Trustees, and by a majority of the trustees who are
neither "interested persons" (as defined in the 1940 Act) of Galaxy nor have any
direct or indirect financial interest in the operation of the 12b-1 Plan or in
any related agreements, by vote cast in person at a meeting called for the
purpose of considering such amendments (the "Disinterested Trustees").
Galaxy's Board of Trustees has concluded that there is a reasonable
likelihood that the 12b-1 Plan will benefit the Funds and their shareholders.
The 12b-1 Plan is subject to annual reapproval by a majority of the
Disinterested Trustees and is terminable at any time with respect to a Fund by a
vote of a majority of such Trustees or by vote of the holders of a majority of
the shares of the Fund. Any agreement entered into pursuant to the 12b-1 Plan
with a Service Organization is terminable with respect to a Fund without
penalty, at any time, by vote of a majority of the Disinterested Trustees, by
vote of the holders of a majority of the shares of the Fund or by the Service
Organization. An agreement will also terminate automatically in the event of
its assignment.
As long as the 12b-1 Plan is in effect, the nomination of the trustees who
are not interested persons of Galaxy (as defined in the 1940 Act) must be
committed to the discretion of such Disinterested Trustees.
DISTRIBUTOR
First Data Distributors, Inc. ("FD Distributors"), a wholly-owned
subsidiary of Investor Services Group, serves as Galaxy's distributor.
Unless otherwise terminated, the Distribution Agreement between Galaxy and
FD Distributors, remains in effect until May 31, 1999, and thereafter will
continue from year to year upon annual approval by Galaxy's Board of Trustees,
or by the vote of a majority of the outstanding shares of Galaxy and by the vote
of a majority of the Board of Trustees of Galaxy who are not parties to the
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreement will terminate
in the event of its assignment, as defined in the 1940 Act.
AUDITORS
Coopers & Lybrand LLP, independent certified public accountants, with
offices at One Post Office Square, Boston, Massachusetts 02109, serve as
auditors to Galaxy.
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<PAGE>
COUNSEL
Drinker Biddle & Reath LLP (of which W. Bruce McConnel, III, Secretary of
Galaxy, is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania 19107,
are counsel to Galaxy and will pass upon certain legal matters on its behalf.
PERFORMANCE AND YIELD INFORMATION
The standardized annualized seven-day yields for the Prime Reserves,
Government Reserves and Tax-Exempt Reserves are computed by: (1) determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account in a Fund having a balance of one share at the beginning of
a seven-day period, for which the yield is to be quoted, (2) dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and (3) annualizing the results (i.e.,
multiplying the base period return by (365/7)). The net change in the value of
the account in each Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, and all fees that are charged by a Fund to
all shareholder accounts in proportion to the length of the base period, other
than non-recurring account and sales charges. For any account fees that vary
with the size of the account, the amount of fees charged is computed with
respect to the Fund's mean (or median) account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The effective compound yield quotation for each Fund is computed
by adding 1 to the unannualized base period return (calculated as described
above), raising the sum to a power equal to 365 divided by 7, and subtracting 1
from the result.
The current yield for the Prime Reserves, Government Reserves and
Tax-Exempt Reserves may be obtained by calling FD Distributors at
1-800-628-0414.
In addition, the Tax-Exempt Reserves may calculate a "tax equivalent
yield." The tax equivalent yield for the Fund is computed by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the Fund's computed
yield that is not tax-exempt. Tax equivalent yields assume the payment of
federal income taxes at a rate of 31%.
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<PAGE>
MISCELLANEOUS
As used in the Prospectus, "assets belonging to a particular Fund" means
the consideration received by Galaxy upon the issuance of shares in that Fund,
together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds and a
portion of any general assets of Galaxy not belonging to a particular Fund. In
determining the net asset value of a particular Fund, assets belonging to the
Fund are charged with the direct liabilities in respect of that Fund and with a
share of the general liabilities of Galaxy, which are allocated in proportion to
the relative asset values of the respective Funds at the time of allocation.
Subject to the provisions of Galaxy's Declaration of Trust, determinations by
the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets with respect to a particular Fund, are
conclusive.
As of June 16, 1998, the name, address and share ownership of the
entities or persons that held of record more than 5% of the outstanding Trust
Shares of each of Galaxy's investment portfolios (including shares of the
Institutional Treasury Money Market Fund) were as follows: Money Market Fund
- -- Fleet New York, Fleet Investmetn Services, 159 East Main Street,
NY/RO/TO3C, Rochester, NY 14638, Account 00000150286 (99.65%); Tax-Exempt
Money Market Fund -- Fleet New York, Fleet Investment Services, 159 East Main
Street, NY/RO/TO3C, Rochester, NY 14638, Account 00000007717 (99.51%);
Government Money Market Fund -- Fleet New York, Fleet Investment Services,
159 East Main Street, NY/RO/TO3C, Rochester, NY 14368, Account 00000012621
(98.60%); U.S. Treasury Money Market Fund -- Fleet New York, Fleet Investment
Services, 159 East Main Street, NY/RO/TO3C, Rochester, NY 14638, Account
00000015922 (92.50%); Institutional Treasury Money Market Fund -- Fleet New
York, Fleet Investment Services, 159 East Main Street, NY/RO/TO3C, Rochester,
NY 14638, Account 00000000019 (97.71%); Equity Value Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14683, Account 00000000064 (76.66%); Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14683, Account 00000003294 (17.67%); Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/T04A, Rochester, NY 14683, Account 00000011551 (5.80%); Equity Growth
Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit, 159 East
Main Street, NY/RO/TO4A, Rochester, NY 14683, Account 00000000082 (69.56%);
Gales & Co., Fleet Investment Services, Mutual Funds Unit, 159 East Main
Street, NY/RO/TO4A, Rochester, NY 14683, Account 00000010017 (15.81%); Gales
& Co., Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14683, Account 00000030718 (14.59%); Equity Income
Fund -- Gales & Co., Fleet Investment Services,
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Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14683,
Account 00000015771 (51.12%); Gales & Co., Fleet Investment Services, Mutual
Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14683, Account
00000003748 (34.38%); Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14683, Account
00000000037 (14.33%); International Equity Fund -- Gales & Co., Fleet
Investment Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000000073 (44.80%); Gales & Co., Fleet
Investment Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000000876 (40.46%); Gales & Co., Fleet
Investment Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000004088 (13.59%); Growth and Income Fund --
Gales & Co., Fleet Investment Services, Mutual Funds Unit, 159 East Main
Street, NY/RO/TO4A, Rochester, NY 14638, Account 05000503793 (68.01%); Gales
& Co., Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14638, Account 05000503873 (28.46%); Asset
Allocation Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit,
159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account 00000000073
(21.31%). Gales & Co., Fleet Investment Services, Mutual Funds Unit, 159
East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account 00000002698
(14.30%); Small Company Equity -- Gales & Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000000046 (67.15%); Gales & Co., Fleet Investment Services, Mutual
Funds Unit, 159 Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000001492 (23.49%); Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000006102 (8.77%); Small Cap Value Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY
14638, Account 05000503999 (65.37%); Gates & Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 05000503917 (19.98%); Gates & Co., Fleet Investment Services, Mutual
Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
05000503953 (14.20%); Intermediate Government Income Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, NY/RO/TO4A, Rochester, NY
14638, Account 00000038408 (41.54%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000007183 (31.64%); Gales & Co., Fleet Investment Services, Mutual
Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000000037 (26.82%); High Quality Bond Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY
14638, Account 00000000037 (66.41%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000001465 (21.01%); Gales & Co., Fleet Investment Services, Mutual
Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000006095 (12.58%); Short-Term Bond Fund -- Gales & Co., Fleet Investment
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<PAGE>
Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY
14638, Account 00000008627 (42.68%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000000064 (40.78%); Gales & Co., Fleet Investment Services, Mutual
Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000001090 (14.44%); Tax-Exempt Bond Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY
14638, Account 00000005899 (40.23%); Gales & Co, Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000000028 (38.26%); Gales and Co., Fleet Investment Services,
Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638,
Account 00000000670 (21.51%); Connecticut Municipal Bond Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14638, Account 00000000019 (76.80%); Gales & Co.,
Fleet Investment Services, Mutual Funds Unit, 159 East Main Street,
NY/RO/TO4A, Rochester, NY 14638, Account 00000000037 (22.55%); Massachusetts
Municipal Bond Fund -- Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000000019 (56.41%); Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000000073 (43.59%); Corporate Bond Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit, NY/RO/TO4A, Rochester, NY 14638, Account
00000000046 (48.38%); Gales Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000006102 (38.44%); Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 East Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
00000001492 (13.18%); New York Municipal Bond Fund -- Gales & Co., Fleet
Investment Services, Mutual Funds Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000000019 (13.66%); Gales & Co., Fleet
Investment Services, Mutual Fund Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000001107 (75.75%); Gales & Co., Fleet
Investment Services, Mutual Fund Unit, 159 East Main Street, NY/RO/TO4A,
Rochester, NY 14638, Account 00000005292 (10.59%); New Jersey Municipal Bond
Fund -- Gales & Co., Fleet Investment Services, Mutual Fund Unit, 159 East
Main Street, NY/RO/TO4A, Rochester, NY 14638, Account 05100115489 (71.30%);
Gales & Co., Fleet Investment Services, Mutual Funds Unit, 159 East Main
Street, NY/RO/TO4A, Rochester, NY 14638, Account 05100115504 (28.70%); and
Strategic Equity Fund -- Gales & Co., Fleet Investment Services, Mutual Funds
Unit, 159 Esat Main Street, NY/RO/TO4A, Rochester, NY 14638, Account
05100115522 (98.64%).
