<PAGE>
[Front cover page]
Prospectus
November 30, 2000
The Galaxy Fund
Galaxy Money Market Portfolios
Galaxy Prime Reserves
Galaxy Tax-Exempt Reserves
Galaxy Government 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.
U.S. Clearing,
a division of Fleet Securities, Inc.
Member New York Stock Exchange
Member SIPC
<PAGE>
Contents
Risk/return summary............................................................1
Introduction...................................................................1
Galaxy Prime Reserves..........................................................3
Galaxy Tax-Exempt Reserves.....................................................6
Galaxy Government Reserves....................................................10
Additional information about risk.............................................13
Investor guidelines...........................................................14
Fund management...............................................................15
How to invest in the Funds....................................................16
Buying and selling shares.....................................................16
How to buy shares....................................................16
How to sell shares...................................................17
Other transaction policies...........................................18
Distribution and shareholder service fees.....................................18
Dividends, distributions and taxes............................................19
Financial highlights..........................................................21
<PAGE>
Risk/return summary
INTRODUCTION
This prospectus describes the Galaxy Prime Reserves, Galaxy Tax-Exempt Reserves
and Galaxy Government 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.
[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.
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 __,
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., which is referred to in this prospectus as the
ADVISER, is the investment adviser for all of these Funds.
<PAGE>
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.
-2-
<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.
[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.
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.
- 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.
-3-
<PAGE>
- 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 bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 1.18% for the quarter ending December 31, 1999
Worst quarter: 1.00% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<S> <C>
---------------------
1999
---------------------
4.33%
---------------------
</TABLE>
The Fund's total return for the nine months ended September 30, 2000 was 4.11 %.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1 year Since inception
-----------------------------------------------------------------------------
<S> <C> <C>
Galaxy Prime
Reserves 4.33% 4.34% (9/22/98)
-----------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-4-
<PAGE>
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. Fees charged by U.S. Clearing for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Distribution and service Total Fund
Management fees (12b-1) fees Other expenses operating expenses
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime Reserves 0.36% 0.56%(2) 0.11% 1.03%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.56% of average daily net assets during the current fiscal year.
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 $105 $328 $569 $1,259
------------------------------------------------------------------------------------------------------
</TABLE>
-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.
[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-
<PAGE>
[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% 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.
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.
- 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.
-7-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 0.64% for the quarter ending December 31, 1999
Worst quarter: 0.47% for the quarter ending March 31, 1999
[bar chart goes here]
<TABLE>
<S> <C>
---------------------
1999
---------------------
2.23%
---------------------
</TABLE>
The Fund's total return for the nine months ended September 30, 2000 was 2.27 %.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------
1 year Since inception
-----------------------------------------------------------
<S> <C> <C>
Galaxy Tax-Exempt
Reserves 2.23% 2.25% (9/22/98)
-----------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-8-
<PAGE>
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. Fees charged by U.S. Clearing for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
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% 0.51%(2) 0.16% 1.07%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.51% of average daily net assets during the current fiscal year.
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 Tax-Exempt
Reserves $109 $340 $590 $1,306
------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<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.
[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.
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.
- 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.
-10-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 1.14% for the quarter ending December 31, 1999
Worst quarter: 0.96% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<S> <C>
---------------------
1999
---------------------
4.19%
---------------------
</TABLE>
The Fund's total return for the nine months ended September 30, 2000 was 4.01 %.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1 year Since inception
--------------------------------------------------------------------
<S> <C> <C>
Galaxy Government
Reserves 4.19% 4.22% (9/22/98)
--------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-11-
<PAGE>
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. Fees charged by U.S. Clearing for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Distribution and Total Fund
Management service (12b-1) Other operating
fees fees expenses expenses
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Government
Reserves 0.40% 0.51%(2) 0.15% 1.06%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.51% of average daily net assets during the current fiscal year.
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 $108 $337 $585 $1,294
-------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<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.
-13-
<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.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
GALAXY FUND FOR INVESTORS WHO WANT...
<S> <C>
-------------------------------------------------------------------------------------------------------------
a flexible and convenient way to manage cash while
Galaxy Prime Reserves earning money market returns
-------------------------------------------------------------------------------------------------------------
a way to earn money market returns that are free
Galaxy Tax-Exempt Reserves from federal income tax
-------------------------------------------------------------------------------------------------------------
a way to earn money market returns with the extra
Galaxy Government Reserves margin of safety associated with U.S. Government
obligations
-------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
Fund management
ADVISER
The Adviser, an indirect wholly-owned subsidiary of FleetBoston Financial
Corporation, was established in 1984 and has its main office at 100 Federal
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 September 30, 2000, the
Adviser managed over $102 billion in assets.
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 management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
FUND MANAGEMENT FEE AS A % OF AVERAGE NET ASSETS
<S> <C>
------------------------------------------------------------------------------------------------------------------
Galaxy Prime Reserves 0.36%
------------------------------------------------------------------------------------------------------------------
Galaxy Tax-Exempt Reserves 0.40%
------------------------------------------------------------------------------------------------------------------
Galaxy Government Reserves 0.40%
------------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<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.
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.
NAV is determined on each day the New York Stock Exchange is open for trading as
of 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.
[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
There is no minimum initial investment to open a Fund account. The minimum for
additional investments in an existing Fund account is $100.
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.
-16-
<PAGE>
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.
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.
-17-
<PAGE>
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.
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 Account Executive 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 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 0.56%, and the Galaxy Tax-Exempt
Reserves and Galaxy Government Reserves do not intend to pay more than 0.51%, 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.
-18-
<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 your brokerage firm.
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.
-19-
<PAGE>
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.
-20-
<PAGE>
Financial highlights
The financial highlights tables shown below will help you understand the
financial performance for the Funds for the fiscal year ended July 31, 2000 and
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.
