GALAXY FUND /DE/, 497, 1999-12-03

GALAXY FUND /DE/
497, 1999-12-03

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<PAGE>

MONEY MARKET PORTFOLIOS

THE GALAXY FUND

PROSPECTUS
November 27, 1999

Galaxy Prime Reserves

Galaxy Government Reserves

Galaxy Tax-Exempt Reserves

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these Funds or determined if this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.

QUICK & REILLY-Registered Trademark-
MEMBER NEW YORK STOCK EXCHANGE

QRPROMM ORFB1040 REV 11/27/99

<PAGE>

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
1 RISK/RETURN SUMMARY

1 Introduction

2 Galaxy Prime Reserves

4 Galaxy Government Reserves

6 Galaxy Tax-Exempt Reserves

8 Additional information about risk

9 Investor guidelines

10 FUND MANAGEMENT

11 HOW TO INVEST IN THE FUNDS

11 Buying and selling shares

11 HOW TO BUY SHARES

12 HOW TO SELL SHARES

12 OTHER TRANSACTION POLICIES

13 Distribution and shareholder service fees

14 DIVIDENDS, DISTRIBUTIONS AND TAXES

15 FINANCIAL HIGHLIGHTS
</TABLE>

<PAGE>

RISK/RETURN SUMMARY
INTRODUCTION

This prospectus describes the Galaxy Prime Reserves, Galaxy Government
Reserves and Galaxy Tax-Exempt Reserves (the "Funds"), three money market
portfolios offered by The Galaxy Fund. The Funds invest primarily in
short-term debt obligations, commonly known as money market instruments, that
are determined by the Funds' investment adviser to carry very little risk.
Money market instruments purchased by the Funds must meet strict requirements
as to investment quality, maturity and diversification. The Funds generally
don't invest in securities with remaining maturities of more than 397 days
(subject to certain exceptions) and the average maturity of all securities
held by a particular Fund must be 90 days or less. Each Fund tries to maintain
its share price at $1.00 to protect your investment from loss.

Shares of the Funds are offered to customers of Quick & Reilly, Inc. ("Quick and
Reilly"), an affiliate of the Funds' investment adviser, who maintain a Quick
Asset-Registered Trademark- account with Quick & Reilly.

On the following pages, you'll find important information about each Fund
including:
- - the Fund's investment objective (sometimes called the Fund's goal) and the
main investment strategies used by the Fund's investment adviser in trying to
achieve that objective
- - the main risks associated with an investment in the Fund
- - the fees and expenses that you will pay as an investor in the Fund

WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are right for all investors. Your investment goals and
tolerance for risk will determine which fund is right for you. On page 9,
you'll find a table which sets forth general guidelines to help you decide which
of the Funds is best suited to you.

THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc. (the "Adviser") is the investment adviser for
all of these Funds. The Adviser, an indirect wholly-owned subsidiary of
FleetBoston Corporation, was established in 1984 and has its main office at
75 State Street, Boston, Massachusetts 02109. The Adviser also provides
investment management and advisory services to individual and institutional
clients and manages the other Galaxy investment portfolios. As of June 30,
1999, the Adviser managed over $66 billion in assets.

- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.

[Sidenote:]
MATURITY
The maturity of a security is the date when the issuer must repay the security's
entire principal amount to an investor, such as a Fund.

GALAXY MONEY MARKET PORTFOLIOS -1-
<PAGE>

GALAXY PRIME RESERVES

THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests in a diversified portfolio of money market instruments,
including commercial paper, notes and bonds issued by U.S. corporations,
obligations issued by the U.S. Government and its agencies and
instrumentalities, and obligations issued by U.S. and foreign banks, such as
certificates of deposit. The Fund also invests in repurchase agreements issued
by financial institutions such as banks and broker-dealers.

The Fund will only buy a security if it has the highest short-term rating from
at least two nationally recognized statistical rating organizations, or one such
rating if only one organization has rated the security. If the security is not
rated, it must be determined by the Adviser to be of comparable credit quality.

THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the other
party may not fulfill its obligations under the agreement. This could cause
the value of your investment to decline.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.

................................................................................

HOW THE FUND HAS PERFORMED
The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

[Sidenote:]
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a fund buys securities from a
seller (usually a bank or broker-dealer) who agrees to buy them back from the
fund on a certain date and at a certain price.

- -2- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

GALAXY PRIME RESERVES

FEES AND EXPENSES OF THE FUND
There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime Reserves 0.36% 0.45% 0.15% 0.96%
.....................................................................................
</TABLE>

EXAMPLE

This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime Reserves $98 $306 $531 $1,178
..................................................................................................
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS -3-
<PAGE>

GALAXY GOVERNMENT RESERVES

THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in U.S. Government obligations, including U.S.
Treasury obligations and obligations of U.S. Government agencies and
instrumentalities. The Fund also invests in repurchase agreements backed by
these obligations.

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - CREDIT RISK - Although U.S. Government securities have historically involved
little credit risk, if an issuer fails to pay interest or repay principal,
the value of your investment could decline.

- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the other
party may not fulfill its obligations under the agreement. This could cause
the value of your investment to decline.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

................................................................................

HOW THE FUND HAS PERFORMED
The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

[Sidenote:]
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are debt obligations issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. U.S. Government
obligations generally have less credit risk than other debt obligations.

- -4- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

GALAXY GOVERNMENT RESERVES

FEES AND EXPENSES OF THE FUND

There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Government Reserves 0.40% 0.40% 0.19% 0.99%
............................................................................................
</TABLE>

EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Government Reserves $101 $315 $547 $1,213
..................................................................................................
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS -5-
<PAGE>

GALAXY TAX-EXEMPT RESERVES

THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax as is consistent with stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its net assets in municipal
securities, which are securities issued by state and local governments and other
political or public bodies or agencies and that pay interest which is exempt
from regular federal income tax. Under normal conditions, the Fund will invest
no more than 20% of its net assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.

Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.

The Fund will only buy a security if it has one of the two highest short-term
ratings from at least two nationally recognized statistical rating
organizations, or one such rating if only one organization has rated the
security. If the security is not rated, it must be determined by the Adviser to
be of comparable credit quality.

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - CREDIT RISK - Although credit risk is very low because the Fund only invests
in high quality obligations, if an issuer fails to pay interest or repay
principal, the value of your investment could decline. The ability of a state
or local government issuer to make payments can be affected by many factors,
including economic conditions, the flow of tax revenues and changes in the
level of federal, state or local aid.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

[Sidenote:]
MUNICIPAL SECURITIES
State and local governments issue municipal securities to raise money to finance
public works, to repay outstanding obligations, to raise funds for general
operating expenses and to make loans to other public institutions. Some
municipal securities, known as private activity bonds, are issued to finance
projects for private companies. Municipal securities, which can be issued as
bonds, notes or commercial paper, usually have fixed interest rates, although
some have interest rates that change from time to time.

[Sidenote:]
TYPES OF MUNICIPAL SECURITIES
GENERAL OBLIGATION securities are secured by the issuer's full faith, credit and
taxing power. REVENUE OBLIGATION securities are usually payable only from
revenues derived from specific facilities or revenue sources. PRIVATE ACTIVITY
BONDS are usually revenue obligations since they are typically payable by the
private user of the facilities financed by the bonds.

- -6- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

GALAXY TAX-EXEMPT RESERVES

HOW THE FUND HAS PERFORMED
The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

FEES AND EXPENSES OF THE FUND
There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Tax-Exempt Reserves 0.40% 0.40% 0.19% 0.99%
............................................................................................
</TABLE>

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Tax-Exempt Reserves $101 $315 $547 $1,213
................................................................................................
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS -7-
<PAGE>

ADDITIONAL INFORMATION ABOUT RISK

The main risks associated with an investment in each of the Funds have been
described above. The following supplements that discussion.

TEMPORARY DEFENSIVE POSITIONS
Each Fund may temporarily hold up to 100% of its total assets in investments
that aren't part of its main investment strategy during unfavorable market
conditions. These investments may include cash (which will not earn any
income) and, in the case of the Galaxy Tax-Exempt Reserves, short-term
taxable investments, such as money market instruments and debt securities
issued or guaranteed by the U.S. Government or its agencies, in excess of 20%
of the Fund's net assets. This strategy could prevent a Fund from achieving its
investment objective.

OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be main
investment strategies of the Funds - and the risks involved - are described
in detail in the Statement of Additional Information (SAI) which is referred
to on the back cover of this prospectus.

YEAR 2000 RISKS
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by the Adviser and the Funds' other service providers don't properly
process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000" or "Y2K" problem. The
Adviser is taking steps to address the Y2K problem with respect to the computer
systems that it uses and to obtain assurances that comparable steps are being
taken by the Funds' 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 the Funds. The Y2K problem could have a negative impact on the issuers
of securities in which the Funds invest, which could hurt the Funds' investment
returns.