As of June 16, 1998, the name, address and share ownership of the entities
or persons that held of record more than 5% of the outstanding Retail A Shares
of each of Galaxy's investment portfolios (including shares of the Connecticut
Municipal Money Market and Massachusetts Municipal Money Market Funds) were as
follows: Money Market Fund -- US Clearing, A Division of Fleet
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Securities Inc., 26 Broadway, New York, NY 10004, Account 05100115664 (5.88%);
Tax-Exempt Money Market Fund -- Hope H. Van Beuren, P.O. Box 4098, Middletown,
RI 02842, Account 00000025010 (6.93%); U.S. Treasury Money Market Fund -- US
Clearing, a Division of Fleet Securities Inc., 26 Broadway, New York, NY 10004,
Account 06100115884 (11.24%); Massachusetts Municipal Money Market Fund -- Fleet
New York, Fleet Investment Services, 159 East Main St., NY/RO/TO3C, Rochester,
NY 14638, Account 05100058503 (48.51%); Connecticut Municipal Money Market Fund
- -- Fleet New York, Fleet Investment Services, 159 East Main St., NY/RO/TO3C,
Rochester, NY 14638, Account 05100068521 (28.69%); Massachusetts Municipal Bond
Fund -- New England Realty Associates, Robert Bline, Ronald Brown, Howard Brown
& Carl Vajeri, 39 Brighton Ave., Boston, MA 02128, Account 06100587013 (5.53%);
and New Jersey Municipal Bond Fund -- Jeffery W Goldman, 7 Hampton Ridge CT, Old
Tappan, NJ 07675, Account 05100780704 (88.60%); NFSC FEBO # AAR-769763, William
H. & Margaret M. Wheeler, 68 Laurel Street, Carteret, NY 07008, Account
7000057096 (8.46%);
As of June 16, 1998, the name, address and share ownership of the entities
or persons that held of record more than 5% of the outstanding Retail B Shares
of each of Galaxy's investment portfolios were as follows: Money Market Fund --
Charles I. Boynton Insurance, 72 River Park Street, Needham, MA 02194, Account
00920380973, (19.24%); Thomas A. Dowd, Myrna L. Dowd(JTWROS) 9 Cypress Ave.,
Shrewsbury, MA 01546, Account 06100563501, (12.83%); Stuart Harris & Patricia N.
Harris(JTWROS) 174 Mayfield Dr., Tumbull, CT 06611-2358, Account 06100220114,
(6.74%); Bruce Hamilton & Sonya D. Hamilton(JTWROS), HC 76 Box 58, Greenville,
ME 04446, Account 06100649581, (6.00%); Steven R. Schwanze, 2393 Lake Elmo Ave.
N., Lake Elmo, MN 5604-8407, Account 06100583213 (22.01%); High Quality Bond
Fund -- E.L. Bradley and Co., Inc., 16 Helen Rd., Needham, MA 02192, Account
05100649206, (5.63%); Short-Term Bond Fund -- Gabriella Dulac & Alain
Dulac(JTWROS) 40 Dix Road, Wethersfield, CT 06109, Account 05100818032, (5.96%);
Elizabeth Mugar, 10 Chesnut St. Apt. 1808, Springfield, MA 01103, Account
06100760012; Tax-Exempt Bond Fund -- David Fendler & Sylvia Fendler(JTWROS), 72
Brinkerhoff Ave., Stamford, CT 06905, Account 05100255354, (9.64%); Doria M.
Peloguin, 43 Kaene Street, Providence, RI 02906-1520, Account 05100506413,
(5.70%); NFSC FEBO # AAD-181030, Carol & Alle Guy, 14 Thomas Street, Scaredale,
NY 10583, Account 07000076164, (5.30%); and Strategic Equity Fund -- Yuet Kum
Ku, 7 Mason Street, Malden, MA 02148, Account 05100918601, (10.30%); Wei Chen,
87 State Creek Drive, Apt. #11, Cheekrowaga, NY 14227, Account 05100564011,
(6.76%); Donald R. Kelly, 116 Balaam Drive, Bangor, ME 04401, Account
06100880133, (6.08%).
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
The following is a description of the securities ratings of Duff & Phelps
Credit Rating Co. ("D&P"), Fitch IBCA, Inc. ("Fitch IBCA"), Standard & Poor's
Ratings Group, Division of McGraw Hill ("S&P"), Moody's Investors Service, Inc.
("Moody's"), and Thomson BankWatch ("Thomson").
CORPORATE AND TAX-EXEMPT BOND RATINGS
The four highest ratings of D&P for tax-exempt and corporate fixed-income
securities are AAA, AA, A and BBB. Securities rated AAA are of the highest
credit quality. The risk factors are considered to be negligible, being only
slightly more than for risk-free U.S. Treasury debt. Securities rated AA are of
high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions. Securities that
are rated "A" have protection factors that are average but adequate. However,
risk factors are more variable and greater in periods of economic stress.
Securities that are rated "BBB" have below average protection factors but are
still considered sufficient for prudent investment. Considerable variability in
risk is present during economic cycles. The AA, A and BBB ratings may be
modified by an addition of a plus (+) or minus (-) sign to show relative
standing within these major rating categories.
The four highest ratings of Fitch IBCA for tax-exempt and corporate bonds
are AAA, AA, A and BBB. Plus (+) and minus (-) signs are used with a rating
symbol to indicate the relative position of a credit within the rating category.
AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor is judged to have an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. AA bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+. A bonds are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. BBB bonds
are considered to be investment grade and of satisfactory credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have an adverse impact on these bonds, and therefore, impair
timely
A-1
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payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
The four highest ratings of S&P for tax-exempt and corporate bonds are AAA,
AA, A and BBB. Bonds rated AAA bear the highest rating assigned by S&P to a
debt obligation and the AAA rating indicates in its opinion an extremely strong
capacity to pay interest and repay principal. Bonds rated AA by S&P are judged
by it to have a very strong capacity to pay interest and repay principal, and
they differ from AAA issues only in small degree. Bonds rated A are considered
to have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than bonds of a higher rated category. Bonds rated BBB are
regarded as having an adequate capacity to pay interest and repay principal.
Whereas such bonds normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for higher rated categories. The AA, A and BBB ratings may be modified by
an addition of a plus (+) or minus (-) sign to show relative standing within
these major rating categories.
The four highest ratings of Moody's for tax-exempt and corporate bonds are
Aaa, Aa, A and Baa. Tax-exempt and corporate bonds rated Aaa are judged to be
of the "best quality." The rating of Aa is assigned to bonds which are of "high
quality by all standards." Aa bonds are rated lower than Aaa bonds because
margins of protection may not be as large or fluctuations of protective elements
may be of greater amplitude or there may be other elements which make the
long-term risks appear somewhat larger. Bonds that are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present that suggest a susceptibility to impairment
sometime in the future. Bonds that are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Moody's may modify a rating of Aa, A or Baa by adding numerical modifiers of 1,
2 or 3 to show relative standing within these categories. The foregoing ratings
are sometimes presented in parentheses preceded with a "con" indicating the
bonds are rated conditionally. Such parenthetical rating denotes the probable
credit stature upon completion of construction or elimination of the basis of
the condition.
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CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
The highest rating of D&P for commercial paper is Duff 1. D&P employs
three designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest
rating category. Duff 1 plus indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be
minor. Duff 1 minus indicates high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small. Duff 2 indicates good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small. Duff 3 indicates satisfactory liquidity and other
protection factors qualify such issues as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely payment is expected.
Duff 4 indicates speculative investment characteristics.
Fitch IBCA's short-term ratings apply to tax-exempt and corporate debt
obligations that are payable on demand or have original maturities of up to
three years. The four highest ratings of Fitch IBCA for short-term securities
are F-1+, F-1, F-2 and F-3. F-1+ securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment. F-1 securities possess very strong
credit quality. Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+. F-2 securities
possess good credit quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the F-1+ and F-1 categories. F-3 securities possess fair credit quality.
Issues assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt considered short-term in the relevant market. Issues
assigned A-1 ratings, in S&P's opinion, indicate that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus (+)
designation. Issues rated A-2 by S&P indicate that capacity for timely payment
on these issues is satisfactory. However, the relative degree of safety is not
as high as for issues designated A-1. Issues rated A-3 have an adequate
capacity for timely payment. They are, however, somewhat more vulnerable to the
A-3
<PAGE>
adverse effects of changes and circumstances than obligations carrying the
higher designations. Issues rated B are regarded as having only a speculative
capacity for timely payment.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. Issuers rated Prime- (or related supporting
institutions) in the opinion of Moody's "have a superior capacity for
repayment of short-term promissory obligations." Principal repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance
on debt and ample asset protection; broad margins in earning coverage of
fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity. Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-erm promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of Prime-1 rated issues, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained. Issuers
rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-erm promissory obligations. Issuers rated
Not Prime do not fall within any of the Prime rating categories.
Thomson commercial paper ratings assess the likelihood of an untimely or
incomplete payment of principal or interest of debt having a maturity of one
year or less, which is issued by a bank holding company or an entity within
the holding company structure. The designation TBW-1 represents the highest
rating category and indicates a very high degree of lieklihoodthat principal
and interest will be paid on a timely basis. The designation TBW-2
represents the second highest rating category and indicates that while the
degree of safety regarding timely payment of principal and interest is
strong, the relative degree of safety is not as high as for issues rated
TBW-1. The designation TBW-represents the lowest investment grade category
and indicates that while more susceptible to adverse developments (both
internal and external) than obligations with higher ratings, the capacity to
service principal and interest in a timely fashion is considered adequate.
TAX-XEMPT NOTE RATINGS
A S&P rating reflects the liquidity concerns and market access risks
unique to notes due in three years or less. Notes rated SP-1 are issued by
issuers that exhibit very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics are
A-4
<PAGE>
given a plus (+) designation. Notes rated SP-2 are issued by issuers that
exhibit satisfactory capacity to pay principal and interest. Notes rated
SP-3 are issued by issuers that exhibit speculative capacity to pay principal
and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated MIG and variable rate demand obligations are designated VMIG.
Such ratings recognize the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG-1 or VMIG-1 are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. Loans bearing the designation MIG-2 or VMIG-2 are of high
quality, with margins of protection ample although not so large as with loans
rated MIG-1 or VMIG-1. Loans bearing the designation MIG-3 or VMIG-3 are of
favorable quality with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be
less well established. Loans bearing the designation MIG-4 or VMIG-4 are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
Fitch IBCA uses its short-term ratings described above under "Corporate and
Tax-Exempt Commercial Paper Ratings" for tax-exempt notes.