Galaxy Prime Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
July 31, 2000 July 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.05 0.04
---- ----
Less dividends:
Dividends from net investment income..................... (0.05) (0.04)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 5.09% 3.59%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $4,330,068 $4,250,399
Ratios to average net assets:
Net investment income.................................... 4.98% 4.10%(3)
Operating expenses....................................... 0.92% 0.96%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-21-
<PAGE>
Galaxy Tax-Exempt Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
July 31, 2000 July 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.03 0.02
---- ----
Less dividends:
Dividends from net investment income..................... (0.03) (0.02)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 2.77% 1.82%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $169,133 $177,840
Ratios to average net assets:
Net investment income.................................... 2.72% 2.09%(3)
Operating expenses....................................... 0.96% 0.99%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-22-
<PAGE>
Galaxy Government Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
July 31, 2000 July 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.05 0.03
---- ----
Less dividends:
Dividends from net investment income..................... (0.05) (0.03)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 4.94% 3.49%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $165,278 $156,853
Ratios to average net assets:
Net investment income.................................... 4.84% 4.00%(3)
Operating expenses....................................... 0.95% 0.99%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-23-
<PAGE>
[Back Cover 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 Account Executive 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 Web site 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.
[FLEET ASSIGNED CODE]
<PAGE>
[Front cover page]
Prospectus
November 30, 2000
The Galaxy Fund
Galaxy Money Market Portfolios
Galaxy Prime Reserves
Galaxy Tax-Exempt Reserves
Galaxy Government 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
A FleetBoston Financial Company
<PAGE>
Contents
Risk/return summary...........................................................1
Introduction..................................................................1
Galaxy Prime Reserves.........................................................3
Galaxy Tax-Exempt Reserves....................................................6
Galaxy Government Reserves...................................................10
Additional information about risk............................................13
Investor guidelines..........................................................14
Fund management..............................................................15
How to invest in the Funds...................................................16
Buying and selling shares....................................................16
How to buy shares...................................................16
How to sell shares..................................................17
Other transaction policies..........................................18
Distribution and shareholder service fees....................................18
Dividends, distributions and taxes...........................................19
Financial highlights.........................................................21
<PAGE>
Risk/return summary
INTRODUCTION
This prospectus describes the Galaxy Prime Reserves, Galaxy Tax-Exempt Reserves
and Galaxy Government 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.
[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.
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 __,
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., which is referred to in this prospectus as the
ADVISER, is the investment adviser for all of these Funds.
<PAGE>
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.
-2-
<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.
[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.
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.
- 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.
-3-
<PAGE>
- 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 bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 1.18% for the quarter ending December 31, 1999
Worst quarter: 1.00% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<S><C>
---------------------
1999
---------------------
4.33%
---------------------
</TABLE>
The Fund's total return for the nine months ended September 30, 2000 was 4.11%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1 year Since inception
-----------------------------------------------------------------------------
<S> <C> <C>
Galaxy Prime
Reserves 4.33% 4.34% (9/22/98)
-----------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-4-
<PAGE>
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. Fees charged by Quick & Reilly for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Distribution and Total Fund
Management service (12b-1) Other operating
fees fees expenses expenses
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy Prime
Reserves 0.36% 0.56%(2) 0.11% 1.03%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.56% of average daily net assets during the current fiscal year.
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 $105 $328 $569 $1,259
-------------------------------------------------------------------------------------------------------------
</TABLE>
-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.
[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.
-6-
<PAGE>
[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.
[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% 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.
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.
- 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.
-7-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 0.64% for the quarter ending December 31, 1999
Worst quarter: 0.47% for the quarter ending March 31, 1999
[bar chart goes here]
---------------------
1999
---------------------
2.23%
---------------------
The Fund's total return for the nine months ended September 30, 2000 was 2.27%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1 year Since inception
---------------------------------------------------------------------------
<S> <C> <C>
Galaxy Tax-
Exempt Reserves 2.23% 2.25% (9/22/98)
---------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-8-
<PAGE>
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. Fees charged by Quick & Reilly for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
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% 0.51%(2) 0.16% 1.07%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.51% of average daily net assets during the current fiscal year.
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 Tax-
Exempt Reserves $109 $340 $590 $1,306
--------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<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.
[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.
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.
- 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.
-10-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the Fund's performance during the last calendar year.
[Sidenote:]
Best quarter: 1.14% for the quarter ending December 31, 1999
Worst quarter: 0.96% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<S><C>
---------------------
1999
---------------------
4.19%
---------------------
</TABLE>
The Fund's total return for the nine months ended September 30, 2000 was 4.01%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1 year Since inception
---------------------------------------------------------------------------
<S> <C> <C>
Galaxy
Government
Reserves 4.19% 4.22% (9/22/98)
---------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-11-
<PAGE>
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. Fees charged by Quick & Reilly for services related to an
investment in the Fund are in addition to and are not reflected in the fees and
expenses in the following table. These fees will be deducted each month from
your Fund account and will reduce your yield.
Annual Fund operating expenses (expenses deducted from the Fund's assets)(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Distribution and Total Fund
Management service (12b-1) Other operating
fees fees expenses expenses
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Galaxy
Government
Reserves 0.40% 0.51%(2) 0.15% 1.06%
--------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the fees and expenses incurred by the Fund during the last fiscal
year as restated to reflect current fees and expenses.
(2) The Fund may pay Distribution and service (12b-1) fees up to a maximum of
1.00% of the Fund's average daily net assets but will limit such fees to no
more than 0.51% of average daily net assets during the current fiscal year.
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 $108 $337 $585 $1,294
-------------------------------------------------------------------------------------------
</TABLE>
-12-
<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.
-13-
<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.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
GALAXY FUND FOR INVESTORS WHO WANT...
<S> <C>
-------------------------------------------------------------------------------------------
a flexible and convenient way to manage cash while
Galaxy Prime Reserves earning money market returns
-------------------------------------------------------------------------------------------
a way to earn money market returns that are free
Galaxy Tax-Exempt Reserves from federal income tax
-------------------------------------------------------------------------------------------
a way to earn money market returns with the extra
margin of safety associated with U.S. Government
Galaxy Government Reserves obligations
-------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
Fund management
ADVISER
The Adviser, an indirect wholly-owned subsidiary of FleetBoston Financial
Corporation, was established in 1984 and has its main office at 100 Federal
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 September 30, 2000, the
Adviser managed over $102 billion in assets.
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 management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
FUND MANAGEMENT FEE AS A % OF AVERAGE NET ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Galaxy Prime Reserves 0.36%
-----------------------------------------------------------------------------------------------------------------
Galaxy Tax-Exempt Reserves 0.40%
-----------------------------------------------------------------------------------------------------------------
Galaxy Government Reserves 0.40%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<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.
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.
NAV is determined on each day the New York Stock Exchange is open for trading as
of 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.
[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.
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.
-16-
<PAGE>
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 & 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 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
-17-
<PAGE>
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.