- -8- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

INVESTOR GUIDELINES

The table below provides information as to which type of investor might want to
invest in each of the Funds. It's meant as a general guide only. TAX-EXEMPT
FUNDS ARE GENERALLY NOT APPROPRIATE INVESTMENTS FOR TAX-DEFERRED RETIREMENT
ACCOUNTS, SUCH AS IRAs, BECAUSE THEIR RETURNS BEFORE TAXES ARE GENERALLY LOWER
THAN THOSE OF TAXABLE FUNDS. Consult your Quick & Reilly Personal Broker for
help in deciding which Fund is right for you.

GALAXY FUND FOR INVESTORS WHO WANT...
- --------------------------------------------------------------------------------
Galaxy Prime Reserves a flexible and convenient way to manage
cash while earning money market returns
- --------------------------------------------------------------------------------
Galaxy Government Reserves a way to earn money market returns with
the extra margin of safety associated with
U.S. Government obligations
- --------------------------------------------------------------------------------
Galaxy Tax-Exempt Reserves a way to earn money market returns that
are free from federal income tax

[Sidenote:]
TAX-EQUIVALENT YIELD
One way to understand the tax advantages of a tax-exempt fund is to compare its
after-tax return to that of a taxable investment. For example, suppose a taxable
fund pays a return of 10%. If you're in the 36% federal income tax bracket, the
fund's return after taxes is 6.4%. When a tax-exempt fund pays a return of 10%,
you don't pay tax. So if you're in the 36% tax bracket that's the equivalent of
earning about 15.6% on a taxable fund. If you're in a low tax bracket, however,
it may not be helpful to invest in a tax-exempt fund if you can achieve a higher
after-tax return from a taxable investment.

GALAXY MONEY MARKET PORTFOLIOS -9-
<PAGE>

FUND MANAGEMENT

ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities, and maintains related records.

ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.

MANAGEMENT FEES
The Funds began operations during the last fiscal year and the management fees
set forth below are those which are currently in effect.

<TABLE>
<CAPTION>
MANAGEMENT FEE
FUND AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Galaxy Prime Reserves 0.36%
................................................................................
Galaxy Government Reserves 0.40%
................................................................................
Galaxy Tax-Exempt Reserves 0.40%
................................................................................
</TABLE>

- -10- GALAXY MONEY MARKET PORTFOLIO
<PAGE>

HOW TO INVEST IN THE FUNDS

BUYING AND SELLING SHARES
You can buy and sell shares of the Funds on any business day. A business day is
any day that Galaxy's distributor, Galaxy's custodian and Quick & Reilly are
open for business.

The Funds have two transaction times each business day, 12:00 noon (Eastern
time) and the close of regular trading hours on the New York Stock Exchange
(usually 4:00 p.m. Eastern time). If your order to buy shares is received and
accepted by Galaxy's distributor before 4:00 p.m. (Eastern time) on a business
day, the price you pay will be the NAV next determined (and you'll begin
receiving dividends on the day of purchase) if Galaxy's custodian receives the
purchase price in immediately available funds by 4:00 p.m. (Eastern time) on the
day of your order. The price at which you sell shares is the NAV next determined
after receipt of your order in proper form as described below. Shares do not
earn dividends on the day a redemption order is effected regardless of whether
the redemption order is effected before or after 12:00 noon (Eastern time).

NAV is determined on each day the New York Stock Exchange is open for trading as
of 12:00 noon (Eastern time) and at the close of regular trading that day
(usually 4:00 p.m. Eastern time). The New York Stock Exchange is generally open
for trading every Monday through Friday, except for national holidays.

The Funds' assets are valued at amortized cost, which is approximately equal to
market value.

HOW TO BUY 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. Account
balances will appear on your Quick & Reilly monthly statement.

ADDITIONAL INVESTMENTS
You can make additional investments 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 and Reilly Personal Broker who will deposit it
into the Fund(s). Please identify the appropriate Fund(s) and indicate your
brokerage account number on your 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.

U.S. Clearing is responsible for sending your order to Galaxy's distributor
and for wiring

[Sidenote:]
NET ASSET VALUE
The price you pay for your shares is based on the net asset value per share
(NAV). It's the value of a Fund's assets, minus the value of the Fund's
liabilities, divided by the number of shares of the Fund held by investors.

[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is $500. There are no
minimum investment requirements for additional investments.

GALAXY MONEY MARKET PORTFOLIOS -11-
<PAGE>

payment to Galaxy's custodian. U.S. Clearing will usually hold your shares of
record in its name and receive all confirmations of purchases and sales. Your
ownership of the shares will be recorded by U.S. Clearing and reflected in the
account statements provided to you by Quick & Reilly.

HOW TO SELL SHARES
You can sell your Fund shares by 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 anyone. 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. You will continue to receive the daily dividends declared on Fund
shares to be sold until the day that the check is presented for payment.

U.S. Clearing is responsible for sending your order to Galaxy's distributor
and for crediting your account with the proceeds. Galaxy doesn't charge a fee
for wiring sale proceeds to U.S. Clearing, but U.S. Clearing may charge your
account for services in connection with the sale of Fund shares. Contact your
Quick & Reilly Personal Broker for more information.

OTHER TRANSACTION POLICIES
Galaxy may refuse any order to buy shares. Galaxy doesn't issue a certificate
when you buy shares but it does keep a record of shares issued to investors.

Payment for shares of a Fund in the amount of $1,000,000 or more may be made, at
the discretion of the Fund, in the form of securities that are permissible
investments for the Fund. See the SAI or contact your Quick & Reilly Personal
Broker for more information.

Galaxy normally pays you cash when you sell your shares, but it has the right to
deliver securities owned by a Fund instead of cash. When you sell these
securities, you'll pay brokerage charges.

Sales proceeds are normally sent to your Quick & Reilly Personal Broker within
three business days but Galaxy reserves the right to send sales proceeds within
seven business days if sending proceeds earlier could adversely affect a Fund.

Galaxy reserves the right to vary or waive any minimum investment requirement.

- -12- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

DISTRIBUTION AND SHAREHOLDER SERVICE FEES
Galaxy has adopted a plan under Rule 12b-1 that allows each Fund to pay fees for
selling and distributing shares and for services provided to shareholders. Each
Fund can pay distribution and shareholder service (12b-1) fees at an annual rate
of up to 1.00% of each Fund's average daily net assets. The Galaxy Prime
Reserves does not intend to pay more than 0.45%, and the Galaxy Government
Reserves and Galaxy Tax-Exempt Reserves do not intend to pay more than 0.40%, of
average daily net assets in distribution and shareholder service (12b-1) fees
during the current fiscal year. Because 12b-1 fees are paid on an ongoing basis,
over time they increase the cost of your investment and may cost more than
paying other sales charges.

GALAXY MONEY MARKET PORTFOLIOS -13-
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund declares and pays dividends from net investment income daily. Although
the Funds do not expect to realize net long-term capital gains, any capital
gains realized will be distributed no less frequently than annually. Dividends
and distributions will be reinvested in additional shares of a Fund. The
crediting and payment of dividends to your account will be in accordance with
the procedures governing your account at Quick & Reilly.

GALAXY PRIME RESERVES AND GALAXY GOVERNMENT RESERVES
Distributions by these Funds will generally be taxable to shareholders. Each of
these Funds expects that all, or substantially all, of its distributions will
consist of ordinary income. You will be subject to income tax on these
distributions. The one major exception to these tax principles is that
distributions on shares held by an IRA (or other tax-qualified plan) will not be
currently taxable.

GALAXY TAX-EXEMPT RESERVES
Distributions by this Fund will generally consist of dividends derived from
interest earned on exempt securities, and these "exempt-interest dividends" will
be exempt income for shareholders for federal income tax purposes. It is
possible, depending upon the Fund's investments, that a portion of the Fund's
distributions could be taxable to shareholders as ordinary income or capital
gains, but the Fund does not expect that this will be the case.

Interest on indebtedness incurred by a shareholder to purchase or carry shares
of this Fund generally will not be deductible for federal income tax purposes.

You should note that a portion of the exempt-interest dividends paid by the Fund
may constitute an item of tax preference for purposes of determining federal
alternative minimum tax liability. Exempt-interest dividends will also be
considered along with other adjusted gross income in determining whether any
Social Security or railroad retirement payments received by you are subject to
federal income taxes.

ALL FUNDS
Taxable dividends paid in January may be taxable as if they had been paid the
previous December. Each year you'll receive in the mail federal tax information
on distributions paid by the Funds.

OTHER STATE AND LOCAL TAX MATTERS
Generally, shareholders may also be subject to state and local taxes on
distributions and redemptions. State income taxes may not apply however to the
portions of each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities or on securities of a particular state, or
localities within a state.

- -14- GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

FINANCIAL HIGHLIGHTS
The financial highlights tables shown below will help you understand the
financial performance for the Funds for the period from September 22, 1998, when
each Fund began operations, through July 31, 1999. Certain information reflects
the financial performance of a single share of each Fund. The total returns in
the tables represent the rate that an investor would have earned on an
investment in each Fund, assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, independent
auditors, whose report, along with the Funds' financial statements, are included
in the Funds' Annual Report and are incorporated by reference into the SAI. The
Annual Report and SAI are available free of charge upon request.