A-5
<PAGE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
(i)
<PAGE>
THE GALAXY FUND
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
N/A
(b) Exhibits:
(1) (a) Declaration of Trust dated March 31, 1986.(4)
(b) Amendment No. 1 to the Declaration of Trust dated as of
April 26, 1988.(4)
(c) Certificate pertaining to Classification of Shares dated May
5, 1986 pertaining to Class A and Class B shares.(4)
(d) Certificate of Classification of Shares dated December 9,
1987 pertaining to Class C, Class D and Class E shares.(4)
(e) Certificate of Classification of Shares dated November 8,
1989 pertaining to Class C - Special Series 1 and Class D -
Special Series 1 shares.(4)
(f) Certificate of Classification of Shares dated August 16,
1990 pertaining to Class F shares; Class G - Series 1
shares; Class G - Series 2 shares; Class H - Series 1
shares; Class H - Series 2 shares; Class I - Series 1
shares; Class I - Series 2 shares; Class J - Series 1
shares; and Class J - Series 2 shares.(4)
(g) Certificate of Classification of Shares dated December 10,
1991 pertaining to Class K - Series 1 shares; Class K -
Series 2 shares; Class L - Series 1 shares; Class L - Series
2 shares; Class M - Series 1 shares; Class M - Series 2
shares; Class N - Series 1 shares; Class N - Series 2
shares; Class O - Series 1 shares; and Class O - Series 2
shares.(4)
(h) Certificate of Classification of Shares dated February 22,
1993 pertaining to Class P -
<PAGE>
Series 1 shares; Class P - Series 2 shares; Class Q - Series
1 shares; Class Q - Series 2 shares; Class R - Series 1
shares; Class R - Series 2 shares; and Class S shares.(4)
(i) Certificate of Classification of Shares dated December 7,
1994 pertaining to Class T - Series 1 shares and Class T -
Series 2 shares.(4)
(j) Form of Certificate of Classification of Shares pertaining
to Class U - Series 1 shares and Class U - Series 2 shares;
Class V shares; Class W shares; and Class X - Series 1
shares and Class X - Series 2 shares.(4)
(k) Form of Certificate of Classification of Shares pertaining
to Class C - Special Series 2 shares; Class H - Series 3
shares; Class J - Series 3 shares; Class K - Series 3
shares; Class L - Series 3 shares; Class M - Series 3
shares; Class N - Series 3 shares; and Class U - Series 3
shares.(4)
(l) Form of Certificate of Classification of Shares pertaining
to Class A - Special Series 2 shares.(2)
(m) Form of Certificate of Classification of Shares pertaining
to Class Y - Series 1 shares and Class Y - Series 2 shares;
Class Z - Series 1 shares, Class Z - Series 2 shares and
Class Z - Series 3 shares; and Class AA - Series 1 shares,
Class AA - Series 2 shares and Class AA - Series 3
shares.(3)
(n) Form of Certificate of Classification of Shares pertaining
to Class BB; Class CC and Class DD shares.
(2) Code of Regulations.(4)
(3) None.
(4) None.
(5) (a) Advisory Agreement between the Registrant and Fleet
Investment Advisors Inc. with respect to the Money Market,
Government, U.S. Treasury, Tax-Exempt, Institutional
Government Money Market (formerly Institutional Treasury
Money Market), Short-
2
<PAGE>
Term Bond, Intermediate Government Income (formerly
Intermediate Bond), Corporate Bond, High Quality Bond,
Tax-Exempt Bond, New York Municipal Bond, Connecticut
Municipal Bond, Massachusetts Municipal Bond, Rhode
Island Municipal Bond, Equity Value, Equity Growth,
Equity Income, International Equity, Small Company Equity
and Asset Allocation Funds dated as of May 19, 1994.(2)
(b) Addendum No. 1 to Advisory Agreement between the Registrant
and Fleet Investment Advisors Inc. with respect to the
Connecticut Municipal Money Market, Massachusetts Municipal
Money Market, Growth and Income and Small Cap Value Funds
dated as of December 1, 1995.(1)
(c) Addendum No. 2 to Advisory Agreement between the Registrant
and Fleet Investment Advisors Inc. with respect to the New
Jersey Municipal Bond Fund, MidCap Equity Fund and Strategic
Equity Fund.
(d) Form of Addendum No. 3 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with respect
to the Prime Reserves, Government Reserves and Tax-Exempt
Reserves.
(e) Sub-Advisory Agreement between Fleet Investment Advisors
Inc. and Oechsle International Advisors, L.P. with respect
to the International Equity Fund dated as of August 12,
1996.(2)
(6) (a) Distribution Agreement between the Registrant and First Data
Distributors, Inc. dated as of June 1, 1997.(3)
(b) Amendment No. 1 to Distribution Agreement between the
Registrant and First Data Distributors, Inc. with respect to
the New Jersey Municipal Bond Fund, MidCap Equity Fund and
Strategic Equity Fund.
(c) Form of Amendment No. 2 to Distribution Agreement between
the Registrant and First Data Distributors, Inc. with
respect to the
3
<PAGE>
Prime Reserves, Government Reserves and Tax-Exempt Reserves.
(7) The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II Deferred
Compensation Plan and Related Agreement effective as of
January 1, 1997. (2)
(8) (a) Global Custody Agreement between the Registrant and The
Chase Manhattan Bank dated as of November 1, 1991.(4)
(b) Form of Amendment to Global Custody Agreement between the
Registrant and The Chase Manhattan Bank with respect to the
New Jersey Municipal Bond, MidCap Equity and Strategic
Equity Funds.(3)
(c) Form of Amendment to Global Custody Agreement between the
Registrant and The Chase Manhattan Bank with respect to the
Prime Reserves, Government Reserves and Tax-Exempt Reserves.
(d) Consent to Assignment of Global Custody Agreement between
the Registrant, The Chase Manhattan Bank, N.A. and 440
Financial Group of Worcester, Inc. to The Shareholder
Services Group, Inc. d/b/a 440 Financial dated March 31,
1995.(4)
(9) (a) Administration Agreement between the Registrant and First
Data Investor Services Group, Inc. dated as of June 1,
1997.(3)
(b) Amendment No. 1 to Administration Agreement between the
Registrant and First Data Investor Services Group, Inc. with
respect to the New Jersey Municipal Bond Fund, MidCap Equity
Fund and Strategic Equity Fund.
(c) Form of Amendment No. 2 to Administration Agreement between
the Registrant and First Data Investor Services Group, Inc.
(d) Form of Amendment No. 3 to Administration Agreement between
the Registrant and First Data Investor Services Group, Inc.
with respect to the
4
<PAGE>
Prime Reserves, Government Reserves and Tax-Exempt Reserves
Fund.
(e) Transfer Agency and Services Agreement between the
Registrant and First Data Investor Services Group, Inc.
dated as of June 1, 1997.(3)
(f) Amendment No. 1 to Transfer Agency and Services Agreement
between the Registrant and First Data Investor Services
Group, Inc. with respect to the New Jersey Municipal Bond
Fund, MidCap Equity Fund and Strategic Equity Fund.
(g) Form of Amendment No. 2 to Transfer Agency and Services
Agreement between the Registrant and First Data Investor
Services Group, Inc.
(h) Form of Amendment No. 3 to Transfer Agency and Services
Agreement between the Registrant and First Data Investor
Services Group, Inc. with respect to the Prime Reserves,
Government Reserves andTax-Exempt Reserves Fund.
(i) Shareholder Services Plan for Trust Shares and Retail A
Shares and Related Forms of Servicing Agreements.(3)
(10) Opinion of counsel that shares will be validly issued,
fully paid and non-assessable.
(11) Consent of Drinker Biddle & Reath LLP.
(12) None.
(13) (a) Purchase Agreement between the Registrant and Shearson
Lehman Brothers Inc. dated July 24, 1986.(4)
(b) Purchase Agreement between the Registrant and Shearson
Lehman Brothers Inc. dated October 11, 1990 with respect to
the Treasury, Equity Growth, Equity Income, International
Equity and High Quality Bond Funds.(4)
5
<PAGE>
(c) Purchase Agreement between the Registrant and SMA Equities,
Inc. dated December 30, 1991 with respect to the Small
Company Equity Fund, Short-Term Bond Fund, Tax-Exempt Bond
Fund, Asset Allocation Fund, and New York Municipal Bond
Fund.(4)
(d) Purchase Agreement between the Registrant and Allmerica
Investments, Inc. dated February 22, 1993 with respect to
the Connecticut Municipal Bond, Massachusetts Municipal
Bond, Rhode Island Municipal Bond and Institutional
Government Money Market (formerly Institutional Treasury
Money Market) Funds.(4)
(e) Purchase Agreement between the Registrant and 440 Financial
Distributors, Inc. dated May 19, 1994 with respect to the
Corporate Bond Fund.(4)
(f) Purchase Agreement between the Registrant and First Data
Investor Services, Inc. dated February 28, 1996 with respect
to the Connecticut Municipal Money Market, Massachusetts
Municipal Money Market Money, Growth and Income and Small
Cap Value Funds.(4)
(g) Purchase Agreement between the Registrant and First Data
Distributors, Inc. with respect to the New Jersey Municipal
Bond Fund.
(h) Form of Purchase Agreement between the Registrant and First
Data Distributors, Inc. with respect to the MidCap Equity
Fund.(3)
(i) Purchase Agreement between the Registrant and First Data
Distributors, Inc. with respect to the Strategic Equity
Fund.
(j) Form of Purchase Agreement between the Registrant and First
Data Distributors, Inc. with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves.
(14) Individual Retirement Account Custodial Agreement and
Accompanying Disclosure
6
<PAGE>
Statement with Adoption Agreement and New Account
Application.(4)
(15) (a) Distribution and Services Plan for Retail B Shares and
Related Form of Servicing Agreement.(3)
(b) Distribution and Services Plan and Related Form of Servicing
Agreement with respect to the Prime Reserves, Government
Reserves and Tax-Exempt Reserves.
(16) (a) Schedules for computation of performance quotations for the
Money Market and Government Funds.(4)
(b) Schedules for computation of performance quotations for the
Intermediate Government Income and Equity Value Funds.(4)
(c) Schedule for computation of performance quotations for the
Tax-Exempt Fund.(4)
(d) Schedule for computation of performance quotations - Equity
Growth Fund.(4)
(e) Schedule for computation of performance quotations - Equity
Income Fund.(4)
(f) Schedule for computation of performance quotations - High
Quality Bond Fund.(4)
(g) Schedule for computation of performance quotations -
International Equity Fund.(4)
(h) Schedule for computation of performance quotations - Small
Company Equity Fund.(4)
(i) Schedule for computation of performance quotations - Asset
Allocation Fund.(4)
(j) Schedule for computation of performance quotations - Short-
Term Bond Fund.(4)
(k) Schedule for computation of performance quotations - Tax-
Exempt Bond Fund.(4)
(l) Schedule for computation of performance quotations - New
York Municipal Bond Fund.(4)
7
<PAGE>
(m) Schedule for computation of performance quotations -
Connecticut Municipal Bond Fund.(4)
(n) Schedule for computation of performance quotations -
Massachusetts Municipal Bond Fund.(4)
(o) Schedule for computation of performance quotations -
Institutional Government Money Market (formerly
Institutional Treasury Money Market) Fund.(4)
(p) Schedule for computation of performance quotations - Rhode
Island Municipal Bond Fund.(4)
(q) Schedule for computation of performance quotations -
Corporate Bond Fund.(4)
(r) Schedule for computation of performance quotations - U.S.