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 0.56%, and the Galaxy Tax-Exempt
Reserves and Galaxy Government Reserves do not intend to pay more than 0.51%, 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.
-18-
<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.
-19-
<PAGE>
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.
-20-
<PAGE>
Financial highlights
The financial highlights tables shown below will help you understand the
financial performance for the Funds for the fiscal year ended July 31, 2000 and
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.
Galaxy Prime Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
JULY 31, 2000 JULY 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.05 0.04
---- ----
Less dividends:
Dividends from net investment income..................... (0.05) (0.04)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 5.09% 3.59%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $4,330,068 $4,250,399
Ratios to average net assets:
Net investment income.................................... 4.98% 4.10%(3)
Operating expenses....................................... 0.92% 0.96%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-21-
<PAGE>
Galaxy Tax-Exempt Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
JULY 31, 2000 JULY 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.03 0.02
---- ----
Less dividends:
Dividends from net investment income..................... (0.03) (0.02)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 2.77% 1.82%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $169,133 $177,840
Ratios to average net assets:
Net investment income.................................... 2.72% 2.09%(3)
Operating expenses....................................... 0.96% 0.99%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-22-
<PAGE>
Galaxy Government Reserves
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period ended
JULY 31, 2000 JULY 31, 1999(1)
------------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......................... $1.00 $1.00
----- -----
Income from investment operations:
Net investment income ................................... 0.05 0.03
---- ----
Less dividends:
Dividends from net investment income..................... (0.05) (0.03)
------ ------
Net increase (decrease) in net asset value.................... -- --
Net Asset Value, End of Period................................ $1.00 $1.00
===== =====
Total Return.................................................. 4.94% 3.49%(2)
Ratios/supplemental data:
Net Assets, End of Period (000's)........................ $165,278 $156,853
Ratios to average net assets:
Net investment income.................................... 4.84% 4.00%(3)
Operating expenses....................................... 0.95% 0.99%(3)
</TABLE>
(1) The Fund commenced operations on September 22, 1998.
(2) Not annualized.
(3) Annualized.
-23-
<PAGE>
[Back Cover 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 20549-6009
1-800-SEC-0330.
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Web site 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.
[FLEET ASSIGNED CODE]
<PAGE>
THE GALAXY FUND
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 30, 2000
GALAXY PRIME RESERVES
GALAXY TAX-EXEMPT RESERVES
GALAXY GOVERNMENT RESERVES
This Statement of Additional Information is not a prospectus. The
prospectuses for the Funds dated November 30, 2000, 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, 2000 (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>
<S> <C>
Page
GENERAL INFORMATION..............................................................................................1
DESCRIPTION OF GALAXY AND ITS SHARES.............................................................................1
INVESTMENT STRATEGIES, POLICIES AND RISKS........................................................................3
Prime Reserves..........................................................................................3
Tax-Exempt Reserves.....................................................................................4
Government 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..........................................................................15
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...........................................................................................................21
In General.............................................................................................21
Tax-Exempt Reserves....................................................................................21
State and Local........................................................................................22
Miscellaneous..........................................................................................23
TRUSTEES AND OFFICERS...........................................................................................23
Shareholder and Trustee Liability......................................................................27
INVESTMENT ADVISER..............................................................................................27
ADMINISTRATOR...................................................................................................28
CUSTODIAN AND TRANSFER AGENT....................................................................................30
EXPENSES........................................................................................................31
PORTFOLIO TRANSACTIONS..........................................................................................31
DISTRIBUTION AND SERVICES PLAN..................................................................................32
DISTRIBUTOR.....................................................................................................34
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
AUDITORS........................................................................................................35
COUNSEL ........................................................................................................35
CODES OF ETHICS.................................................................................................35
PERFORMANCE AND YIELD INFORMATION...............................................................................35
Performance Reporting..................................................................................36
MISCELLANEOUS...................................................................................................37
FINANCIAL STATEMENTS............................................................................................77
APPENDIX A.....................................................................................................A-1
</TABLE>
-ii-
<PAGE>
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, Tax-Exempt Reserves and Government 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 FINANCIAL 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 thirty seven 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 Money Market Fund, Institutional Government Money
Market Fund, Institutional Treasury Money Market Fund, Prime Reserves,
Government Reserves, Tax-Exempt Reserves, Equity Value Fund, Equity Growth Fund,
Growth Fund II, Equity Income Fund, International Equity Fund, Pan Asia 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, Intermediate Tax-Exempt Bond Fund, New Jersey Municipal Bond Fund,
New York Municipal Bond Fund, Connecticut Municipal Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund, Rhode Island Municipal Bond Fund
and Florida Municipal Bond Fund. Galaxy is also authorized to issue shares of
beneficial interest in two additional investment portfolios, the MidCap Equity
Fund and the New York Municipal Money Market Fund. As of the date of this
Statement of Additional Information, however, the MidCap Equity Fund and the New
York Municipal Money Market 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
<PAGE>
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").
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 a fundamental 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.
-2-
<PAGE>
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 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.
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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.
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.
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
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Agencies") (such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors
Service, Inc. ("Moody's") or Fitch Inc. ("Fitch") in the highest category for
short-term debt securities, (ii) is rated by the only Rating Agency that has
issued a rating with respect to such security or issuer in such Rating Agency's
highest category for short-term debt, or (iii) if not rated, the security is
determined to be of comparable quality. The Tax-Exempt Reserves will not
purchase a security (other than a U.S. Government security) unless the security
(i) is rated by at least two such Rating Agencies in one of the two highest
categories for short-term debt securities, (ii) is rated by the only Rating
Agency that has assigned a rating with respect to such security in one of such
Rating Agency's two highest categories for short-term debt 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
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it is not obligated to do so by law. Some U.S. Government obligations may be
issued as variable or floating rate instruments.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal.
However, due to fluctuations in interest rates, the market value of such
securities may vary during the period a shareholder owns shares of the Funds.
MONEY MARKET INSTRUMENTS
Money market instruments include, but are not limited to, 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.
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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 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.
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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 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
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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-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
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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.
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
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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 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. 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
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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.
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
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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
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
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accordance with the applicable quality requirements described above under
"Quality Requirements." GICs are considered illiquid securities and will be
subject to the Fund's 10% limitation on illiquid investments, unless there is an
active and substantial secondary market for the particular instrument and market
quotations are readily available.