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

<TABLE>
<CAPTION>
GALAXY GALAXY GALAXY
PRIME GOVERNMENT TAX-EXEMPT
RESERVES RESERVES RESERVES
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 31, 1999(1) JULY 31, 1999(1) JULY 31, 1999(1)
- ----------------------------------------------------------- ---------------- ---------------- ----------------
- ----------------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
........................................................... ................ ................ ................
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.03 0.02
........................................................ ................ ................ ................
LESS DIVIDENDS:
Dividends from net investment income (0.04) (0.03) (0.02)
........................................................ ................ ................ ................
Net increase (decrease) in net asset value -- -- --
........................................................ ................ ................ ................
Net Asset Value, End of Period $1.00 $1.00 $1.00
- ----------------------------------------------------------- ---------------- ---------------- ----------------
- ----------------------------------------------------------- ---------------- ---------------- ----------------
Total Return 3.59%(2) 3.49%(2) 1.82%(2)

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $4,250,399 $156,853 $177,840
........................................................ ................ ................ ................
RATIOS TO AVERAGE NET ASSETS:
Net investment income 4.10%(3) 4.00%(3) 2.09%(3)
........................................................ ................ ................ ................
Operating expenses 0.96%(3) 0.99%(3) 0.99%(3)
........................................................ ................ ................ ................
</TABLE>

(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.

GALAXY MONEY MARKET PORTFOLIOS -15-

<PAGE>

WHERE TO FIND MORE INFORMATION

You'll find more information about the Funds in the following documents:

ANNUAL AND SEMI-ANNUAL REPORTS
Galaxy's annual and semi-annual reports contain more information about each
Fund.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains detailed information about the Funds and their policies. By
law, it's incorporated by reference into (considered to be part of) this
prospectus.

You can get a free copy of these documents, request other information about the
Funds and make shareholder inquiries by contacting your Quick & Reilly Personal
Broker or by writing to:

The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520

You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.

Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090.

Reports and other information about the Funds are also available on the
EDGAR Database on the SEC's website at http://www.sec.gov. Copies of this
information may also be obtained, after paying a duplicating fee, by
electronic request to the SEC's e-mail address at [email protected].

Galaxy's Investment Company Act File No. is 811-4636.

<PAGE>

MONEY MARKET PORTFOLIOS

THE GALAXY FUND

PROSPECTUS
November 27, 1999

Galaxy Prime Reserves

Galaxy Government Reserves

Galaxy Tax-Exempt Reserves

U.S. CLEARING-SM-
A DIVISION OF FLEET SECURITIES, INC.
MEMBER NEW YORK STOCK
EXCHANGE, INC.
MEMBER SIPC

QRPROUSMM FLT1 11/27/99

<PAGE>

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
1 RISK/RETURN SUMMARY

1 Introduction

2 Galaxy Prime Reserves

4 Galaxy Government Reserves

6 Galaxy Tax-Exempt Reserves

8 Additional information about risk

9 Investor guidelines

10 FUND MANAGEMENT

11 HOW TO INVEST IN THE FUNDS

11 Buying and selling shares

11 HOW TO BUY SHARES

12 HOW TO SELL SHARES

12 OTHER TRANSACTION POLICIES

13 Distribution and shareholder service fees

14 DIVIDENDS, DISTRIBUTIONS AND TAXES

15 FINANCIAL HIGHLIGHTS
</TABLE>
<PAGE>

RISK/RETURN SUMMARY

INTRODUCTION

This prospectus describes the Galaxy Prime Reserves, Galaxy Government
Reserves and Galaxy Tax-Exempt Reserves (the "Funds"), three money market
portfolios offered by The Galaxy Fund. The Funds invest primarily in
short-term debt obligations, commonly known as money market instruments, that
are determined by the Funds' investment adviser to carry very little risk.
Money market instruments purchased by the Funds must meet strict requirements
as to investment quality, maturity and diversification. The Funds generally
don't invest in securities with remaining maturities of more than 397 days
(subject to certain exceptions) and the average maturity of all securities
held by a particular Fund must be 90 days or less. Each Fund tries to
maintain its share price at $1.00 to protect your investment from loss.

Shares of the Funds 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").

On the following pages, you'll find important information about each Fund
including:

- - the Fund's investment objective (sometimes called the Fund's goal) and the
main investment strategies used by the Fund's investment adviser in trying to
achieve that objective
- - the main risks associated with an investment in the Fund
- - the fees and expenses that you will pay as an investor in the Fund

WHICH FUND IS RIGHT FOR YOU?

Not all mutual funds are right for all investors. Your investment goals and
tolerance for risk will determine which Fund is right for you. On page 9,
you'll find a table which sets forth general guidelines to help you decide which
of the Funds is best suited to you.

THE FUNDS' INVESTMENT ADVISER

Fleet Investment Advisors Inc. (the "Adviser") is the investment adviser for
all of these Funds. The Adviser, an indirect wholly-owned subsidiary of
FleetBoston Corporation, was established in 1984 and has its main office at
75 State Street, Boston, Massachusetts 02109. The Adviser also provides
investment management and advisory services to individual and institutional
clients and manages the other Galaxy investment portfolios. As of June 30,
1999, the Adviser managed over $66 billion in assets.

[Sidenote:]
MATURITY
The maturity of a security is the date when the issuer must repay the security's
entire principal amount to an investor, such as a Fund.

GALAXY MONEY MARKET PORTFOLIOS 1
<PAGE>

GALAXY PRIME RESERVES

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund invests in a diversified portfolio of money market instruments,
including commercial paper, notes and bonds issued by U.S. corporations,
obligations issued by the U.S. Government and its agencies and
instrumentalities, and obligations issued by U.S. and foreign banks, such as
certificates of deposit. The Fund also invests in repurchase agreements issued
by financial institutions such as banks and broker-dealers.

THE MAIN RISKS OF INVESTING IN THE FUND

While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the other
party may not fulfill its obligations under the agreement. This could cause
the value of your investment to decline.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

2 GALAXY MONEY MARKET PORTFOLIOS

<PAGE>

GALAXY PRIME RESERVES

HOW THE FUND HAS PERFORMED

The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

FEES AND EXPENSES OF THE FUND

There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime Reserves 0.36% 0.45% 0.15% 0.96%
- ----------------------------------------------------------------------------------------------------
</TABLE>

EXAMPLE

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime Reserves $98 $306 $531 $1,178
- ----------------------------------------------------------------------------------------------------
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS 3
<PAGE>

GALAXY GOVERNMENT RESERVES

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund invests primarily in U.S. Government obligations, including U.S.
Treasury obligations and obligations of U.S. Government agencies and
instrumentalities. The Fund also invests in repurchase agreements backed by
these obligations.

THE MAIN RISKS OF INVESTING IN THE FUND

While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - CREDIT RISK - Although U.S. Government securities have historically involved
little credit risk, if an issuer fails to pay interest or repay principal,
the value of your investment could decline.

- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the other
party may not fulfill its obligations under the agreement. This could cause
the value of your investment to decline.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

4 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

GALAXY GOVERNMENT RESERVES

HOW THE FUND HAS PERFORMED

The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

FEES AND EXPENSES OF THE FUND

There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Government Reserves 0.40% 0.40% 0.19% 0.99%
- --------------------------------------------------------------------------------------------------------
</TABLE>

EXAMPLE

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Government Reserves $101 $315 $547 $1,213
- ----------------------------------------------------------------------------------------------------
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS 5
<PAGE>

GALAXY TAX-EXEMPT RESERVES

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current interest income exempt from federal
income tax as is consistent with stability of principal.

THE FUND'S MAIN INVESTMENT STRATEGIES

The Fund normally invests at least 80% of its net assets in municipal
securities, which are securities issued by state and local governments and other
political or public bodies or agencies and that pay interest which is exempt
from regular federal income tax. Under normal conditions, the Fund will invest
no more than 20% of its net assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.

THE MAIN RISKS OF INVESTING IN THE FUND

While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:

- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.

- - CREDIT RISK- Although credit risk is very low because the Fund only invests
in high quality obligations, if an issuer fails to pay interest or repay
principal, the value of your investment could decline. The ability of a state
or local government issuer to make payments can be affected by many factors,
including economic conditions, the flow of tax revenues and changes in the
level of federal, state or local aid.

- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.

6 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

GALAXY TAX-EXEMPT RESERVES

HOW THE FUND HAS PERFORMED

The Fund began operations in September of 1998 and has a performance record of
less than a full calendar year.

FEES AND EXPENSES OF THE FUND

There are no sales charges when you buy or sell shares of the Fund. The
following table shows the fees and expenses you may pay when you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)

DISTRIBUTION AND TOTAL FUND
MANAGEMENT SERVICE (12b-1) OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Tax-Exempt Reserves 0.40% 0.40% 0.19% 0.99%
- ---------------------------------------------------------------------------------------------------------
</TABLE>

EXAMPLE

Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Tax-Exempt Reserves $101 $315 $547 $1,213
- ---------------------------------------------------------------------------------------------------------
</TABLE>

GALAXY MONEY MARKET PORTFOLIOS 7
<PAGE>

ADDITIONAL INFORMATION ABOUT RISK

The main risks associated with an investment in each of the Funds have been
described above. The following supplements that discussion.