Treasury Fund.(1)
(s) Schedule for computation of performance quotations -
Connecticut Municipal Money Market Fund.(1)
(t) Schedule for computation of performance quotations -
Massachusetts Municipal Money Market Fund.(1)
(u) Schedule for computation of performance quotations - Small
Cap Value Fund.(1)
(v) Schedule for computation of performance quotations - Growth
and Income Fund.(1)
(18) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System.(3)
(27) Not Applicable.
- --------------------------------------
(1) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 27 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-4806 and 811-4636) on March 4, 1996.
(2) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 29 to the
8
<PAGE>
Registrant's Registration Statement on Form N-1A as filed with the
Commission on December 30, 1996.
(3) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 31 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 15, 1997.
(4) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 32 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on February 27, 1998.
9
<PAGE>
Item 25. Persons Controlled By or Under Common Control with Registrant
Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities
The following is as of June 16, 1998:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class A Shares 104,929
Class A -
Special Series 1 Shares 27
Class A -
Special Series 2 Shares 32
Class B Shares 17,664
Class B -
Special Series 1 Shares 74
Class C Shares 12
Class C-
Special Series 1 Shares 23,205
Class C -
Special Series 2 Shares 3,167
Class D Shares 3
Class D -
Special Series 1 Shares 4,650
Class E Shares 3,100
Class E -
Special Series 1 Shares 3
Class F Shares 21,389
Class F -
Special Series 1 Shares 17
Class G - Series 1 Shares 11
Class G - Series 2 Shares 10,985
Class H - Series 1 Shares 9
Class H - Series 2 Shares 28,460
Class H - Series 3 Shares 4,185
Class I - Series 1 Shares 6
Class I - Series 2 Shares 16,188
Class J - Series 1 Shares 3
Class J - Series 2 Shares 2,480
Class J - Series 3 Shares 240
Class K - Series 1 Shares 11
Class K - Series 2 Shares 18,598
Class K - Series 3 Shares 3,150
Class L - Series 1 Shares 4
Class L - Series 2 Shares 1,645
10
<PAGE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class L - Series 3 Shares 73
Class M - Series 1 Shares 3
Class M - Series 2 Shares 913
Class M - Series 3 Shares 69
Class N - Series 1 Shares 7
Class N - Series 2 Shares 20,018
Class N - Series 3 Shares 4,193
Class O - Series 1 Shares 3
Class O - Series 2 Shares 1,232
Class P - Series 1 Shares 4
Class P - Series 2 Shares 793
Class Q - Series 1 Shares 3
Class Q - Series 2 Shares 946
Class R - Series 1 Shares 0
Class R - Series 2 Shares 216
Class S Shares 6
Class T - Series 1 Shares 698
Class T - Series 2 Shares 0
Class U - Series 1 Shares 7
Class U - Series 2 Shares 20,757
Class U - Series 3 Shares 6,083
Class V Shares 1,350
Class W Shares 821
Class X - Series 1 Shares 38
Class X - Series 2 Shares 14,307
Class Y - Series 1 Shares 3
Class Y - Series 2 Shares 6
Class Z - Series 1 Shares 3
Class Z - Series 2 Shares 450
Class Z - Series 3 Shares 56
Class AA - Series 1 Shares 0
Class AA - Series 2 Shares 0
Class AA - Series 3 Shares 0
Class BB Shares 0
Class CC Shares 0
Class DD Shares 0
</TABLE>
Item 27. Indemnification
Indemnification of the Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in
Section 1.19 of the Distribution Agreement incorporated herein by reference
as Exhibit (6)(a), in Section 12 of the Global Custody Agreement incorporated
herein by reference as Exhibit (8)(a) and in Article 10 of the Transfer
Agency and Services Agreement incorporated herein by reference as Exhibit
11
<PAGE>
9(c). The Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types of errors
and omissions. In addition, Section 9.3 of the Registrant's Declaration of
Trust dated March 31, 1986, incorporated herein by reference to Exhibit
(1)(a) hereto, provides as follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The Trust
shall indemnify each of its Trustees against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
he may be involved or with which he may be threatened, while as a
Trustee or thereafter, by reason of his being or having been such a
Trustee EXCEPT with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties, PROVIDED that as
to any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless
the Trust shall have received a written opinion from independent legal
counsel approved by the Trustees to the effect that if either the
matter of willful misfeasance, gross negligence or reckless disregard
of duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully
entitled, PROVIDED that no person may satisfy any right of indemnity
or reimbursement hereunder except out of the property of the Trust.
The Trustees may make advance payments in connection with the
indemnification under this Section 9.3, PROVIDED that the indemnified
person shall have given a written undertaking to reimburse the Trust
in the event it is subsequently determined that he is not entitled to
such indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended, may be permitted to trustees, officers and
controlling persons
12
<PAGE>
of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. (a) Business and Other Connections of Investment Adviser
Fleet Investment Advisors Inc. ("Fleet") is an investment adviser
registered under the Investment Advisers Act of 1940 (the
"Advisers Act").
The list required by this Item 28 of officers and directors of
Fleet, together with information as to any business profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated
herein by reference to Schedules A and D of Form ADV filed by
Fleet pursuant to the Advisers Act (SEC File No. 801-20312).
(b) Business and Other Connections of Sub-Adviser
Oechsle International Advisors, L.P. ("Oechsle") is an investment
adviser registered under the Investment Advisers Act of 1940 (the
"Advisers Act").
The list required by this Item 28 of the partners of Oechsle,
together with information as to any business profession, vocation
or employment of a substantial nature engaged in by such partners
during the past two years, is incorporated herein by reference to
Schedules A and D of Form ADV filed by Oechsle pursuant to the
Advisers Act (SEC File No. 801-28111).
13
<PAGE>
Item 29. Principal Underwriter
(a) In addition to The Galaxy Fund, First Data Distributors, Inc.
(the "Distributor") currently acts as distributor for The Galaxy
VIP Fund, Galaxy Fund II, Alleghany Funds, Wilshire Target Funds,
Inc., Panorama Trust, Undiscovered Managers Funds, LKCM Funds,
ABN Amro Funds, First Choice Funds Trust, Forward Funds, Inc.,
IBJ Funds Trust, ICM Series Trust, Light Revolution Funds, Inc.
and BT Insurance Funds Trust. The Distributor is registered with
the Securities and Exchange Commission as a broker-dealer and is
a member of the National Association of Securities Dealers. The
Distributor is a wholly-owned subsidiary of First Data Investor
Services Group, Inc., 4400 Computer Drive, Westboro, MA
01581-5108.
(b) The information required by this Item 29 (b) with respect to each
director, officer, or partner of the Distributor, is incorporated
by reference to Schedule A of Form BD filed by the Distributor,
with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (File No. 8-45467).
(c) The Distributor receives no compensation from the Registrant for
distribution of its shares other than payments for distribution
assistance pursuant to Registrant's Distribution and Services
Plan for Retail B Shares and Distribution and Services Plan for
the Prime Reserves, Government Reserves and Tax-Exempt Reserves.
The Distributor is an affiliated person of First Data Investor
Services Group, Inc., the Registrant's administrator, which
receives administration, fund accounting and transfer agency fees
as described in parts A and B.
Item 30. Location of Accounts and Records
(1) Fleet Investment Advisors Inc., 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
investment adviser to all of the Registrant's Funds).
(2) Oechsle International Advisors, L.P., One International Place,
Boston, Massachusetts 02210 (records relating to its functions as
sub-
14
<PAGE>
investment adviser to the International Equity Fund).
(3) First Data Distributors, Inc., 4400 Computer Drive, Westboro,
Massachusetts 01581-5108 (records relating to its functions as
distributor).
(4) First Data Investor Services Group, Inc. 53 State Street, Mail
Stop BOS 425, Boston, MA 02109 (records relating to its
functions as administrator).
(5) First Data Investor Services Group, Inc. 4400 Computer Drive,
Westboro, MA 01581-5108 (records relating to its functions as
transfer agent).
(6) Drinker Biddle & Reath LLP, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107
(Registrant's Declaration of Trust, Code of Regulations and
Minute Books).
(7) The Chase Manhattan Bank, 1211 Avenue of the Americas, New York,
New York 10036 (records relating to its functions as custodian).
Item 31. Management Services
Inapplicable.
Item 32. Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest available Annual
Reports to Shareholders which includes Management's Discussion of the
Registrant's performance, upon request and without charge.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, Registrant has duly
caused this Post-Effective Amendment No. 33 to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pawtucket, State of Rhode
Island, on the 30th day of June, 1998.
THE GALAXY FUND
Registrant
/s/John T. O'Neill
---------------------
President
John T. O'Neill
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 33 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/John T. O'Neill Trustee, President June 30, 1998
- ------------------------ and Treasurer
John T. O'Neill
*/s/Dwight E. Vicks, Jr. Chairman of the Board June 30, 1998
- ------------------------ of Trustees
Dwight E. Vicks, Jr.
*/s/Donald B. Miller Trustee June 30, 1998
- ------------------------
Donald B. Miller
*/s/Louis DeThomasis Trustee June 30, 1998
- ------------------------
Louis DeThomasis
*/s/Bradford S. Wellman Trustee June 30, 1998
- ------------------------
Bradford S. Wellman
*/s/James M. Seed Trustee June 30, 1998
- ------------------------
James M. Seed
*By:/s/John T. O'Neill
- ------------------------
John T. O'Neill
Attorney-In-Fact
16
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 4, 1996 /s/Dwight E. Vicks, Jr.
---------------------------------
Dwight E. Vicks, Jr.