ASSET-BACKED SECURITIES - PRIME RESERVES
The Prime Reserves may purchase asset-backed securities which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables and credit card receivables. The Fund
will only purchase asset-backed securities that meet the applicable quality
requirements described above under "Quality Requirements."
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.
-14-
<PAGE>
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 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
-15-
<PAGE>
permitted investments, where the value of the collateral is equal at
all times to at least 100% of the value of the securities loaned.
2. Purchase securities of any one issuer if immediately after such
purchase more than 5% of the value of its total assets would be
invested in the securities of such issuer (the "5% limitation"),
except that up to 25% of the value of its total assets may be invested
without regard to the 5% limitation; notwithstanding the foregoing
restriction, each Fund may invest without regard to the 5% limitation
in U.S. Government obligations and as otherwise permitted in
accordance with Rule 2a-7 under the 1940 Act or any successor rule.
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
-16-
<PAGE>
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.
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.
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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 3200 Horizon Drive, King of Prussia, Pennsylvania
19406.
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 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.
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<PAGE>
TAXES
IN GENERAL
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.
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 and 100% of any such amounts that were not distributed in the prior 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.
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<PAGE>
An investment in the Tax-Exempt Reserves is not intended to constitute a
balanced investment program. Shares of the Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R. 10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt and, therefore, not
only would the shareholder not gain any additional benefit from the Fund's
dividends being tax-exempt, but such dividends would be ultimately taxable to
the beneficiaries when distributed. 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.
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
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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.
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>
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
Vicks Lithograph & Trustee Lithograph & Printing Corporation
Printing Corporation (book manufacturing and
Commercial Drive commercial printing); Director, Utica
P.O. Box 270 First Insurance Company; Trustee,
Yorkville, NY 13495 Savings Bank of Utica; Director,
Age 67 Monitor Life Insurance Company;
Director, Commercial Travelers
Mutual Insurance Company; Trustee,
The Galaxy VIP Fund; Trustee,
Galaxy Fund II.
John T. O'Neill President, Private Investor; Executive Vice
28 Narragansett Bay Avenue Treasurer & President and CFO, Hasbro, Inc. (toy
Warwick, RI 02889 Trustee and game manufacturer) until
Age 56 December 1999; Trustee, The
Galaxy VIP Fund; Trustee, Galaxy
Fund II.
</TABLE>
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<PAGE>
<TABLE>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
---------------- ----------- ----------------------
<S> <C> <C>
Louis DeThomasis Trustee President, Saint Mary's College of
Saint Mary's College Minnesota; Director, Bright Day
of Minnesota Travel, Inc.; Trustee, Religious
Winona, MN 55987 Communities Trust; Trustee, The
Age 60 Galaxy VIP Fund; Trustee, Galaxy
Fund II.
Donald B. Miller Trustee Chairman, Horizon Media, Inc.
10725 Quail Covey Road (broadcast services);
Boynton Beach, FL 33436 Director/Trustee, Lexington Funds;
Age 74 Chairman, Executive Committee,
Compton International, Inc.
(advertising agency); Trustee, Keuka
College; Trustee, The Galaxy VIP
Fund; Trustee, Galaxy Fund II.
James M. Seed Trustee Chairman and President, The Astra
The Astra Ventures, Inc. Projects, Incorporated (land
One Citizens Plaza development); President, The Astra
Providence, RI 02903 Ventures, Incorporated (previously,
Age 59 Buffinton Box Company -
manufacturer of cardboard boxes);
Commissioner, Rhode Island
Investment Commission; Trustee,
The Galaxy VIP Fund; Trustee,
Galaxy Fund II.
Bradford S. Wellman(1) Trustee Private Investor; Vice President and
2468 Ohio Street Director, Acadia Management
Bangor, ME 04401 Company (investment services);
Age 69 Director, Essex County Gas
Company, until January 1994;
Director, Maine Mutual Fire
Insurance Co.; Member, Maine
Finance Authority; Trustee, The
Galaxy VIP Fund; Trustee, Galaxy
Fund II.
</TABLE>
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<PAGE>
<TABLE>
Positions Principal Occupation
with The During Past 5 Years
Name and Address Galaxy Fund and Other Affiliations
---------------- ----------- ----------------------
<S> <C> <C>
W. Bruce McConnel, III Secretary Partner of the law firm Drinker
One Logan Square Biddle & Reath LLP, Philadelphia,
18th and Cherry Streets Pennsylvania.
Philadelphia, PA 19103-6996
Age 57
William Greilich Vice President Vice President, PFPC Inc., 1991-96;
PFPC Inc. Vice President and Division
4400 Computer Drive Manager, PFPC Inc., 1996 to
Westboro, MA 01581-5108 present.
Age 46
-------------------------
</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 September 8, 2000, each trustee receives an annual aggregate fee
of $54,000 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 $4,000 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. For the period May
28, 1999 until September 7, 2000, each trustee was entitled to receive an annual
aggregate fee of $45,000 for his services as a trustee of the Trusts, plus an
additional $3,500 for each in-person Galaxy Board meeting attended, with all
other fees being those currently in effect. Prior to May 28, 1999, each trustee
was entitled to receive an annual aggregate fee of $40,000 for his services as a
trustee of the Trusts, plus an additional $2,500 for each in-person Galaxy Board
meeting attended, with all other fees being those currently in effect.
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
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<PAGE>
"Plan"). Under the Plan, a trustee may elect to have his deferred fees treated
as if they had been invested by the Trusts in the shares of one or more
portfolios in the Trusts, or other types of investment options, and the amount
paid to the trustees under the Plan will be determined based upon the
performance of such investments. Deferral of trustees' fees will have no effect
on a portfolio's assets, liabilities, and net income per share, and will not
obligate the Trusts to retain the services of any trustee or obligate a
portfolio to any level of compensation to the trustee. The Trusts may invest in
underlying securities without shareholder approval.
No employee of Fleet or PFPC Inc. ("PFPC"), Galaxy's administrator,
receives any compensation from Galaxy for acting as an officer. 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 Funds' fiscal year ended July 31, 2000.
<TABLE>
<CAPTION>
============================================================================================================
Pension or
Retirement
Benefits Total Compensation
Aggregate Accrued as Part from Galaxy and
Compensation from of Fund Fund Complex* Paid
Name of Person/position Galaxy Expenses to Trustees
----------------------- ------ -------- -----------
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford S. Wellman
Trustee $55,760 None $59,750
------------------------------------------------------------------------------------------------------------
Dwight E. Vicks, Jr.