TEMPORARY DEFENSIVE POSITIONS

Each Fund may temporarily hold up to 100% of its total assets in investments
that aren't part of its main investment strategy during unfavorable market
conditions. These investments may include cash (which will not earn any
income) and, in the case of the Galaxy Tax-Exempt Reserves, short-term
taxable investments, such as money market instruments and debt securities
issued or guaranteed by the U.S. Government or its agencies, in excess of 20%
of the Fund's net assets. This strategy could prevent a Fund from achieving
its investment objective.

OTHER TYPES OF INVESTMENTS

This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be main
investments strategies of the Funds - and the risks involved - are described
in detail in the Statement of Additional Information (SAI) which is referred
to on the back cover of this prospectus.

YEAR 2000 RISKS

As with other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Adviser and the Funds' other service providers
don't properly process and calculate date-related information and data from
and after January 1, 2000. This is commonly known as the "Year 2000" or "Y2K"
problem. The Adviser is taking steps to address the Y2K problem with respect
to the computer systems that it uses and to obtain assurances that comparable
steps are being taken by the Funds' 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 the Funds. The Y2K problem could have a
negative impact on the issuers of securities in which the Funds invest, which
could hurt the Funds' investment returns.

8 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

INVESTOR GUIDELINES

The table below provides information as to which type of investor might want to
invest in each of the Funds. It's meant as a general guide only. TAX-EXEMPT
FUNDS ARE GENERALLY NOT APPROPRIATE INVESTMENTS FOR TAX-DEFERRED RETIREMENT
ACCOUNTS, SUCH AS IRAs, BECAUSE THEIR RETURNS BEFORE TAXES ARE GENERALLY LOWER
THAN THOSE OF TAXABLE FUNDS. Consult your Account Executive for help in deciding
which Fund is right for you.

GALAXY FUND FOR INVESTORS WHO WANT...
- --------------------------------------------------------------------------------
GALAXY PRIME RESERVES a flexible and convenient way to manage
cash while earning money market returns
- --------------------------------------------------------------------------------
GALAXY GOVERNMENT RESERVES a way to earn money market returns with
the extra margin of safety associated with
U.S. Government obligations
- --------------------------------------------------------------------------------
GALAXY TAX-EXEMPT RESERVES a way to earn money market returns that
are free from federal income tax
- --------------------------------------------------------------------------------

GALAXY MONEY MARKET PORTFOLIOS 9
<PAGE>

FUND MANAGEMENT

ADVISER

The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities, and maintains related records.

ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES

The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.

MANAGEMENT FEES

The Funds began operations during the last fiscal year and the management fees
set forth below are those which are currently in effect.

<TABLE>
<CAPTION>
MANAGEMENT FEE
FUND AS A % OF AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Galaxy Prime Reserves 0.36%
- --------------------------------------------------------------------------------
Galaxy Government Reserves 0.40%
- --------------------------------------------------------------------------------
Galaxy Tax-Exempt Reserves 0.40%
- --------------------------------------------------------------------------------
</TABLE>

10 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

HOW TO INVEST IN THE FUNDS

BUYING AND SELLING SHARES

You can buy and sell shares of the Funds on any business day. A business day is
any day that Galaxy's distributor, Galaxy's custodian and U.S. Clearing are open
for business.

The Funds' assets are valued at amortized cost, which is approximately equal to
market value.

HOW TO BUY 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.

ADDITIONAL INVESTMENTS
You can make additional investments 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 identify the appropriate Fund(s)
and indicate your brokerage account number on your check or draft.

[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
There is no minimum initial investment to open a Fund account. The minimum for
additional investments in an existing Fund account is $100.

GALAXY MONEY MARKET PORTFOLIOS 11
<PAGE>

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.

U.S. Clearing is responsible for sending your order to Galaxy's distributor and
for wiring payment to Galaxy's custodian. U.S. Clearing will usually hold your
shares of record in its name and receive all confirmations of purchases and
sales. Your ownership of the shares will be recorded by U.S. Clearing and
reflected in the account statements provided to you.

HOW TO SELL SHARES

You can sell your Fund shares by 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 anyone. 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. You will continue to receive the daily dividends declared on
Fund shares to be sold until the day that the check is presented for payment.

U.S. Clearing is responsible for sending your order to Galaxy's distributor and
for crediting your account with the proceeds. Galaxy doesn't charge a fee for
wiring sale proceeds to U.S. Clearing, but U.S. Clearing may charge your account
for services in connection with the sale of Fund shares. Contact your Account
Executive for more information.

OTHER TRANSACTION POLICIES

Galaxy may refuse any order to buy shares. Galaxy doesn't issue a certificate
when you buy shares but it does keep a record of shares issued to investors.

Galaxy normally pays you cash when you sell your shares, but it has the right to
deliver securities owned by a Fund instead of cash. When you sell these
securities, you'll pay brokerage charges.

12 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

Sales proceeds are normally sent to U.S. Clearing within three business days but
Galaxy reserves the right to send sales proceeds within seven business days if
sending proceeds earlier could adversely affect a Fund.

Galaxy reserves the right to vary or waive any minimum investment requirement.

DISTRIBUTION AND SHAREHOLDER SERVICE FEES

Galaxy has adopted a plan under Rule 12b-1 that allows each Fund to pay fees for
selling and distributing shares and for services provided to shareholders. Each
Fund can pay distribution and shareholder service (12b-1) fees at an annual rate
of up to 1.00% of each Fund's average daily net assets. The Galaxy Prime
Reserves does not intend to pay more than 0.45%, and the Galaxy Government
Reserves and Galaxy Tax-Exempt Reserves do not intend to pay more than 0.40%, of
average daily net assets in distribution and shareholder service (12b-1) fees
during the current fiscal year. Because 12b-1 fees are paid on an ongoing basis,
over time they increase the cost of your investment and may cost more than
paying other sales charges.

GALAXY MONEY MARKET PORTFOLIOS 13
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

GALAXY PRIME RESERVES AND GALAXY GOVERNMENT RESERVES

Distributions by these Funds will generally be taxable to shareholders. Each of
these Funds expects that all, or substantially all, of its distributions will
consist of ordinary income. You will be subject to income tax on these
distributions. The one major exception to these tax principles is that
distributions on shares held by an IRA (or other tax-qualified plan) will not be
currently taxable.

GALAXY TAX-EXEMPT RESERVES

Distributions by this Fund will generally consist of dividends derived from
interest earned on exempt securities, and these "exempt-interest dividends" will
be exempt income for shareholders for federal income tax purposes. It is
possible, depending upon the Fund's investments, that a portion of the Fund's
distributions could be taxable to shareholders as ordinary income or capital
gains, but the Fund does not expect that this will be the case.

Interest on indebtedness incurred by a shareholder to purchase or carry shares
of this Fund generally will not be deductible for federal income tax purposes.

ALL FUNDS

Taxable dividends paid in January may be taxable as if they had been paid the
previous December. Each year you'll receive in the mail federal tax information
on distributions paid by the Funds.

OTHER STATE AND LOCAL TAX MATTERS

Generally, shareholders may also be subject to state and local taxes on
distributions and redemptions. State income taxes may not apply however to
the portions of each Fund's distributions, if any, that are attributable to
interest on U.S. Government securities or on securities of a particular
state, or localities within a state.

14 GALAXY MONEY MARKET PORTFOLIOS
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables shown below will help you understand the
financial performance for the Funds for the period from September 22, 1998, when
each Fund began operations, through July 31, 1999. Certain information reflects
the financial performance of a single share of each Fund. The total returns in
the tables represent the rate that an investor would have earned on an
investment in each Fund, assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, independent
auditors, whose report, along with the Funds' financial statements, are included
in the Funds' Annual Report and are incorporated by reference into the SAI. The
Annual Report and SAI are available free of charge upon request.

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
GALAXY GALAXY GALAXY
PRIME GOVERNMENT TAX-EXEMPT
RESERVES RESERVES RESERVES
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 31, 1999(1) JULY 31, 1999(1) JULY 31, 1999(1)
- ---------------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
- ---------------------------------------------------------- ---------------- ---------------- ----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.03 0.02
- ---------------------------------------------------------- ---------------- ---------------- ----------------
LESS DIVIDENDS:
Dividends from net investment income (0.04) (0.03) (0.02)
- ---------------------------------------------------------- ---------------- ---------------- ----------------
Net increase (decrease) in net asset value -- -- --
Net Asset Value, End of Period $1.00 $1.00 $1.00
- ---------------------------------------------------------- ---------------- ---------------- ----------------
- ---------------------------------------------------------- ---------------- ---------------- ----------------
Total Return 3.59%(2) 3.49%(2) 1.82%(2)

RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) $4,250,399 $156,853 $177,840
- ---------------------------------------------------------- ---------------- ---------------- ----------------

RATIOS TO AVERAGE NET ASSETS:
Net investment income 4.10%(3) 4.00%(3) 2.09%(3)
- ---------------------------------------------------------- ---------------- ---------------- ----------------

Operating expenses 0.96%(3) 0.99%(3) 0.99%(3)
- ---------------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>

(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.