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Donald B. Miller
---------------------------
Donald B. Miller
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Brother Louis DeThomasis
---------------------------
Brother Louis DeThomasis
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Bradford S. Wellman
----------------------
Bradford S. Wellman
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/James M. Seed
--------------------
James M. Seed
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
(1)(n) Form of Certificate of Classification of Shares
pertaining to Class BB; Class CC and Class DD Shares
(5)(c) Addendum No. 2 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with
respect to the New Jersey Municipal Bond Fund, MidCap
Equity Fund and Strategic Equity Fund
(5)(d) Form of Addendum No. 3 to Advisory Agreement between
the Registrant and Fleet Investment Advisors Inc. with
respect to the Prime Reserves, Government Reserves and
Tax-Exempt Reserves
(6)(b) Amendment No. 1 to Distribution Agreement between the
Registrant and First Data Distributors, Inc. with
respect to the New Jersey Municipal Bond Fund, MidCap
Equity Fund and Strategic Equity Fund
(6)(c) Form of Amendment No. 2 to Distribution Agreement
between the Registrant and First Data Distributors,
Inc. with respect to the Prime Reserves, Government
Reserves and Tax-Exempt Reserves
(8)(c) Form of Amendment to Global Custody Agreement between
the Registrant and The Chase Manhattan Bank with
respect to the Prime Reserves, Government Reserves and
Tax-Exempt Reserves
(9)(b) Amendment No. 1 to Administration Agreement between the
Registrant and First Data Investor Services Group, Inc.
with respect to the New Jersey Municipal Bond Fund,
MidCap Equity Fund and Strategic Equity Fund
(9)(c) Form of Amendment No. 2 to Administration Agreement
between the Registrant and First Data Investor Services
Group, Inc.
(9)(d) Form of Amendment No. 3 to Administration Agreement
between the Registrant and First Data Investor Services
Group, Inc. with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves
(9)(f) Amendment No. 1 to Transfer Agency and Services
<PAGE>
Agreement between the Registrant and First Data
Investor Services Group, Inc. with Respect to the New
Jersey Municipal Bond Fund, MidCap Equity Fund and
Strategic Equity Fund
(9)(g) Form of Amendment No. 2 to Transfer Agency and Services
Agreement between the Registrant and First Data
Investor Services Group, Inc.
(9)(h) Form of Amendment No. 3 to Transfer Agency and Services
Agreement between the Registrant and First Data
Investor Services Group, Inc. with respect to the Prime
Reserves, Government Reserves and Tax-Exempt Reserves
(10) Opinion of counsel that shares will be validly issued,
fully paid and non-assessable
(11) Consent of Drinker Biddle & Reath LLP
(13)(g) Purchase Agreement between the Registrant and First
Data Distributors, Inc. with respect to the New Jersey
Municipal Bond Fund
(13)(i) Purchase Agreement between the Registrant and First
Data Distributors, Inc. with respect to the Strategic
Equity Fund
(13)(j) Form of Purchase Agreement between the Registrant and
First Data Distributors, Inc. with respect to the Prime
Reserves, Government Reserves and Tax-Exempt Reserves
(15)(b) Distribution and Services Plan and Related Form of
Servicing Agreement with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves
<PAGE>
Exhibit (1)(n)
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby certify as follows:
(1) That I am the duly elected Secretary of The Galaxy Fund (the
"Trust");
(2) That in such capacity I have examined the records of actions
taken by the Board of Trustees of the Trust at the regular meeting of the Board
held on May 28, 1998;
(3) That the following resolutions were duly adopted at the
meeting by the Board of Trustees of the Trust:
1. CREATION OF CLASS BB SHARES REPRESENTING INTERESTS IN THE PRIME
RESERVES.
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of
Trust, an unlimited number of authorized and unissued shares of beneficial
interest in Galaxy be, and hereby are, classified and designated as Class
BB shares;
FURTHER RESOLVED, that each Class BB share created pursuant to
the foregoing resolution shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption that are set forth in
Galaxy's Declaration of Trust with respect to any class of shares of
Galaxy; and
FURTHER RESOLVED, that Class BB shares shall represent interests
in the Prime Reserves.
2. CREATION OF CLASS CC SHARES REPRESENTING INTERESTS IN THE
GOVERNMENT RESERVES.
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of
Trust, an unlimited number of authorized and unissued shares of beneficial
interest in Galaxy be, and hereby are, classified and designated as Class
CC shares;
FURTHER RESOLVED, that each Class CC share created pursuant to
the foregoing resolution shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption that are set forth in
Galaxy's Declaration of Trust with respect to any class of
<PAGE>
shares of Galaxy; and
FURTHER RESOLVED, that Class CC shares shall represent interests
in the Government Reserves.
3. CREATION OF CLASS DD SHARES REPRESENTING INTERESTS IN THE
TAX-EXEMPT RESERVES.
RESOLVED, that pursuant to Section 5.1 of Galaxy's Declaration of
Trust, an unlimited number of authorized and unissued shares of beneficial
interest in Galaxy be, and hereby are, classified and designated as Class
DD shares;
FURTHER RESOLVED, that each Class DD share created pursuant to
the foregoing resolution shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption that are set forth in
Galaxy's Declaration of Trust with respect to any class of shares of
Galaxy; and
FURTHER RESOLVED, that Class DD shares shall represent interests
in the Tax-Exempt Reserves.
(4) That the foregoing resolutions remain in full force and
effect on the date hereof.
----------------------
W. Bruce McConnel, III
Dated: June __, 1998
Commonwealth of Pennsylvania :
: ss
County of Philadelphia :
Subscribed and sworn to
before me this ____ day
of June, 1998
- --------------------------
Notary Public
My Commission Expires:
<PAGE>
Exhibit (5)(c)
ADDENDUM NO. 2 TO ADVISORY AGREEMENT
This Addendum No. 2, dated as of the 3rd day of March, 1998, is
entered into between THE GALAXY FUND, a Massachusetts business trust, located in
Westboro, Massachusetts ("Galaxy"), and FLEET INVESTMENT ADVISORS INC., a New
York corporation, located in Boston, Massachusetts (the "Adviser").
WHEREAS, Galaxy and the Adviser have entered into an Advisory
Agreement dated as of May 19, 1994, which was extended to additional investment
portfolios of Galaxy by Addendum No. 1 dated as of December 1, 1995 (the
"Advisory Agreement"), pursuant to which Galaxy appointed the Adviser to act as
investment adviser to Galaxy for its Money Market Fund, Government Fund,
Tax-Exempt Fund, U.S. Treasury Fund, Institutional Government Money Market Fund
(formerly know as the Institutional Treasury Money Market Fund), Short-Term Bond
Fund, Intermediate Government Income Fund, High Quality Bond Fund, Corporate
Bond Fund, Tax-Exempt Bond Fund, New York Municipal Bond Fund, Connecticut
Municipal Bond Fund, Massachusetts Municipal Bond Fund, Rhode Island Municipal
Bond Fund, Equity Value Fund, Equity Growth Fund, Equity Income Fund,
International Equity Fund, Small Company Equity Fund, Asset Allocation Fund,
Growth and Income Fund, Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund and Small Cap Value Fund (each a "Fund");
WHEREAS, Galaxy has notified the Adviser that it has established three
new portfolios, namely the New Jersey Municipal Bond Fund, MidCap Equity Fund
and Strategic Equity Fund and that it desires to retain the Adviser to act as
the investment adviser therefor, and the Adviser has notified Galaxy that it is
willing to serve as investment adviser for the New Jersey Municipal Bond Fund,
MidCap Equity Fund and Strategic Equity Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT. Galaxy hereby appoints the Adviser to act as
investment adviser to Galaxy for the New Jersey Municipal Bond Fund, MidCap
Equity Fund and Strategic Equity Fund for the period and on the terms set forth
in the Advisory Agreement. The Adviser hereby accepts such appointment and
agrees to render the services set forth in the Advisory Agreement for the
compensation herein provided.
2. COMPENSATION. For the services provided and the expenses assumed
pursuant to the Advisory Agreement with respect to the New Jersey Municipal Bond
Fund, MidCap Equity Fund and Strategic Equity Fund, Galaxy will pay the Adviser
and the Adviser will accept as full compensation therefor fees, computed daily
and paid monthly, based on the net assets of the New Jersey Municipal Bond Fund,
Mid Cap Equity Fund and Strategic Equity
<PAGE>
Fund considered separately on a per-Fund basis, at the annual rate of .75% of
the net assets of each of the New Jersey Municipal Bond Fund, MidCap Equity Fund
and Strategic Equity Fund.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Fund" as used in the Advisory Agreement shall be deemed to include the New
Jersey Municipal Bond Fund, MidCap Equity Fund and Strategic Equity Fund.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
THE GALAXY FUND
By: /s/John T. O'Neill
-------------------------
Title: President
FLEET INVESTMENT ADVISORS INC.
By: /s/illegible
-------------------------
Title:
----------------------
-2-
<PAGE>
Exhibit (5)(d)
ADDENDUM NO. 3 TO ADVISORY AGREEMENT
This Addendum No. 3, dated as of the ____ day of __________, 1998, is
entered into between THE GALAXY FUND, a Massachusetts business trust, located in
Westboro, Massachusetts ("Galaxy"), and FLEET INVESTMENT ADVISORS INC., a New
York corporation, located in Boston, Massachusetts (the "Adviser").
WHEREAS, Galaxy and the Adviser have entered into an Advisory
Agreement dated as of May 19, 1994, which was extended to additional investment
portfolios of Galaxy by Addendum No. 1 dated as of December 1, 1995 and Addendum
No. 2 dated as of March 3, 1998 (the "Advisory Agreement"), pursuant to which
Galaxy appointed the Adviser to act as investment adviser to Galaxy for its
Money Market Fund, Government Fund, Tax-Exempt Fund, U.S. Treasury Fund,
Institutional Government Money Market Fund, Short-Term Bond Fund, Intermediate
Government Income Fund, High Quality Bond Fund, Corporate Bond Fund, Tax-Exempt
Bond Fund, New York Municipal Bond Fund, Connecticut Municipal Bond Fund,
Massachusetts Municipal Bond Fund, Rhode Island Municipal Bond Fund, Equity
Value Fund, Equity Growth Fund, Equity Income Fund, International Equity Fund,
Small Company Equity Fund, Asset Allocation Fund, Growth and Income Fund,
Connecticut Municipal Money Market Fund, Massachusetts Municipal Money Market
Fund, Small Cap Value Fund, New Jersey Municipal Bond Fund, MidCap Equity Fund
and Strategic Equity Fund (each a "Fund");
WHEREAS, Galaxy has notified the Adviser that it has established three
new portfolios, namely the Prime Reserves, Government Reserves and Tax-Exempt
Reserves and that it desires to retain the Adviser to act as the investment
adviser therefor, and the Adviser has notified Galaxy that it is willing to
serve as investment adviser for the Prime Reserves, Government Reserves and
Tax-Exempt Reserves;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT. Galaxy hereby appoints the Adviser to act as
investment adviser to Galaxy for the Prime Reserves, Government Reserves and
Tax-Exempt Reserves for the period and on the terms set forth in the Advisory
Agreement. The Adviser hereby accepts such appointment and agrees to render the
services set forth in the Advisory Agreement for the compensation herein
provided.