Chairman and Trustee $60,427 None $64,750
------------------------------------------------------------------------------------------------------------
Donald B. Miller**
Trustee $56,694 None $60,750
------------------------------------------------------------------------------------------------------------
Rev. Louis DeThomasis
Trustee $55,760 None $59,750
------------------------------------------------------------------------------------------------------------
John T. O'Neill
President, Treasurer
and Trustee $58,094 None $62,250
------------------------------------------------------------------------------------------------------------
James M. Seed**
Trustee $56,694 None $60,750
============================================================================================================
</TABLE>
-------------
* The "Fund Complex" consists of Galaxy, The Galaxy VIP Fund and Galaxy Fund
II, which comprise a total of 49 separate portfolios as of July 31, 2000.
** Deferred compensation (including interest) in the amounts of $100,680 and
$111,017 accrued during the Funds' fiscal year ended July 31, 2000 for
Messrs. Miller and Seed, respectively.
-26-
<PAGE>
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, Galaxy's Declaration of Trust provides that shareholders
shall not be subject to any personal liability for the acts or obligations of
Galaxy, and that every note, bond, contract, order or other undertaking made by
Galaxy shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his or her being or having been a shareholder and not
because of his or her acts or omissions outside such capacity or some other
reason. The Declaration of Trust also provides that Galaxy shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of Galaxy, and shall satisfy any judgment thereon. Thus, the risk of
shareholder liability is limited to circumstances in which Galaxy itself would
be unable to meet its obligations.
The Declaration of Trust states further that no trustee, officer or agent
of Galaxy shall be personally liable for or on account of any contract, debt,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of Galaxy; nor shall any trustee be personally liable to any person for
any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim against
the trustees or Galaxy shall look solely to the trust property for payment.
With the exceptions stated, the Declaration of Trust provides that a
trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a trustee, and that the Board of Trustees
shall indemnify representatives and employees of Galaxy to the same extent to
which they themselves are entitled to indemnification.
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.
-27-
<PAGE>
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. Fleet
may from time to time, in its discretion, allocate a portion of its advisory
fees to Fleet Bank or other subsidiaries of FleetBoston Financial Corporation in
consideration of their efforts in the sale of shares of the Funds.
For the fiscal year ended July 31, 2000 and the period from September 22,
1998 (commencement of operations) to July 31, 1999, Galaxy paid advisory fees to
Fleet as set forth below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR OR PERIOD ENDED JULY 31,
FUND 2000 1999(1)
---- ---- ------
<S> <C> <C>
Prime Reserves $15,722,584 $11,806,913
Tax-Exempt Reserves $ 726,319 $ 546,391
Government Reserves $ 699,562 $ 503,030
--------------------------
</TABLE>
1. For the period from September 28, 1998 (commencement of operations) to July
31, 1999.
The advisory agreement provides that Fleet shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of its duties under the advisory agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Fleet in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. Unless sooner terminated, the advisory agreement will
continue in effect with respect to a particular Fund 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.
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 Financial Services
Group.
-28-
<PAGE>
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, effective June 26, 2000:
<TABLE>
<CAPTION>
COMBINED AVERAGE DAILY NET ASSETS ANNUAL RATE
<S> <C> <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%
From $18 to $21 billion..................... 0.0575%
Over $21 billion............................ 0.0525%
</TABLE>
For the period from September 10, 1998 through June 25, 2000, Galaxy paid
PFPC administration fees based on the combined average daily net assets of the
Funds and all other portfolios offered by Galaxy at the following annual rates:
<TABLE>
<CAPTION>
COMBINED AVERAGE DAILY NET ASSETS ANNUAL RATE
<S> <C> <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 fiscal year ended July 31, 2000, the Prime Reserves, Tax-Exempt
Reserves and Government Reserves paid PFPC administration fees at the effective
annual rate of 0.073% of each Fund's average daily net assets.
-29-
<PAGE>
For the fiscal year ended July 31, 2000 and the period September 22, 1998
(commencement of operations) through July 31, 1999, PFPC received administration
fees as set forth below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR OR PERIOD ENDED JULY 31,
FUND 2000 1999(1)
---- ---- -------
<S> <C> <C>
Prime Reserves $3,201,005 $2,485,044
Tax-Exempt Reserves $ 132,655 $ 103,321
Government Reserves $ 127,688 $ 95,182
--------------------------
</TABLE>
1. For the period from September 28, 1998 (commencement of operations) to July
31, 1999.
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.
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.
-30-
<PAGE>
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 Fleet or 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 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.
-31-
<PAGE>
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, 2000: (1) the Prime Reserves was a party to a repurchase agreement
with Goldman, Sachs & Co. with a value of $58,716,000, held commercial paper of
Associates Corp. of North America with an aggregate value of $139,827,200, and
held commercial paper of Ford Motor Credit Corp. with an aggregate value of
$149,203,903; and (2) the Government Reserves was a party to a repurchase
agreement with Lehman Brothers with a value of $27,033,000. Goldman, Sachs &
Co., Associates Corp. of North America, Ford Motor Credit Corp. and Lehman
Brothers (or their affiliates) are considered "regular brokers or dealers" of
Galaxy. At July 31, 2000 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.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan pursuant to Rule 12b-1
(the "Rule") 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
-32-
<PAGE>
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 0.56% (on an annualized basis) of the average daily net assets of the
Prime Reserves and not more than 0.51% (on an annualized basis) of the average
daily net assets of the Tax-Exempt Reserves and Government 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 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.
-33-
<PAGE>
During the fiscal year ended July 31, 2000, the Prime Reserves, Tax-Exempt
Reserves and Government Reserves 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..................................... $10,962,253 $8,769,803
Tax-Exempt Reserves................................ $ 453,949 $ 272,370
Government Reserves................................ $ 437,226 $ 262,336
</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.
DISTRIBUTOR
PDI serves as Galaxy's distributor. PDI is a registered broker/dealer with
principal offices located at 3200 Horizon Drive, King of Prussia, Pennsylvania
19406. Jane Haegele is the sole shareholder of PDI.
Unless otherwise terminated, the Distribution Agreement between Galaxy and
PDI remains in effect until November 30, 2001, 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.