GALAXY MONEY MARKET PORTFOLIOS 15

<PAGE>

WHERE TO FIND MORE INFORMATION

You'll find more information about the Funds in the following documents:

ANNUAL AND SEMI-ANNUAL REPORTS
Galaxy's annual and semi-annual reports contain more information about each
Fund.

You can get a free copy of these documents, request other information about
the Funds and make shareholder inquiries by contacting your Account
Executive, or by writing to:

The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520.

Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090.

Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's website at http://www.sec.gov. Copies of this
information may also be obtained, after paying a duplicating fee, by
electronic request to the SEC's e-mail address at [email protected].

Galaxy's Investment Company Act File No. is 811-4636.
<PAGE>

THE GALAXY FUND
STATEMENT OF ADDITIONAL INFORMATION

November 27, 1999 (as amended December 1, 1999)

GALAXY PRIME RESERVES
GALAXY GOVERNMENT RESERVES
GALAXY TAX-EXEMPT RESERVES

This Statement of Additional Information is not a prospectus. The
prospectuses for the Funds dated November 27, 1999, as they may be supplemented
or revised from time to time (the "Prospectuses"), as well as the Funds' Annual
Report to Shareholders dated July 31, 1999 (the "Annual Report"), may be
obtained, without charge, by writing:

The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520

or by calling 1-877-BUY-GALAXY (1-877-289-4252)

The financial statements included in the Annual Report and the report
thereon of Ernst & Young LLP, The Galaxy Fund's independent auditors, are
incorporated by reference into this Statement of Additional Information.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C>
GENERAL INFORMATION.............................................................. 1
DESCRIPTION OF GALAXY AND ITS SHARES............................................. 1
INVESTMENT STRATEGIES, POLICIES AND RISKS........................................ 3
Prime Reserves.......................................................... 3
Government Reserves..................................................... 3
Tax-Exempt Reserves..................................................... 4
Other Investment Policies and Risk Considerations....................... 4
Quality Requirements.................................................... 4
U.S. Government Obligations............................................. 5
Money Market Instruments................................................ 6
Municipal Securities.................................................... 7
Stand-By Commitments.................................................... 9
Tender Option Bonds..................................................... 10
Variable and Floating Rate Instruments.................................. 10
Repurchase and Reverse Repurchase Agreements............................ 11
When-Issued and Delayed Settlement Transactions......................... 12
Securities Lending - Prime Reserves and Government Reserves............. 13
Guaranteed Investment Contracts - Prime Reserves........................ 13
Asset-Backed Securities - Prime Reserves................................ 14
Investment Company Securities........................................... 14
Portfolio Securities Generally.......................................... 15
INVESTMENT LIMITATIONS........................................................... 15
NET ASSET VALUE.................................................................. 18
DIVIDENDS........................................................................ 19
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................... 20
Special Procedures for In-Kind Payments................................. 20
TAXES............................................................................ 20
State and Local......................................................... 22
Miscellaneous........................................................... 22
TRUSTEES AND OFFICERS............................................................ 23
Shareholder and Trustee Liability....................................... 26
INVESTMENT ADVISER............................................................... 27
Authority to Act as Investment Adviser.................................. 28
ADMINISTRATOR.................................................................... 28
CUSTODIAN AND TRANSFER AGENT..................................................... 29
EXPENSES......................................................................... 30
PORTFOLIO TRANSACTIONS........................................................... 30
DISTRIBUTION AND SERVICES PLAN................................................... 32
DISTRIBUTOR...................................................................... 34
AUDITORS......................................................................... 34
COUNSEL.......................................................................... 35
</TABLE>

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TABLE OF CONTENTS
(continued)
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PERFORMANCE AND YIELD INFORMATION................................................ 35
Performance Reporting................................................... 36
MISCELLANEOUS.................................................................... 37
FINANCIAL STATEMENTS............................................................. 37
APPENDIX A....................................................................... A-1
</TABLE>

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GENERAL INFORMATION

This Statement of Additional Information should be read in conjunction with
a current Prospectus. This Statement of Additional Information relates to the
Prospectuses for the Prime Reserves, Government Reserves and Tax-Exempt Reserves
(the "Funds"), three money market portfolios offered by The Galaxy Fund. No
investment in the Funds should be made without reading a Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEETBOSTON CORPORATION 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. ALTHOUGH THE FUNDS SEEK TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUNDS.

DESCRIPTION OF GALAXY AND ITS SHARES

The Galaxy Fund ("Galaxy") is an open-end management investment company
currently offering shares of beneficial interest in twenty-nine investment
portfolios: Money Market Fund, Government Fund, U.S. Treasury Fund, Tax-Exempt
Fund, Connecticut Municipal Money Market Fund, Massachusetts Municipal Money
Market Fund, Institutional Government Money Market Fund, Prime Reserves,
Government Reserves, Tax-Exempt Reserves, Equity Value Fund, Equity Growth Fund,
Equity Income Fund, International Equity Fund, Small Company Equity Fund, Asset
Allocation Fund, Small Cap Value Fund, Growth and Income Fund, 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. Galaxy
is also authorized to issue shares of beneficial interest in an additional
investment portfolio, the MidCap Equity Fund. As of the date of this Statement
of Additional Information, however, the MidCap Equity Fund had not commenced
investment operations.

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 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 an
unlimited number of shares in 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
Investment Company Act of 1940, as amended (the "1940 Act").

<PAGE>

Each share of Galaxy (irrespective of series designation) has a par value
of $.001 per share, represents an equal proportionate interest in the related
investment portfolio with other shares of the same class (irrespective of series
designation), and is entitled to such dividends and distributions out of the
income earned on the assets belonging to such investment portfolio as are
declared in the discretion of Galaxy's Board of Trustees.

Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectuses, shares will be fully paid and
non-assessable.

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
portfolio affected by the matter. A particular portfolio is deemed to be
affected by a matter unless it is clear that the interests of each portfolio in
the matter are substantially identical or that the matter does not affect any
interest of the portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in an investment objective or a fundamental
investment policy would be effectively acted upon with respect to a portfolio
only if approved by a majority of the outstanding shares of such portfolio.
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 a
proportionate fractional vote for each fractional share held, and will vote in
the aggregate and not by class or series, except as otherwise expressly required
by law or when the Board of Trustees determines that the matter to be voted on
affects only the interests of shareholders of a particular class or series.
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.

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. 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 portfolio 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

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<PAGE>

the portfolio 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 portfolio's assets into money and, in connection therewith, to cause
all outstanding shares of the portfolio involved to be redeemed at their net
asset value; or (c) combine the assets belonging to a portfolio with the assets
belonging to another portfolio of Galaxy and, in connection therewith, to cause
all outstanding shares of any portfolio 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 portfolio's investment 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 portfolio's shareholders at
least 30 days prior thereto.

INVESTMENT STRATEGIES, POLICIES AND RISKS

Fleet Investment Advisors Inc. ("Fleet"), the Fund's 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, as
described in the Prospectuses, 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. The following investment strategies, policies and risks
supplement those set forth in the Funds' Prospectuses.

PRIME RESERVES

Instruments in which the Prime Reserves invests 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 "Other Investment Policies and
Risk Considerations" below.

GOVERNMENT RESERVES

Instruments in which the Government Reserves invests have remaining
maturities of 397 days or less (except for certain variable and floating rate
notes and securities underlying certain repurchase agreements). See "Other
Investment Policies and Risk Considerations" below.

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<PAGE>

TAX-EXEMPT RESERVES

Instruments in which the Tax-Exempt Reserves invests 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 "Other Investment
Policies and Risk Considerations" below.

Municipal securities, as that term is used in this Statement of Additional
Information, are 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. 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. The Fund's investments in private activity bonds
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.

Although the Fund does not presently intend to do so on a regular basis, it
may invest more than 25% of its total 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.

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

Investment methods described in the Prospectuses and this Statement of
Additional Information are among those which one or more of the Funds have the
power to utilize. Some may be employed on a regular basis; others may not be
used at all. Accordingly, reference to any particular method or technique
carries no implication that it will be utilized or, if it is, that it will be
successful.

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

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<PAGE>

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 securities, 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 will be made in accordance with
procedures established by the Board of Trustees. Generally, if a security has
not been rated by a Rating Agency, Fleet will acquire the security if it
determines that the security is of comparable quality to securities that have
received the requisite ratings. Fleet considers an issuer's long-term bond
ratings and other relevant information in its evaluation of unrated short-term
securities.

U.S. GOVERNMENT OBLIGATIONS

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
Corporation, Federal Intermediate Credit Banks, Resolution Trust Corporation and
Maritime Administration.

U.S. Treasury securities differ only in their interest rates, maturities
and time of issuance: Treasury Bills have initial maturities of one year or
less; Treasury Notes have initial maturities of one to ten years; and Treasury
Bonds generally have initial maturities of more than 10 years. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as 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.

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<PAGE>

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. For the purposes of the Prime Reserves' 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.

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 who 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

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<PAGE>

adequate trading market exists for such securities. The Prime Reserves and
Tax-Exempt Reserves may also purchase Rule 144A securities. See "Investment
Limitations" below.