2. COMPENSATION. For the services provided and the expenses assumed
pursuant to the Advisory Agreement with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves, Galaxy will pay the Adviser and the
Adviser will accept as full compensation therefor fees, computed daily and paid
monthly, based on the net assets of the Prime Reserves, Government Reserves and
Tax-Exempt Reserves considered separately
<PAGE>
on a per-Fund basis, at the annual rate of .40% of the first $750,000,000 of net
assets of each of the Prime Reserves, Government Reserves and Tax-Exempt
Reserves plus .35% of net assets of each such Fund in excess of $750,000,000.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Fund" as used in the Advisory Agreement shall be deemed to include the Prime
Reserves, Government Reserves and Tax-Exempt Reserves. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of
the date and year first above written.
THE GALAXY FUND
By:
-------------------------
Title: President
FLEET INVESTMENT ADVISORS INC.
By:
-------------------------
Title:
----------------------
<PAGE>
Exhibit (6)(b)
THE GALAXY FUND
DISTRIBUTION AGREEMENT
Amendment No. 1
March 3, 1998
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Distribution
Agreement between the Trust and First Data Distributors, Inc. ("FD
Distributors") dated as of June 1, 1997 (the "Agreement") is herewith amended to
provide that FD Distributors shall be the distributor for the Trust's New Jersey
Municipal Bond Fund, MidCap Equity Fund and Strategic Equity Fund on the terms
and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By: /s/John T. O'Neill
------------------------
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA DISTRIBUTORS, INC.
By: /s/Scott M. Hacker
------------------------
Name:Scott M. Hacker
Title:VP & Treasurer
<PAGE>
Exhibit (6)(c)
THE GALAXY FUND
DISTRIBUTION AGREEMENT
Amendment No. 2
___________________, 1998
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund
(the "Trust"), a Massachusetts business trust, has agreed that the
Distribution Agreement between the Trust and First Data Distributors, Inc.
("FD Distributors") dated as of June 1, 1997 (the "Agreement") is herewith
amended to provide that FD Distributors shall be the distributor for the
Trust's Prime Reserves, Government Reserves and Tax-Exempt Reserves on the
terms and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By: _________________________
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA DISTRIBUTORS, INC.
By: ______________________________
Name:
Title:
<PAGE>
Exhibit (8)(c)
THE GALAXY FUND
Amendment to
GLOBAL CUSTODY AGREEMENT
_________________, 1998
The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, NY 11245
Attn: Global Custody Division
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Global Custody
Agreement ("Agreement") between the Trust and The Chase Manhattan Bank (formerly
The Chase Manhattan Bank, N.A.) ("Chase") dated as of November 1, 1991, is
herewith amended to provide that Chase shall be the custodian for the Trust's
Prime Reserves, Government Reserves and Tax-Exempt Reserves on the terms and
conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.
Very truly yours,
THE GALAXY FUND
By:
-----------------------------
Name:
Title:
Accepted:
THE CHASE MANHATTAN BANK
By:
--------------------------
Name:
Title:
<PAGE>
Exhibit (9)(b)
THE GALAXY FUND
ADMINISTRATION AGREEMENT
Amendment No. 1
March 3, 1998
First Data Investor Services
Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Administration
Agreement between the Trust and First Data Investor Services Group, Inc.
("FDISG") dated as of June 1, 1997 (the "Agreement") is herewith amended to
provide that FDISG shall be the administrator for the Trust's New Jersey
Municipal Bond Fund, MidCap Equity Fund and Strategic Equity Fund on the terms
and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By: /s/John T. O'Neill
---------------------
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/illegible
-----------------
Name:
Title:
<PAGE>
Exhibit (9)(c)
AMENDMENT NO. 2 TO ADMINISTRATION AGREEMENT
This Amendment No. 2, dated as of March 5, 1998, is entered into
between FIRST DATA INVESTOR SERVICES GROUP, INC., a Massachusetts corporation
("FDISG") and THE GALAXY FUND, a Massachusetts business trust (the "Company").
WHEREAS, FDISG and the Company have entered into an Administration
Agreement, dated as of June 1, 1997, as amended on February 27, 1998 (the
"Administration Agreement"), pursuant to which the Company appointed FDISG to
act as Administrator for the Company's portfolios; and
WHEREAS, Section 9 of the Administration Agreement provides that no
change, termination, modification, or waiver of any term or condition of the
Administration Agreement shall be valid unless in writing signed by each party;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The following sub-section is added to the Administration
Agreement as sub-section (f) to Section 3:
"(f) FDISG agrees to perform the services set forth herein in
accordance with the performance standards set forth in Appendix I to this
Agreement."
2. Sub-section (f) to Section 8 of the Administration Agreement is
amended and restated in its entirety to read as follows:
"(f) In the event this Agreement is terminated by the Company
pursuant to Sections 8(c) or 8(d) hereof or pursuant to paragraph (b) of the
performance standards set forth in Appendix I hereto, all reasonable expenses
associated with movement of records and materials and conversion thereof to a
successor administrator will be borne by FDISG and the Company shall not be
responsible for FDISG's costs associated with such termination. In the event of
termination of this Agreement pursuant to any other Section of this Agreement,
all reasonable expenses associated with conversation to a successor
administrator will be borne by the Company."
3. Appendix I attached hereto is added as an Appendix to the
Administration Agreement.
4. The changes effected by this Amendment No. 2 shall be effective
as of May 1, 1998. Except to the extent amended hereby, the Administration
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the day and year first above written.
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By:
-----------------------------
Name:
Title:
THE GALAXY FUND
By:
-----------------------------
Name: John T. O'Neill
Title: President
-2-
<PAGE>
Appendix I
Pursuant to Article 3 of this Agreement, FDISG has agreed to perform
the services described in this Agreement in accordance with the Performance
Standards set forth in this Appendix I. The parties agree that such Performance
Standards, which are described below, may be revised from time to time upon the
mutual agreement of the parties.
Each of the performance standards will be monitored by a Quality
Assurance Team:
(a) In the event that FDISG fails to meet a particular Performance
Standard (except for any failure due to circumstances beyond its control) in any
particular month, FDISG agrees to take appropriate corrective action within the
following thirty (30) day period.
(b) In the event that FDISG fails to meet a particular Performance
Standard (except for any failure due to circumstances beyond its control) for
any three (3) months within a six (6) month period, the Company shall have the
right to terminate this Agreement upon forty-five (45) days' written notice to
FDISG.
CATEGORY STANDARD
- -------- --------
All NAV's to NASDAQ by the 98% accuracy rate as measured
NASDAQ reporting deadline by information available on
the day of reporting*
All daily yield and days to 98% accuracy rate as measured
maturity data along with the by information available on
7-day yield data reported to the day of reporting*
NASDAQ by the NASDAQ reporting
deadline
Release of the "Fleet Export 90% of the time**
File" by 8:00 p.m. each
business day
Cash availability provided to 90% accuracy rate as measured
investment advisers each morning by information available on
by 9:45 a.m. the day of reporting***
- ------------------------
* assumes all vendor-provided data to FDISG is correct and on time; also that
all trade data provided by investment advisers is correct and on time
** assumes that there are normal market conditions and that all
vendor-supplied data to FDISG is provided on time
*** assumes that all data provided by any transfer agent or sub-
-3-
<PAGE>
transfer agent to FDISG is accurate and on time
-4-
<PAGE>
Exhibit (9)(d)
THE GALAXY FUND
ADMINISTRATION AGREEMENT
Amendment No. 3
_________________, 1998
First Data Investor Services
Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Administration
Agreement between the Trust and First Data Investor Services Group, Inc.
("FDISG") dated as of June 1, 1997 (the "Agreement") is herewith amended to
provide that FDISG shall be the administrator for the Trust's Prime Reserves,
Government Reserves and Tax-Exempt Reserves on the terms and conditions
contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By: _______________________
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: __________________________
Name:
Title:
<PAGE>
Exhibit (9)(f)
THE GALAXY FUND
TRANSFER AGENCY AND SERVICES AGREEMENT
Amendment No. 1
March 3, 1998
First Data Investor Services
Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Transfer Agency
and Services Agreement ("Agreement") between the Trust and First Data Investor
Services Group, Inc. ("FDISG") dated as of June 1, 1997, is herewith amended to
provide that FDISG shall be the transfer agent and dividend disbursing agent for
the Trust's New Jersey Municipal Bond Fund, MidCap Equity Fund and Strategic
Equity Fund on the terms and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.
Very truly yours,
THE GALAXY FUND
By: /s/John T. O'Neill
-----------------------------
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/illegible
---------------------------------
Name:
Title:
<PAGE>
Exhibit (9)(g)
AMENDMENT NO. 2 TO
TRANSFER AGENCY AND SERVICES AGREEMENT
This Amendment No. 2, dated as of March 5, 1998, is entered into
between THE GALAXY FUND (the "Fund"), a Massachusetts business trust, and FIRST
DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts corporation.
WHEREAS, the Fund and FDISG have entered into a Transfer Agency and
Services Agreement, dated as of June 1, 1997, as amended on February 27, 1998
(the "Transfer Agency Agreement"), pursuant to which the Fund appointed FDISG to
act as the transfer agent, dividend disbursing agent and agent in connection
with certain other activities for the Fund's portfolios; and
WHEREAS, Section 25.1 of the Transfer Agency Agreement provides, in
part, that no change, termination, modification or waiver of any term or
condition of the Transfer Agency Agreement shall be valid unless in writing
signed by each party;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The following paragraph is added to Schedule A of the Transfer
Agency Agreement as Section 10:
"10. FULFILLMENT.