It is expected that on or about December 31, 2000 PDI will be acquired by PFPC
Distributors, Inc. ("PFPC Distributors"), an indirect, wholly-owned
subsidiary of PNC Financial Services Group. PFPC Distributors, 400 Bellevue
Parkway, Wilmington, Delaware 19809, is expected to enter into a new
Distribution Agreement with Galaxy effective upon the consummation of PFPC
Distributor's acquisition of PDI on substantially the same terms and
conditions as PDI's existing Distribution Agreement with Galaxy.
-34-
<PAGE>
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 year ended July 31, 2000 have been
audited by Ernst & Young LLP.
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.
CODES OF ETHICS
Galaxy and Fleet have adopted codes of ethics pursuant to Rule 17j-1 under
the 1940 Act that permit investment personnel subject to their particular codes
of ethics to invest in securities, including securities that may be purchased or
held by the Funds, for their own accounts. The codes of ethics are on public
file with, and are available from, the Securities and Exchange Commission's
Public Reference Room in Washington, D.C.
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.
-35-
<PAGE>
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, 2000, the annualized yields and
effective yields for the Prime Reserves, Tax-Exempt Reserves and Government
Reserves were as set forth below:
<TABLE>
<CAPTION>
TAX-
ANNUALIZED EFFECTIVE EQUIVALENT
FUND YIELD YIELD YIELD
---- ----- ------ -----
<S> <C> <C> <C>
Prime Reserves................................. 5.74% 5.90% *
Tax-Exempt Reserves............................ 3.24% 3.29% 4.70%
Government Reserves............................ 5.60% 5.76% *
</TABLE>
----------------------
* Not applicable.
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.
-36-
<PAGE>
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.
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 a investment advisory
agreement, a Rule 12b-1 distribution plan or a change in a fundamental
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.
-37-
<PAGE>
As of November 14, 2000, the name, address and percentage ownership of the
entities or persons who held of record or benefically more than 5% of the
outstanding shares of each class of Galaxy's investment portfolios were as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 99.67%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
WYLIE O'BRIAN
70 JAFFARIAN ROAD
HAVERHILL, MA 01832-2909 5.04%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
JAMES H. FURNEAUX &
CAROL S. FURNEAUX
JTTEN
810 CONCORD ROAD
CARLISLE, MA 01741-1523 6.11%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MELLON BANK (DE) NA
ENHANCED CASH FUND
WILSHIRE ENHANCED INDEX
TRUST
135 SANTILLI HWY.
EVERETT, MA 02149-1906 5.09%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TAX-EXEMPT FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
BRENDA MAY EARL
279 CENTRAL PARK WEST
PH-19A
NEW YORK, NY 10024-3080 5.11%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JOSEPH DIMENNA
1049 FIFTH AVE. APT. P3
NEW YORK, NY 10028-0115 9.64%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THOMAS E. DAMBRA
CONSTANCE M. DAMBRA
370 RIVERVIEW ROAD
REXFORD, NY 12148-1428 11.28%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
BOB & CO.
TREASURY
ATTN: A. J. FERULLO
100 FEDERAL STREET
#01-12-02
BOSTON, MA 02110-1802 6.62%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ROBERT J. GRANTHAM &
HANNELORE GRANTHAM
JTTEN
71 MOUNT VERNON STREET
BOSTON, MA 02108-1330 6.53%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GILBERT L. WADE
143 AVENUE B APARTMENT 6A
NEW YORK, NY 10009-5026 5.19%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GOVERNMENT FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 98.40%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. TREASURY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 94.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
26 BROADWAY
NEW YORK, NY 10004-1703 11.32%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
ALLAN J. OCONNER
P. O. BOX 5071
INCLINE VILLAGE, NV 89450-5071 6.07%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INSTITUTIONAL TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 17.43%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BOB & CO.
TREASURY
ATTN: A. J. FERULLO
100 FEDERAL STREET
#01-13-07
BOSTON, MA 02110-1802 6.77%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET BANK OMNIBUS
STEVEN P. SUCHECKI
20 CHURCH STREET
HARTFORD, CT 06103 61.32%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 98.97%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND
--------------------------------------------------------------------------------
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 31.22%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
26 BROADWAY
NEW YORK, NY 10004-1703 5.60%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BOB & CO.
TREASURY
ATTN: A.J. FERULLO
100 FEDERAL STREET
#01-13-07
BOSTON, MA 02110-1802 19.31%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
KERN OIL INC.
ATTN: VIRGINIA FRAZIER
7724 E. PANAMA LN.
BAKERSFIELD, CA 93307-9210 7.15%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 42.78%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. CLEARING A DIVISION OF FLEET
SECURITIES, INC.
26 BROADWAY
NEW YORK, NY 10004-1703 20.43%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONNECTICUT MUNICIPAL MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
FLEET NATIONAL BANK
P.O. BOX 92800
ROCHESTER, NY 14692-8900 47.60%
--------------------------------------------------------------------------------
</TABLE>
-41-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
WILLIAM L. BUCKNALL
NORMA LEE BUCKNALL
5 OAK RIDGE DR.
BETHANY, CT 06524-3117 5.42%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY VALUE FUND
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 66.24%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 21.78%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 9.84%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY GROWTH FUND
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 66.92%
--------------------------------------------------------------------------------
</TABLE>
-42-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 18.47%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 14.36%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 104-32732-16
HILDA BRANDT
ROLAND PARK PLACE
830 W. 40TH STREET, APT. 359
BALTIMORE, MD 21211-2176 44.83%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 114-97238-17
SARA MALLOW
6415 NW 24TH STREET
BOCA RATON, FL 33434-4320 23.40%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 120-97689-18
YOOK Y DOO
46-34 ROBINSON ST.
FLUSHING, NY 11355-3445 7.79%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 021-90471-15
MABEL L BOWMAN
35634 MEYERS CT.
FREMONT, CA 94536-2540 6.16%
--------------------------------------------------------------------------------
</TABLE>
-43-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 237-97013-17
YALE HIRSHBERG
48 LAURELWOOD DRIVE
WEBSTER, MA 01570-3441 6.64%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 111-98315-17
THOMAS J BERNFELD
185 WEST END AVENUE, APT. 21D
NEW YORK, NY 10023-5548 18.98%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 166-31108-13
FRANK CATANHO, TRUSTEE OF THE FRANK CATANHO
1996 TRUST DATED 10/22/96
24297 MISSION BLVD.
HAYWARD, CA 94544-1020 12.27%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 024-90318-16
LYNN C. SHERRIE
P.O. BOX 316
WILSON, NY 14172-0316 11.91%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 221-00085-18
WALTER M. SWIECICKI &
CATHLEEN SWIECICKI JT WROS
119 OLD BEEKMAN ROAD
MONMOUTH JUNCTION, NJ 08852-3114 10.27%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 244-90004-19
W P FLEMING
66500 E 253RD
GROVE, OK 74344-6163 5.64%
--------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING CORP.