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 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 Tax-Exempt Reserves' 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 a 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 a Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit a Fund to tender the security at the
time of each interest rate adjustment or at other fixed intervals. The
Tax-Exempt Reserves 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. Variable interest rates generally
reduce changes in the market value of municipal securities from their original
purchase prices. Accordingly, as interest rates decrease or increase, the
potential

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<PAGE>

for capital appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations. The terms of these variable rate
demand instruments require payment of principal and accrued interest from the
issuer of the municipal securities, the issuer of the participation interest or
a guarantor of either issuer.

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 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 affect 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.

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 Rating Agency, such as
Moody's, S&P and Fitch IBCA described in Appendix A hereto, represent such
Rating Agency's opinion as to the quality of the 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 multistate
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Fund's Prospectuses. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer." An issuer's obligations under its municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the federal
Bankruptcy Code and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment 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 notes, bond anticipation notes,
revenue anticipation notes, tax-

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<PAGE>

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 Prospectuses for the Fund
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. 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 its portfolio. 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.

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. 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 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.

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<PAGE>

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, liabilities, contingent claims and other
relevant financial information.

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 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

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<PAGE>

market. Substantial holdings of variable and floating rate instruments could
reduce portfolio liquidity.

If a variable or floating rate instrument is not rated, Fleet 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.

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 the Funds' 10%
limit described in Investment Limitations No. 9 under "Investment Limitations"
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' investments in repurchase agreements will be,
under normal market conditions, subject to such Fund's 20% overall limit on
taxable obligations.

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<PAGE>

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 1940 Act.

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.

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.

WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS

Each Fund may purchase securities on a "when-issued" or "delayed
settlement" basis. When-issued transactions, which 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.

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 the 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

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<PAGE>

securities on a when-issued or delayed settlement basis exceeded 25% of the
value of its total 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.

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 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.

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.

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.

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<PAGE>

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."

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.

INVESTMENT COMPANY SECURITIES

Each Fund may invest in securities issued by other 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 municipal
securities) and that meet the applicable quality requirements described above
under "Quality Requirements" and (b) determine their net asset

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<PAGE>

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 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.

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
("SEC").

INVESTMENT LIMITATIONS

In addition to each Fund's investment objective as stated in its
Prospectuses, 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").

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

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<PAGE>

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.

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 borrowing; or mortgage, pledge, or hypothecate any
assets except in connection with any such borrowing and in amounts not
in excess of the lesser of the dollar amounts borrowed or 10% of the
value of a Fund's total assets at the time of such borrowing. 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.

5. 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.

6. 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 the Fund's investment objective,
policies and limitations may be deemed to be underwriting.

7. 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.

8. Purchase or sell commodities or commodity contracts or invest in oil,
gas or other mineral exploration or development programs or mineral
leases.

9. Invest in or sell put options, call options, straddles, spreads, or
any combination thereof.

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<PAGE>

10. Invest in companies for the purpose of exercising management or
control.

In addition, the Prime Reserves and Government Reserves may not:

11. 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:

12. 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. With respect to Investment Limitation No. 4 above, the Board of
Trustees of Galaxy will determine whether a later increase in the percentage
limitation

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<PAGE>

with respect to illiquid securities adversely affects the level of liquidity
being maintained by a Fund and will consider whether the Fund should reduce its
holdings of illiquid securities in order to maintain adequate liquidity.

Each Fund may follow non-fundamental operating policies that are more
restrictive than its fundamental investment limitations, as set forth in the
Prospectuses and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the 1940 Act. In particular, 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 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 the 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 securities described above, 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.

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 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 of these Funds can be
expected to vary inversely

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<PAGE>

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
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 he or she holds
shares of a Fund and in its receiving upon redemption a price per share lower
than that which he or she paid.

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<PAGE>

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares in each Fund are sold on a continuous basis by Galaxy's
distributor, Provident Distributors, Inc. ("PDI"). PDI is a registered
broker/dealer with its principal offices located at Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428.

On a Business Day when the New York Stock Exchange (the "Exchange") closes
early due to a partial holiday or otherwise, Galaxy will advance the time at
which purchase and redemption orders must be received in order to be processed
on that Business Day.

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 SEC, exists making
disposal of a Fund's investments or determination of its net asset value not
reasonably practicable; (b) the Exchange is closed (other than customary
weekend and holiday closings); or (c) the SEC by order has permitted such
suspension.

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. However, Galaxy has filed an election with the Securities
and Exchange Commission ("SEC") to pay in cash all redemptions requested by a
shareholder of record limited in amount during any 90-day period to the
lesser of $250,000 or 1% of the net assets of a Fund at the beginning of such
period. Such commitment cannot be revoked without the prior approval of the
SEC.

SPECIAL PROCEDURES FOR 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 permissible investments for
the Fund as described in the Prospectuses. For further information about this
form of payment, contact your broker-dealer representative. In connection
with an in-kind securities payment, 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 to 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.

TAXES

Each Fund qualified during its last taxable year and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and to distribute out its income
to shareholders each year, so that each Fund itself generally will be relieved
of federal income and excise taxes. If a Fund were to fail to so qualify: (1)
the Fund would be taxed at regular corporate rates without any deduction for
distributions to shareholders; and (2) shareholders would be taxed as if they
received ordinary dividends, although corporate shareholders could be eligible
for the dividends received deduction.

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<PAGE>

A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to distribute with respect to each calendar year at least 98% of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses) for the one year period ending October 31 of such calendar
year. Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and any capital gain net income prior to the end
of each calendar year to avoid liability for this excise tax.

The Funds will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or gross sale proceeds paid to
any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to withholding by the Internal Revenue Service for
failure to properly include on his or her return payments of taxable interest or
dividends, or (iii) has failed to certify to the Funds that he or she is not
subject to back up withholding when required to do so or that he or she is an
"exempt recipient."

A taxable gain or loss may be realized by a shareholder upon redemption,
transfer or exchange of shares of a Fund depending upon the tax basis of such
shares and their price at the time of redemption, transfer or exchange.

TAX-EXEMPT RESERVES. It is the policy of the Tax-Exempt Reserves 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 a 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.

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.

An investment in the Tax-Exempt Reserves is not intended to constitute a
balanced investment program. Shares of the Funds 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. In addition, the Fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by "private activity bonds" or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who (i) regularly uses a part of such facilities in his or her trade or business
and whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, (ii) occupies more than 5% of the usable area of such
facilities or (iii) are persons for whom such facilities or a part thereof were
specifically constructed, reconstructed or acquired. "Related persons" include
certain related natural persons, affiliated corporations, a partnership and its
partners and an S corporation and its shareholders.

-21-
<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 shares of the
Tax-Exempt Reserves, 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-interest dividends received with respect to the
shares.

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.

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.

MISCELLANEOUS

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made each year.

-22-
<PAGE>
TRUSTEES AND OFFICERS

The business and affairs of the Funds are managed under the direction of
Galaxy's Board of Trustees in accordance with the laws of the Commonwealth of
Massachusetts and the Trust's Declaration of Trust. The trustees and executive
officers of Galaxy, their addresses, principal occupations during the past five
years, and other affiliations are as follows:

<TABLE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
- ---------------- ----------- ----------------------
<S> <C> <C>
Dwight E. Vicks, Jr. Chairman & President & Director, Vicks Lithograph &
Vicks Lithograph & Trustee Printing Corporation (book manufacturing
Printing Corporation and commercial printing); Director, Utica
Commercial Drive First Insurance Company; Trustee, Savings
P.O. Box 270 Bank of Utica; Director, Monitor Life
Yorkville, NY 13495 Insurance Company; Director, Commercial
Age 65 Travelers Mutual Insurance Company;
Trustee, The Galaxy VIP Fund; Trustee,
Galaxy Fund II.

John T. O'Neill President, Treasurer Executive Vice President and CFO, Hasbro,
Hasbro, Inc. & Trustee Inc. (toy and game manufacturer); Trustee,
1011 Newport Avenue The Galaxy VIP Fund; Trustee, Galaxy Fund
Pawtucket, RI 02862 II.
Age 54

Louis DeThomasis Trustee President, Saint Mary's College of
Saint Mary's College Minnesota; Director, Bright Day Travel,
of Minnesota Inc.; Trustee, Religious Communities Trust;
Winona, MN 55987 Trustee, The Galaxy VIP Fund; Trustee,
Age 58 Galaxy Fund II.

Donald B. Miller Trustee Chairman, Horizon Media, Inc. (broadcast
10725 Quail Covey Road services); Director/Trustee, Lexington
Boynton Beach, FL 33436 Funds; Chairman, Executive Committee,
Age 73 Compton International, Inc. (advertising
agency); Trustee, Keuka College; Trustee,
The Galaxy VIP Fund; Trustee, Galaxy Fund
II.
</TABLE>
-23-

<PAGE>

<TABLE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
- ---------------- ----------- ----------------------
<S> <C> <C>
James M. Seed Trustee Chairman and President, The Astra Projects,
The Astra Ventures, Inc. Incorporated (land development); President,
One Citizens Plaza The Astra Ventures, Incorporated
Providence, RI 02903 (previously, Buffinton Box Company -
Age 58 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 and
2468 Ohio Street Director, Acadia Management Company
Bangor, ME 04401 (investment services); Director, Essex
Age 68 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 Biddle &
One Logan Square Reath LLP, Philadelphia, Pennsylvania.
18th and Cherry Streets
Philadelphia, PA 19103-6996
Age 56

Jylanne Dunne Vice President Vice President, PFPC Inc.,
PFPC Inc. and Assistant 1990 to present.
4400 Computer Drive Treasurer
Westboro, MA 01581-5108
Age 39
</TABLE>

-24-
<PAGE>

<TABLE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
- ---------------- ----------- ----------------------
<S> <C> <C>
William Greilich Vice President Vice President, PFPC Inc.,
PFPC Inc. 1991-96; Vice President and Division
4400 Computer Drive Manager, PFPC Inc., 1996-present.
Westboro, MA 01581-5108
Age 45
</TABLE>

- -------------------------

(1) May be deemed to be an "interested person" within the definition set forth
in Section 2(a)(19) of the 1940 Act.