FDISG will process and mail Fund marketing literature. Tasks include
kit assembly, order processing and mailing of materials. This service may be
terminated by the Fund upon ninety (90) days' written notice to FDISG."
2. The following is added to Schedule B of the Transfer Agency
Agreement:
- -------------------------------------------------------------------------------
"FULFILLMENT PRICING
- -------------------------------------------------------------------------------
SHAREHOLDER KITS
- -------------------------------------------------------------------------------
Self Mailer (68-71) .1480
- -------------------------------------------------------------------------------
Bond, Equity and Asset Allocation Kits (53-59) .1480
- -------------------------------------------------------------------------------
Fleet Payroll Kits - Money Market, Bond, Equity
(10, 11, 31-33) .3500
- -------------------------------------------------------------------------------
Money Mkt., Variable Instit. Kits, A/P Form IRA
& Reg (12, 63, 72, 50, 62) .4300
- -------------------------------------------------------------------------------
Annuity Kit, Exchange and Transfer (93-98) .4800
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
IRA, VIP & Retirement Kits (61, 85, 89, 90, 91) .6100
- -------------------------------------------------------------------------------
Total Service IRA Kit (91, 100) 1.3000
- -------------------------------------------------------------------------------
Annuity Fulfillment (99) .4800
- -------------------------------------------------------------------------------
College Investment Kit (100) 2.0000
- -------------------------------------------------------------------------------
New Kits (102, 110, 13) .4000
- -------------------------------------------------------------------------------
Net West S/H Kit (103) .3500
- -------------------------------------------------------------------------------
New Kits (20, 200, 201, 220-222, 109) .3500
- -------------------------------------------------------------------------------
New Kits (461A) .3500
- -------------------------------------------------------------------------------
New Broker Kit (FND-FIS) 55.0000
- -------------------------------------------------------------------------------
Investment Spec Report Dec. 1997 .1800
- -------------------------------------------------------------------------------
PK (Pro Kit w/supplements) (1-313) .0500
- -------------------------------------------------------------------------------
Individual Items - Components .0500
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OTHER FULFILLMENT CHARGES 9./pallet
- -------------------------------------------------------------------------------
Warehouse Storage
- -------------------------------------------------------------------------------
Transportation Charges - pass through/out-of-pocket
- -------------------------------------------------------------------------------
Print Charges - pass through/out of pocket
- -------------------------------------------------------------------------------
3. Appendix I to the Transfer Agency Agreement is amended and
restated in its entirety to read as set forth in Appendix I hereto.
4. The changes to the Transfer Agency Agreement effected by this
Amendment No. 2 shall be effective as of May 1, 1998. Except to the extent
amended hereby, the Transfer Agency Agreement shall remain unchanged and in full
force and effect and is hereby ratified and confirmed in all respects as amended
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the day and year first above written.
THE GALAXY FUND
By:
--------------------------
Name: John T. O'Neill
Title: President
-2-
<PAGE>
FIRST DATA INVESTOR
SERVICES GROUP, INC.
By:
--------------------------
Name:
------------------------
Title:
------------------------
-3-
<PAGE>
Exhibit (9)(h)
THE GALAXY FUND
TRANSFER AGENCY AND SERVICES AGREEMENT
Amendment No. 3
_____________, 1998
First Data Investor Services
Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Transfer Agency
and Services Agreement ("Agreement") between the Trust and First Data Investor
Services Group, Inc. ("FDISG") dated as of June 1, 1997 is herewith amended to
provide that FDISG shall be the transfer agent and dividend disbursing agent for
the Trust's Prime Reserves, Government Reserves and Tax-Exempt Reserves on the
terms and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.
Very truly yours,
THE GALAXY FUND
By:
------------------------------------
Name: John T. O'Neill
Title: President
Accepted:
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By:
------------------------
Name:
Title:
<PAGE>
Exhibit (10)
Law Offices
DRINKER BIDDLE REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Fax: (215) 988-2757
June 30, 1998
The Galaxy Fund
4400 Computer Drive
Westboro, MA 01581-5108
RE: SHARES REGISTERED BY POST-EFFECTIVE AMENDMENT NO. 33 TO REGISTRATION
STATEMENT ON FORM N-1A (FILE NOS. 33-4806 AND 811-4636)
--------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to The Galaxy Fund (the "Trust") in connection
with the preparation and filing with the Securities and Exchange Commission of
Post-Effective Amendment No. 33 (the "Amendment") to the Trust's Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, registering
Class BB, Class CC and Class DD shares of beneficial interest (collectively,
the "Shares") representing interests in the Prime Reserves, Government Reserves
and Tax - Exempt Reserves, respectively. The Amendment seeks to register an
indefinite number of the Shares.
We have reviewed the Trust's Declaration of Trust, its Code of Regulations,
resolutions adopted by its Board of Trustees and shareholders and such other
legal and factual matters as we have deemed appropriate.
This opinion is based exclusively on the laws of the Commonwealth of
Massachusetts and the federal laws of the United States of America. We have
relied upon an opinion of Ropes & Gray, special Massachusetts counsel to the
Trust, insofar as our opinion relates to matters arising under the laws of the
Commonwealth of Massachusetts.
Based upon the foregoing, it is our opinion that the Shares, when issued
for payment as described in the Trust's prospectus relating to the Shares and
for not less than $.001 per share, will be validly issued, fully paid and
non-assessable by the Trust.
<PAGE>
The Galaxy Fund
Page 2
We note that under certain circumstances, the shareholders of a Massachusetts
business trust may be subject to assessment at the instance of creditors to
pay the obligations of such trust in the event that such trust's assets are
insufficient for that purpose. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each note, bond, contract, order or
other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust or any class of shares of beneficial interest of the
Trust. The Declaration of Trust provides for indemnification out of the
assets of the particular class of shares for all loss and expense of any
shareholder of that class held personally liable solely by reason of his
being or having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which that class of shares itself would be unable to meet
its obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
Exhibit (11)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
Firm under the caption "Counsel" in the Statements of Additional Information
that are included in Post-Effective Amendment No. 33 to the Registration
Statement (No. 33-4806) on Form N-1A under the Securities Act of 1933, as
amended, of The Galaxy Fund. This consent does not constitute a consent under
Section 7 of the Securities Act of 1933, and in consenting to the use of our
name and the references to our Firm under such caption we have not certified any
part of the Registration Statement and do not otherwise come within the
categories of persons whose consent is required under Section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania Drinker Biddle & Reath LLP
June 30, 1998
<PAGE>
Exhibit (13)(g)
PURCHASE AGREEMENT
The Galaxy Fund, a Massachusetts business trust (the "Trust"), and First
Data Distributors Inc., a Massachusetts corporation ("FD Distributors"), hereby
agree with each other as follows:
1. The Trust hereby offers FD Distributors and FD Distributors
hereby purchases one (1) Class Y - Series 1 share and one (1) Class Y - Series 2
share, each share representing an interest in the Trust's New Jersey Municipal
Bond Fund, at a purchase price of $10 per share, aggregating to two (2) shares
of beneficial interest in the Trust (such shares of beneficial interest in the
Trust being hereinafter collectively known as "Shares"). FD Distributors hereby
acknowledges purchase of the Shares and the Trust hereby acknowledges receipt
from FD Distributors of funds in the amount of $20 in full payment for the
Shares.
2. FD Distributors represents and warrants to the Trust that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 3rd day of March, 1998.
THE GALAXY FUND
By: /s/ John T. O'Neill
------------------------------------
FIRST DATA DISTRIBUTORS INC.
By: /s/ Scott M. Hacker
------------------------------------
<PAGE>
Exhibit (13)(i)
PURCHASE AGREEMENT
The Galaxy Fund, a Massachusetts business trust (the "Trust"), and First
Data Distributors Inc., a Massachusetts corporation ("FD Distributors"), hereby
agree with each other as follows:
1. The Trust hereby offers FD Distributors and FD Distributors
hereby purchases one (1) Class AA - Series 1 share, one (1) Class AA - Series 2
share and one (1) Class AA - Series 3 share, each share representing an interest
in the Trust's Strategic Equity Fund, at a purchase price of $10 per share,
aggregating to three (3) shares of beneficial interest in the Trust (such shares
of beneficial interest in the Trust being hereinafter collectively known as
"Shares"). FD Distributors hereby acknowledges purchase of the Shares and the
Trust hereby acknowledges receipt from FD Distributors of funds in the amount of
$30 in full payment for the Shares.
2. FD Distributors represents and warrants to the Trust that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 3rd day of March, 1998.
THE GALAXY FUND
By:/s/John T. O'Neill
-----------------------------
FIRST DATA DISTRIBUTORS INC.
By:/s/Scott M. Hacker
-----------------------------
<PAGE>
Exhibit (13)(j)
PURCHASE AGREEMENT
The Galaxy Fund, a Massachusetts business trust (the "Trust"), and First
Data Distributors Inc., a Massachusetts corporation ("FD Distributors"), hereby
agree with each other as follows:
1. The Trust hereby offers FD Distributors and FD Distributors
hereby purchases (i) ten (10) Class BB shares, each such share representing an
interest in the Trust's Prime Reserves, (ii) ten (10) Class CC shares, each such
share representing an interest in the Trust's Government Reserves, and (iii) ten
(10) Class DD shares, each such share representing an interest in the Trust's
Tax-Exempt Reserves, at a purchase price of $1.00 per share, aggregating to
thirty (30) shares of beneficial interest in the Trust (such shares of
beneficial interest in the Trust being hereinafter collectively known as
"Shares"). FD Distributors hereby acknowledges purchase of the Shares and the
Trust hereby acknowledges receipt from FD Distributors of funds in the amount of
$30 in full payment for the Shares.
2. FD Distributors represents and warrants to the Trust that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the ____ day of _______________, 1998.
THE GALAXY FUND
By:_____________________________
FIRST DATA DISTRIBUTORS INC.