FBO 131-98122-18
ELAINE B. ODESSA
9 NEWMAN ROAD
PAWTUCKET, RI 02860-6183 6.33%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GROWTH FUND II
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 21.88%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 7.98%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 69.72%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 979-00486-16
JOSEPH PAPAI JR.
918 LEE AVENUE
NORTH BRUNSWICK, NJ 08902-2351 9.11%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET BANK NA 6.86%
CUST OF THE ROLLOVER IRA
FBO JUAN ROSAI
25 CRESTVIEW DR.
NORTH HAVEN, CT 06473
--------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
JOHN S. BUNTON
780 MOUNTAIN ROAD
MAPLEWOOD VILLAGE
PARSONFIELD, ME 04047 5.19%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 51.76%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 35.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 12.43%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 29.33%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 28.07%
--------------------------------------------------------------------------------
</TABLE>
-46-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 39.60%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
CHARLES SCHWAB & CO. INC.
SPECIAL CUSTODY ACCT. FOR EXCLUSIVE OF
CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST.
SAN FRANCISCO, CA 94104-4122 10.12%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MELLON BANK, NA
ACF SMM TRUST 1999-J
A/C #SMME1000002
135 SANTILLI HWY
ROOM 026 0320
EVERETT, MA 02149-1950 7.96%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 125-98055-11
ALBERT F TWANMO
6508 81ST ST.
CABIN JOHN, MD 20818-1203 80.62%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 136-99157-13
JON-PAUL DADAIAN
178 CLARKEN DRIVE
WEST ORANGE, NJ 07052-3441 14.83%
--------------------------------------------------------------------------------
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 102-59241-17
CHURCH & FRIARY OF ST. FRANCIS OF ASSISI
C/O FR. RONALD P STARK OFM
135 WEST 31ST ST.
NEW YORK, NY 10001-3405 72.65%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 195-90025-18
GUIDO GUINASSO
418 COLLEGE AVENUE
SAN FRANCISCO, CA 94112-1114 5.25%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
TRUST COMPANY OF AMERICA
FB TCA
P.O. BOX 6503
ENGLEWOOD, CO 80155-6675 25.16%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 54.90%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 40.20%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 160-27022-17
LINDA SHAW, TRUSTEE FOR THE LINDA J SHAW
TRUST
920 MEADOWS ROAD
GENEVA, IL 60134-3052 36.51%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 113-27816-16
PAMELA M FEIN
68 OAK RIDGE DRIVE
BETHANY, CT 06524-3118 29.52%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 175-97327-10
MARGARET ANN GILLENWATER
2525 E PRINCE ROAD #23
TUCSON, AZ 85716-1146 24.69%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO#103-80060-19
SAINT CLARE SCHOOL ENDOWMENT FUND
ATTN: FR, O'SHEA/ANDREW J HOUVOURAS
&/OR BRUCE BLATMAN
821 PROSPERITY FARMS ROAD
NO PALM BEACH, FL 33408-4299 6.42%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 147-97497-13
MARTIN ALLEN SANTE
8858 MOANALUA WAY
DIAMONDHEAD, MS 39525 29.49%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 103-31744-16
IRWIN LUFTIG & ELAINE LUFTIG
6119 BEAR CREEK CT
LAKE WORTH, FL 33467-6812 19.45%
--------------------------------------------------------------------------------
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 148-28677-18
LINDA M. BERKE & MICHAEL E. BERKE JT TEN
30941 WESTWOOD ROAD
FARMINGTON HILLS, MI 48331-1466 16.54%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 147-29019-15
WALTER W QUAN
2617 SKYLINE DRIVE
LORAIN, OH 44053-2243 16.14%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 013-90166-12
FLORENCE G. ST. ONGE
34 CEDAR LANE
WARREN, RI 02885-2236 6.18%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 108-00116-10
MICHAEL KENNEDY & CARLEEN KENNEDY JT WROS
12 WALTON AVENUE
LOCUST VALLEY, NY 11560-1227 5.94%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSET ALLOCATION FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 91.77%
--------------------------------------------------------------------------------
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 6.79%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 114-97238-17
SARA MALLOW
6415 NW 24TH STREET
BOCA RATON, FL 33434-4320 33.07%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 175-97327-10
MARGARET ANN GILLENWATER
2525 E PRINCE ROAD #23
TUCSON, AZ 85716-1146 21.13%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 170-29789-15
NICHOLAS G. ROSELLI & NICHOLAS A. ROSELLI JT
WROS
315 SOUTHAMPTON ROAD
WESTFIELD, MA 01085-1360 10.79%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 194-97099-17