Effective May 28, 1999, each trustee receives an annual aggregate fee of
$45,000 for his services as a trustee of Galaxy, The Galaxy VIP Fund ("Galaxy
VIP") and Galaxy Fund II ("Galaxy II") (collectively, the "Trusts"), plus an
additional $3,250 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 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 May 28,
1999, (i) each trustee received an annual aggregate fee of $40,000 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 1, 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

-25-
<PAGE>

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 PFPC Inc.("PFPC"), Galaxy's administrator, 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 during the fiscal year ended July 31, 1999.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Pension or
Retirement Total Compensation
Benefits Accrued from Galaxy and Fund
Aggregate Compensation as Part of Fund Complex Paid to
Name of Person/position From Galaxy Expenses Trustees
----------------------- ----------- -------- --------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford S. Wellman $49,384 None $54,250
Trustee
- ------------------------------------------------------------------------------------------------------------
Dwight E. Vicks, Jr.
Chairman and Trustee $53,711 None $59,000
- ------------------------------------------------------------------------------------------------------------
Donald B. Miller**
Trustee $50,070 None $55,000
- ------------------------------------------------------------------------------------------------------------
Rev. Louis DeThomasis
Trustee $49,384 None $54,250
- ------------------------------------------------------------------------------------------------------------
John T. O'Neill
President, Treasurer $52,346 None $57,500
and Trustee
- ------------------------------------------------------------------------------------------------------------
James M. Seed**
Trustee $49,384 None $54,250
- ------------------------------------------------------------------------------------------------------------
</TABLE>

- ----------------

* The "Fund Complex" consists of Galaxy, The Galaxy VIP Fund and Galaxy Fund
II, which comprise a total of 43 separate portfolios.

** Deferred compensation (including interest) in the amounts of $66,955 and
$101,379 accrued during the Funds' fiscal year ended July 31, 1999 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

-26-
<PAGE>

personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and not
because of his or her acts or omissions outside such capacity or some other
reason. The Declaration of Trust also provides that Galaxy shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of Galaxy, and shall satisfy any judgment thereon. Thus, the risk of
shareholder liability is limited to circumstances in which Galaxy itself would
be unable to meet its obligations.

The Declaration of Trust states further that no trustee, officer or agent
of Galaxy shall be personally liable for or on account of any contract, debt,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of Galaxy; nor shall any trustee be personally liable to any person for
any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim against
the trustees or Galaxy shall look solely to the trust property for payment.

With the exceptions stated, the Declaration of Trust provides that a
trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a trustee, and that the Board of Trustees
shall indemnify representatives and employees of Galaxy to the same extent to
which they themselves are entitled to indemnification.

INVESTMENT ADVISER

Fleet serves as investment adviser to the Funds. In its advisory agreement,
Fleet has agreed to provide investment advisory services to the Funds as
described in the Prospectuses. 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" below.

For the services provided and expenses assumed, Fleet is entitled to
receive advisory fees, computed daily and paid monthly, at the annual rate of
0.40% of the first $750,000,000 of each Fund's average daily net assets, plus
0.35% of each Fund's average daily net assets in excess of $750,000,000.

During the period from September 22, 1998 (commencement of operations) to
July 31, 1999, Galaxy paid advisory fees of $11,806,913, $546,391 and $503,030
to Fleet for the Prime Reserves, Government Reserves and Tax-Exempt Reserves,
respectively.

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

-27-
<PAGE>

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 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 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.

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 its affiliates or banks generally from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of
customers. Fleet, the custodian and institutions which agree to provide
shareholder support services that are banks or bank affiliates are subject to
such banking laws and regulations. Should legislative, judicial or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Funds, Galaxy might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operation. It is anticipated, however, that any resulting change in
the Funds' method of operation would not affect a Fund's net asset value per
share or result in financial loss to any shareholder.

ADMINISTRATOR

PFPC (formerly known as First Data Investor Services Group, Inc.),
located at 4400 Computer Drive, Westboro, Massachusetts 01581-5108, serves as
the Funds' administrator. PFPC is a majority-owned subsidiary of PNC Bank
Corp.

PFPC generally assists the Funds in their administration and operation.
PFPC also serves as administrator to the other portfolios of Galaxy. For the
services provided to the Funds, PFPC is entitled to receive administration
fees based on the combined average daily net assets of the Funds and the other
portfolios offered by Galaxy, computed daily and paid monthly, at the
following annual rates:

-28-
<PAGE>

<TABLE>
<CAPTION>
COMBINED AVERAGE DAILY NET ASSETS ANNUAL RATE
--------------------------------- -----------
<S> <C>
Up to $2.5 billion.......................... 0.090%
From $2.5 to $5 billion..................... 0.085%
From $5 to $12 billion...................... 0.075%
From $12 to $15 billion..................... 0.065%
From $15 to $18 billion..................... 0.060%
Over $18 billion............................ 0.0575%
</TABLE>

In addition, PFPC also receives a separate annual fee from each Galaxy
portfolio for certain fund accounting services. From time to time, PFPC may
waive voluntarily all or a portion of the administration fee payable to it by
the Funds.

For the period September 22, 1998 (commencement of operations) through
July 31, 1999, the Prime Reserves, Government Reserves and Tax-Exempt Reserves
paid PFPC administration fees at the effective annual rate of 0.08% of each
Fund's average daily net assets.

During the period September 22, 1998 (commencement of operations) through
July 31, 1999, PFPC received administration fees in the amounts of $2,485,044,
$103,321 and $95,182 for the Prime Reserves, Government Reserves and
Tax-Exempt Reserves, respectively.

Under the administration agreement between Galaxy and PFPC (the
"Administration Agreement"), PFPC 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 to compute the net asset value and
net income of the Funds. PFPC 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. Unless
otherwise terminated, the Administration Agreement will remain in effect until
May 31, 2001 and thereafter will continue from year to year upon annual
approval of Galaxy's Board of Trustees.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank ("Chase Manhattan"), located at One Chase
Manhattan Plaza, New York, New York 10081, a wholly-owned subsidiary of The
Chase Manhattan Corporation, serves as the custodian of the Funds' assets
pursuant to a Global Custody Agreement.

-29-
<PAGE>

Under the Global 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.

PFPC also serves as the Funds' transfer and dividend disbursing agent,
pursuant to a Transfer Agency and Services Agreement (the "Transfer Agency
Agreement"). Communications to PFPC should be directed to PFPC at P.O. Box
5108, 4400 Computer Drive, Westboro, Massachusetts 01581. Under the Transfer
Agency Agreement, PFPC has agreed to: (i) issue and redeem shares of each
Fund; (ii) transmit all communications by each Fund to its shareholders of
record, including reports to shareholders, dividend and distribution notices
and proxy materials for meetings of shareholders; (iii) respond to
correspondence by security brokers and others relating to its duties; (iv)
maintain shareholder accounts; and (v) make periodic reports to the Board of
Trustees concerning Galaxy's operations.

EXPENSES

Fleet and PFPC bear all expenses in connection with the performance of
their services for the Funds, except that Galaxy bears the expenses incurred
in the Funds' operations including: taxes; interest; fees (including fees paid
to its trustees and officers who are not affiliated with PFPC); SEC fees;
state securities fees; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing 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; costs of independent pricing services; costs of shareholder reports
and meetings; and any extraordinary expenses. The Funds also pay for brokerage
fees and commissions in connection with the purchase of portfolio securities.

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

-30-
<PAGE>

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, PFPC, or their affiliates, and will not give preference to affiliates
and correspondent banks of Fleet with respect to such transactions.

Galaxy is required to identify any securities of its "regular brokers or
dealers" that the Funds have acquired during Galaxy's most recent fiscal
year. At July 31, 1999, (1) the Prime Reserves was a party to a repurchase
agreement with Goldman, Sachs & Co. with a value of $145,613,000, held
commercial paper of Associates Corp. of North America with a value of
$149,010,528, and held commercial paper of General Motors Acceptance Corp.
with a value of $134,656,901; and (2) the Government Reserves held Goldman,
Sachs & Co. with a value of $21,496,000. Goldman, Sachs & Co., Associates
Corp. of North America, and General Motors Acceptance Corp. (or their
affiliates) are considered "regular brokers or dealers" of Galaxy. At July
31, 1999 the Tax-Exempt Reserves did not hold securities of any of Galaxy's
"regular brokers or dealers."