By:_____________________________
<PAGE>
Exhibit (15)(b)
THE GALAXY FUND
DISTRIBUTION AND SERVICES PLAN
FOR PRIME RESERVES,
GOVERNMENT RESERVES AND
TAX-EXEMPT RESERVES
This Distribution and Services Plan (the "Plan") has been adopted by
the Board of Trustees of The Galaxy Fund (the "Trust") with respect to the
following investment portfolios of the Trust: Prime Reserves, Government
Reserves and Tax-Exempt Reserves (collectively, the "Funds"). The Plan has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Section 1. EXPENSES. The Trust may incur expenses under the Plan in
an amount not to exceed 1.00% annually of the average daily net assets
attributable to each of the Funds.
Section 2. DISTRIBUTION PAYMENTS. (a) The Trust may pay the
distributor of the Trust (the "Distributor") (or any other person) a fee (a
"Distribution Fee") of up to 0.75% annually of the average daily net assets of
each of the Funds. The Distribution Fee shall be calculated and accrued daily,
paid monthly and shall be in consideration for distribution services and the
assumption of related expenses (including the payment of commissions and
transaction fees) in conjunction with the offering and sale of shares of the
Funds. In determining the amounts payable on behalf of a Fund under the Plan,
the net asset value of the Fund's shares shall be computed in the manner
specified in the Trust's then current Prospectuses and Statements of Additional
Information describing such Funds.
(b) Payments to the Distributor under subsection (a) above shall be
used by the Distributor to cover expenses and activities primarily intended to
result in the sale of shares of the Funds. Such expenses and activities may
include but are not limited to: (i) direct out-of-pocket promotional expenses
incurred by the Distributor in advertising and marketing shares of the Funds;
(ii) expenses incurred in connection with preparing, printing, mailing, and
distributing or publishing advertisements and sales literature; (iii) expenses
incurred in connection with printing and mailing Prospectuses and Statements of
Additional Information to other than current shareholders; (iv) periodic
payments or commissions to one or more securities dealers, brokers, financial
institutions or other industry professionals, such as investment advisors,
accountants, and estate planning firms (each a "Distribution Organization") with
respect to a Fund's shares beneficially owned by customers for whom the
Distribution Organization is the Distribution Organization of record or
shareholder of record; (v) the direct or indirect cost of financing the payments
or expenses included in (i) and (iv) above; or (vi) such other services as may
be
<PAGE>
construed by any court or governmental agency or commission, including the
Securities and Exchange Commission (the "Commission"), to constitute
distribution services under the 1940 Act or rules and regulations thereunder.
Section 3. PAYMENTS FOR ADMINISTRATIVE SERVICES COVERED BY PLAN. (a)
The Trust may also pay securities dealers, brokers, financial institutions or
other industry professionals, such as investment advisors, accountants, and
estate planning firms (each a "Service Organization") for administrative support
services provided with respect to their customers' shares of the Funds. Such
administrative support services shall be provided pursuant to an agreement in
substantially the form attached hereto ("Servicing Agreement"). Any
organization providing distribution assistance may also become a Service
Organization and receive fees for administrative support services pursuant to a
Servicing Agreement under this Plan.
(b) Fees paid to a Service Organization under subsection (a) above may
be paid at an annual rate of up to 0.25% of the average daily net assets
attributable to the outstanding shares of each of the Funds, which shares are
owned of record or beneficially by that Service Organization's customers for
whom such Service Organization is the dealer of record or shareholder of record
or with whom it has a servicing relationship. Such fees shall be calculated and
accrued daily, paid monthly and computed in the manner set forth in the
Servicing Agreement.
Section 4. EXPENSES ALLOCATED; COMPLIANCE. Amounts paid by a Fund
under the Plan must be for services rendered for or on behalf of such Fund.
However, joint distribution financing or other services rendered with respect to
such Funds (which may involve other investment funds or companies that are
affiliated persons of the Trust or affiliated persons of the Distributor) is
authorized to the extent permitted by law.
Section 5. REPORTS TO TRUST. So long as this Plan is in effect, the
Distributor shall provide the Trust's Board of Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made.
Section 6. APPROVAL OF PLAN. This Plan will become effective with
respect to a particular Fund on the date the public offering of shares of such
Fund commences upon the approval by a majority of the Board of Trustees,
including a majority of those trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan (the "Disinterested Trustees"), pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
-2-
<PAGE>
Section 7. CONTINUANCE OF PLAN. Unless sooner terminated in
accordance with the terms hereof, this Plan shall continue until May 28, 1999,
and thereafter for so long as its continuance is specifically approved at least
annually by the Trust's Board of Trustees in the manner described in Section 6
hereof.
Section 8. AMENDMENTS. This Plan may be amended at any time by the
Board of Trustees provided that (a) any amendment to increase materially the
costs which a Fund may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the outstanding shares
of the Fund affected by such matter, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval in the manner
described in Section 6 hereof.
Section 9. TERMINATION. This Plan, as to any Fund, is terminable
without penalty at any time by (a) a vote of a majority of the Disinterested
Trustees, or (b) a vote of a majority of the outstanding shares of such Fund.
Section 10. SELECTION/NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of those Disinterested Trustees shall be
committed to the discretion of such Disinterested Trustees.
Section 11. MISCELLANEOUS. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Adopted: May 28, 1998
-3-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
to
DISTRIBUTION AND SERVICES PLAN
FOR PRIME RESERVES,
GOVERNMENT RESERVES AND
TAX-EXEMPT RESERVES
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the provision
of administrative support services to your customers who may from time to time
be the record or beneficial owners of shares of one or more of our investment
portfolios (individually, a "Fund" and collectively, the "Funds"), which are
listed on Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide administrative support services to your
customers ("Clients") who may from time to time own of record or beneficially a
Fund's shares. Services provided may include some or all of the following: (i)
processing dividend and distribution payments from a Fund on behalf of Clients;
(ii) providing information periodically to Clients showing their positions in
the shares of a Fund; (iii) arranging for bank wires; (iv) responding to routine
Client inquiries concerning their investment in the shares of a Fund; (v)
providing sub-accounting with respect to the shares of a Fund beneficially owned
by Clients or the information necessary for sub-accounting; (vi) if required by
law, forwarding shareholder communications from a Fund (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Clients; (vii) aggregating and processing
purchase, exchange, and redemption requests from Clients and placing net
purchase, exchange, and redemption orders for Clients; (viii) providing Clients
with a service that invests the assets of their accounts in the shares of a Fund
pursuant to specific or pre-authorized instructions; (ix) establishing and
maintaining accounts and records relating to Clients that invest in the shares
of a Fund; (x) assisting Clients in changing dividend or distribution options,
account designations and addresses; (xi) developing, maintaining and operating
systems necessary to support sweep accounts; and (xii) other similar services we
may reasonably request to the extent you are permitted to do so under applicable
law.
Section 2. You will provide such office space and equipment, telephone and
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services to Clients.
Section 3. Neither you nor any of your officers, employees or agents is
authorized to make any representations concerning us, a Fund, or its shares
except those contained in our then current prospectus for such Fund, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter or in any respect. You will not engage in activities pursuant to this
Agreement which constitute acting as a broker or dealer under state law unless
you have obtained the licenses required by law. You and your employees will,
upon request, be available during normal business hours to consult with us or
our designees concerning the performance of your responsibilities under this
Agreement.
<PAGE>
Section 5. In consideration of the services and facilities provided by you
hereunder, we will pay to you, and you will accept as full payment therefor, a
fee at the annual rate of .25% of the average daily net asset value of the
shares of a Fund owned of record or beneficially by Clients from time to time
for whom you are the dealer of record or holder of record or with whom you have
a servicing relationship. Said fee will be computed daily and payable monthly.
For purposes of determining the fees payable under this Section 5, the average
daily net asset value of Clients' shares will be computed in the manner
specified in our then current Registration Statement in connection with the
computation of the net asset value of the particular Fund's shares for purposes
of purchases and redemptions. The fee rates stated above may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of shares of a Fund, including the sale of such shares to you for the
account of any Clients.
Section 6. You acknowledge that you will provide to our Board of Trustees, at
least quarterly, a written report of the amounts expended pursuant to this
Agreement and the purposes for which such expenditures were made. In connection
with such reports, you will furnish us or our designees with such information as
we or they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of some or all of the
services described herein), and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to our Board of Trustees concerning
this Agreement and the monies paid or payable by us pursuant hereto, as well as
any other reports or filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent, warrant
and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
us; (ii) the compensation payable to you hereunder, together with any other
compensation you receive from Clients in connection with the investment of their
assets in shares of the Funds, will be disclosed to Clients, will be authorized
by Clients and will not be excessive or unreasonable.
Section 9. This Agreement will become effective on the date a fully executed
copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until [May 28, 1999], and thereafter
will continue automatically for successive annual periods provided such
continuance is specifically approved at least annually by us in the manner
described in Section 12 hereof. This Agreement is terminable with respect to
any Fund, without penalty, at any time by us (which termination may be by vote
of a majority of our Disinterested Trustees as defined in Section 12 hereof or
by vote of the holders of a majority of the outstanding shares of such Fund) or
by you upon notice to us. This Agreement will terminate in the event of its
assignment, as defined in the Investment Company Act of 1940 (the "Act").
Section 10. All notices and other communications to either you or us will be
duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown above.
Section 11. This Agreement will be construed in accordance with the laws of the
Commonwealth of Massachusetts without giving effect to principles of conflict of
laws.
Section 12. This Agreement has been approved by vote of a majority of (i) our
Board of Trustees and (ii) those Trustees who are not "interested persons" (as
defined in the Act) of us and have no direct or indirect financial interest in
-2-
<PAGE>
the operation of the Distribution and Services Plan adopted by us regarding the
provision of administrative support services to the record or beneficial owners
of shares of the Funds or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 14. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders, or representatives of
the Trust personally, but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o First Data Investor Services Group, Inc., 4400 Computer Drive,
Westboro, Massachusetts 01581-5108.
Very truly yours,
THE GALAXY FUND
By:
---------------------------------------------------
Authorized Officer
Accepted and Agreed to:
Name of Organization
By:
---------------------------------------------------
Authorized Officer
Date:
-------------------------------------------------
- ------------------------------------------------------
Taxpayer Identification Number
- ------------------------------------------------------
Account Number
- ------------------------------------------------------
Dealer Code
-3-
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Funds for which you wish
to act as a Service Organization:
/ / Prime Reserves
/ / Government Reserves
/ / Tax-Exempt Reserves
-------------------------------------------
(Service Organization Name)
By:
----------------------------------------
----------------------------------------
Authorized Officer
Dated:
-------------------------------------