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 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 and
portfolios, or other investment companies or accounts in order to obtain best
execution.

-31-
<PAGE>

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) PDI 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 PDI 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, 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, 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 0.75% (annualized) of the average daily net
assets of a Fund and payments for shareholder administrative support services
may not exceed 0.25% (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 Statement of Additional Information, Galaxy intends to limit
payments under the Distribution and Services Plan to an aggregate fee of not
more than 0.45% (on an annualized basis) of the average daily net assets of the
Prime Reserves and not more than 0.40% (on an annualized basis) of the average
daily net assets of the Government Reserves and Tax-Exempt Reserves.

Payments for distribution expenses under the Distribution and Services Plan
are subject to the Rule. The Rule defines distribution expenses to include the
cost of "any activity which is primarily intended to result in the sale of
shares issued by" Galaxy. 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 Distribution and
Services

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<PAGE>

Plan provides that a report of the amounts expended under the Distribution and
Services 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
Distribution and Services Plan provides that it may not be amended to increase
materially the costs which the Funds may bear for distribution pursuant to the
Distribution and Services 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 Distribution and Services Plan or in any
related agreements (the "12b-1 Trustees"), by vote cast in person at a meeting
called for the purpose of considering such amendments.

During the period September 22, 1998 (commencement of operations) through
July 31, 1999, the Prime Reserves, Government Reserves and Tax-Exempt Reserves
Funds bore distribution fees and shareholder servicing fees under the
Distribution and Services Plan as set forth in the table below:

<TABLE>
<CAPTION>
Shareholder
Fund Distribution Fees Services Fees
- ---- ----------------- -------------
<S> <C> <C>
Prime Reserves................................ $6,563,050 $8,203,813
Government Reserves........................... $ 204,896 $ 341,494
Tax-Exempt Reserves........................... $ 188,636 $ 314,394
</TABLE>

During this period, all amounts paid under the Distribution and Services Plan
were attributable to payments to broker-dealers.

Galaxy's Board of Trustees has concluded that there is a reasonable
likelihood that the Distribution and Services Plan will benefit each of the
Funds and their respective shareholders. The Distribution and Services Plan is
subject to annual reapproval by a majority of the 12b-1 Trustees and is
terminable at any time with respect to a Fund by a vote of a majority of the
12b-1 Trustees or by vote of the holders of a majority of the outstanding shares
of the Fund. Any agreement entered into pursuant to the Distribution and
Services Plan with a Service Organization is terminable with respect to a Fund
without penalty, at any time, by vote of a majority of the 12b-1 Trustees, by
vote of the holders of a majority of the outstanding 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 Distribution and Services 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 the 12b-1 Trustees.

-33-
<PAGE>

DISTRIBUTOR

PDI serves as Galaxy's distributor. PDI is a registered broker/dealer
with principal offices located at Four Falls Corporate Center, 6th Floor, West
Conshohocken, Pennsylvania 19428-2961. Jane Haegele is the sole shareholder of
PDI.

Unless otherwise terminated, the Distribution Agreement between Galaxy
and PDI remains in effect until November 30, 2000, 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.

The following table shows all sales charges, commissions and other
compensation received by PDI directly or indirectly from the Funds during the
period September 22, 1998 (commencement of operations) through July 31, 1999:

<TABLE>
<CAPTION>
Brokerage
Net Underwriting Compensation on Commissions in
Discounts and Redemption and Connection with Fund Other
Fund Commissions Repurchase Transactions Compensation(1)
---- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Prime Reserves N/A N/A $0 $14,766,863

Government Reserves N/A N/A $0 $ 546,390

Tax-Exempt Reserves N/A N/A $0 $ 503,030
</TABLE>

- ----------------
(1) Represents payments made under the Distribution and Services Plan during
the fiscal period ended July 31, 1999 (see "Distribution and Services Plan"
above).

AUDITORS

Ernst & Young LLP, independent auditors, with offices at 200 Clarendon
Street, Hancock Tower, Boston, Massachusetts 02116-5072, serves as auditors for
Galaxy. The financial highlights for the respective Funds included in their
Prospectuses and the financial statements for the Funds contained in the Funds'
Annual Report to Shareholders and incorporated by reference into this Statement
of Additional Information for the fiscal period ended July 31, 1999 have been
audited by Ernst & Young LLP.

-34-
<PAGE>
COUNSEL

Drinker Biddle & Reath LLP (of which W. Bruce McConnel, III, Secretary of
Galaxy, is a partner), One Logan Square, 18th & Cherry Streets, Philadelphia,
Pennsylvania 19103, 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 Funds are computed by:
(1) determining the net change, exclusive of capital changes and income other
than investment income, 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.

In addition, the Tax-Exempt Reserves may calculate a "tax equivalent
yield." The tax equivalent yield is computed by dividing that portion of a
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%.

The current yields for the Funds may be obtained by calling
1-877-BUY-GALAXY (1-877-289-4252).

For the seven-day period ended July 31, 1999, the annualized yields and
effective yields for the Prime Reserves, Government Reserves and Tax-Exempt
Reserves were as set forth below:

<TABLE>
<CAPTION>
Tax-
----
Annualized Effective Equivalent
FUND Yield Yield Yield
- ---- ----- ----- -----
<S> <C> <C> <C>
Prime Reserves................................. 4.23% 4.32% *
Government Reserves............................ 4.09% 4.18% *
Tax-Exempt Reserves............................ 2.16% 2.18% 3.13%
</TABLE>

- ----------------------
* not applicable

-35-

<PAGE>
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 indexes or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, such data is reported in national financial
publications such as DONOGHUE'S MONEY FUND REPORT (-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 and is calculated as described above. Each Fund
may also advertise its "effective yield" which is calculated as described above.
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" is computed as described above.

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 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.

-36-

<PAGE>
MISCELLANEOUS

As used in this Statement of Additional Information, "assets belonging to"
a particular Fund means the consideration received by Galaxy upon the issuance
of shares in that particular 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 particular 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.

Shareholders will receive unaudited semi-annual reports describing the
Funds' investment operations and annual financial statements audited by
independent certified public accountants.

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, a 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.

As of the date of this Statement of Additional Information no entity or
person held of record more than 5% of the outstanding shares of Galaxy's
Prime Reserves, Government Reserves or Tax-Exempt Reserves.

FINANCIAL STATEMENTS

Galaxy's Annual Report to Shareholders with respect to the Funds for the
fiscal period ended July 31, 1999 has been filed with the SEC. The financial
statements in such Annual Report (the "Financial Statements") are incorporated
by reference into this Statement of Additional Information. The Financial
Statements and Financial Highlights included in the Annual Report for the Funds
for the fiscal period ended July 31, 1999 have been audited by Ernst & Young
LLP, whose report thereon also appears in such Annual Report and is incorporated
herein by reference. The Financial Statements in such Annual Report have been
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

-37-
<PAGE>

APPENDIX A

COMMERCIAL PAPER RATINGS
- ------------------------

A Standard & Poor's commercial paper rating is a current opinion of
the creditworthiness of an obligor with respect to financial obligations having
an original maturity of no more than 365 days. The following summarizes the
rating categories used by Standard and Poor's for commercial paper:

"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:

"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be

A-1
<PAGE>

evidenced by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and ample
asset protection; broad margins in earnings 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.

"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

"D-2" - Debt possesses 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.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

A-2
<PAGE>

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

"D-5" - Issuer failed to meet scheduled principal and/or interest
payments.

Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This designation
indicates the best capacity for timely payment of financial commitments and may
have an added "+" to denote any exceptionally strong credit feature.

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

Thomson Financial BankWatch short-term ratings assess the likelihood
of an untimely payment of principal and interest of debt instruments with
original maturities of one year or less. The following summarizes the ratings
used by Thomson Financial BankWatch:

"TBW-1" - This designation represents Thomson Financial BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.

"TBW-2" - This designation represents Thomson Financial BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of

A-3
<PAGE>

principal and interest is strong, the relative degree of safety is not as high
as for issues rated "TBW-1."

"TBW-3" - This designation represents Thomson Financial BankWatch's
lowest investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

"TBW-4" - This designation represents Thomson Financial BankWatch's
lowest rating category and indicates that the obligation is regarded as
non-investment grade and therefore speculative.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.

A-4
<PAGE>

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but payments on this
obligation are being continued.

"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or

A-5
<PAGE>

fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk appear somewhat larger than
the "Aaa" securities.

"A" - Bonds 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
which suggest a susceptibility to impairment sometime in the future.

"Baa" - Bonds 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.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" indicates poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.

The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater economic
stress.

A-6
<PAGE>

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.

"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic change over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

A-7
<PAGE>

"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

"CCC", "CC", "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.

Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:

"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.

"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

A-8
<PAGE>

"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.

"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson Financial BankWatch to non-investment grade long-term debt. Such issues
are regarded as having speculative characteristics regarding the likelihood of
timely repayment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in
default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

MUNICIPAL NOTE RATINGS
- ----------------------

A Standard and Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:

"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

A-9
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"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes 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.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

"SG" - This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.

A-10