JAMES KENNETH WINTER
2523 GREENRIDGE DR.
BELDEN, MS 08826-9530 14.41%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING CORP
FBO# 155-98529-16
FREDERICK B GALT
144 JAY STREET
ALBANY, NY 12210-1806 5.01%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 138-97818-14
CAROL Y FOSTER
524 MARIE AVENUE
BLOUNTSTOWN, FL 32424-1218 10.87%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 102-92974-11
ANN E HERZOG
74 TACOMA STREET
STATEN ISLAND, NY 10304-4222 10.37%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 166-98559-16
ANN P SARGENT
422 LOS ENCINOS AVENUE
SAN JOSE, CA 95134-1336 6.91%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 166-97970-19
ALICIA E SCHOBER
10139 RIDGEWAY DRIVE
CUPERTINO, CA 95014-2658 6.71%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 194-14889-16
PAUL R THORNTON & KARIN Z THORNTON JT TEN
1207 OAK GLEN LANE
SUGAR LAND, TX 77479-6175 6.16%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING CORP
FBO# 013-00189-14
DAVID PAQUIN & SUSAN PAQUIN
ATTN: PAUL D NUNES VP
JT TEN 100 WESTMINISTER ST.,
RI/MO/F02G
PROVIDENCE, RI 02903-2318 5.11%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMALL COMPANY EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
</TABLE>
-52-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 61.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 28.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 9.14%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMALL CAP VALUE FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 44.63%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 36.65%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 18.54%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 104-32732-16
HILDA BRANDT
ROLAND PARK PLACE
830 W. 40TH, APT. 359
BALTIMORE, MD 21211-2176 30.37%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 150-98301-11
N CLIFFORD NELSON JR
58 MIDDLEBURY ROAD
ORCHARD PARK, NY 14127-3581 19.14%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 102-60254-19
FREDERICK W GEISSINGER
601 NW 2ND STREET
EVANSVILLE, IN 47708-1013 19.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 103-97564-14
THOMAS X MCKENNA
170 TURTLE CREEK DRIVE
TEQUESTA, FL 33469-1547 12.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 103-31296-18
EDWARD U RODDY III
109 ANGLER AVENUE
PALM BEACH, FL 33480-3101 9.35%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 111-98315-17
THOMAS J BERNFELD
185 WEST END AVENUE, APT. 21D
NEW YORK, NY 10023-5548 13.72%
--------------------------------------------------------------------------------
</TABLE>
-54-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 162-27769-10
GILBERT SHUE & EVA SHUE TRUSTEES
SHUE FAMILY TRUST - DTD
11/8/84
10119 RIVERSIDE DR.
ONTARIO, CA 91761-7814 12.03%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 107-30623-15
ANDREJS ZVEJNIEKS
2337 CHRISTOPHER WALK
ATLANTA, GA 30327-1110 9.29%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 108-98472-11
RUFUS O. EDDINS, JR.
360 DOMINION CIRCLE
KNOXVILLE, TN 37922-2750 7.23%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 221-97250-13
MICHEAL A VESCHI
106 EXMOOR COURT
LEESBURG, VA 20176-2049 6.94%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STRATEGIC EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 94.24%
--------------------------------------------------------------------------------
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 5.20%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
VIOLET K. SAIDNEHR
260 MIDDLE NECK ROAD
GREAT NECK, NY 11021-1175 5.92%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PAN-ASIA FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
FIM FUNDING, INC.
ATTN: RICHARD JOSEPH
75 STATE STREET
5TH FLOOR
MAILSTOP: MA DE 10404G
BOSTON, MA 02109 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
MARK MASKOWITZ
P.O. BOX 576
WAINSCOTT, NY 11975-0576 45.80%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET BANK, NA
CUST FOR THE IRA PLAN FBO
MARK MASKOWITZ
P.O. BOX 576
WAINSCOTT, NY 11975-0576 21.26%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANTHONY P VERICCO
& ANTONIA VERICCO JT WROS
32 SUSAN DRIVE
SAUGUS, MA 01906 5.40%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JOHN J MANCINI
ANTHONY MANCINI JT TEN
114 ALPINE ROAD
PORTLAND, ME 04103-2804 11.30%
--------------------------------------------------------------------------------
</TABLE>
-56-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
ANDREW MONTZOLIS
40 FOX RUN ROAD
WATERBURY, CT 06708-2137 7.27%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET BANK, NA
CUST OF THE ROLLOVER IRA
FBO BEN V. PHAN
120 STOUGHTON STREET
DORCHESTER, MA 02125-1900 68.01%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FIM FUNDING, INC.
ATTN: RICHARD JOSEPH
75 STATE STREET, 5TH FLOOR
MAILSTOP: MA DE 10404G
BOSTON, MA 02109 12.03%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING CORP
FBO# 245-01434-13
ANTHONY M. SAVOY
103 OAK STREET
INDIAN ORCHARD, MA 01151-1538 12.64%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
FIM FUNDING, INC.
ATTN: RICHARD JOSEPH
75 STATE STREET
5TH FLOOR
MAILSTOP: MA DE 10404G
BOSTON, MA 02109 99.61%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
FIM FUNDING, INC.
ATTN: RICHARD JOSEPH
75 STATE STREET
5TH FLOOR
MAILSTOP: MA DE 10404G
BOSTON, MA 02109 99.61%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT INCOME FUND
--------------------------------------------------------------------------------
</TABLE>
-57-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 64.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 21.17%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 1648-0001 14.19%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
ADRIANA VITA
345 PARK AVE.
NEW YORK, NY 10154 5.37%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET BANK, NA
CUST OF THE ROLLOVER IRA
FBO JOEL J CORRIVEAU, SR.
28 LOUISE AVE.
METHUEN, MA 01844 9.24%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BOOTT MILLS
C/O RICHARD D LEGGAT
25TH FLOOR
150 FEDERAL STREET
BOSTON, MA 02110-1745 8.00%
--------------------------------------------------------------------------------
</TABLE>
-58-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
PIPE FITTERS LOCAL 537
HEALTH & WELFARE FUND
35 TRAVIS STREET #1
ALLSTON, MA 02134-1251 8.47%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 32.76%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 16.78%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 50.04%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 103-30971-12
DORIS G SCHACK
FBO - DORIS G SCHACK
LIVING TRUST
9161 EAST EVANS
SCOTTSDALE, AZ 85260-7575 19.66%
--------------------------------------------------------------------------------
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 132-90090-11
VIRGINIA HOLMES
303 BELLA VISTA DRIVE
ITHACA, NY 14850-5774 54.35%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 013-02964-11
JANE L GRAYHURST
770 BOYLSTON ST., APT 10G
BOSTON, MA 02199-7709 8.96%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 132-47141-10
VIRGINIA A HOLMES
303 BELLA VISTA DRIVE
ITHACA, NY 14850-5774 16.88%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME B SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 200-70099-19
NEIL C FELDMAN
41 WINDHAM WAY
ENGLISHTOWN, NJ 07726-8216 32.60%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF
FLEET SECURITIES INC.
FBO# 119-97697-10
IRA ZORNBERG
4219 NAUTILUS AVENUE
BROOKLYN, NY 11224-1019 13.15%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 147-24459-13
JAY ROBERT KLEIN
26800 AMHEARST CIRCLE
#209
CLEVELAND, OH 44122-7572 12.63%
--------------------------------------------------------------------------------
</TABLE>
-60-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 230-02116-18
MARJORIE DION
301 RAIMOND STREET
YAPHANK, NY 11980-9725 12.54%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 157-98031-13
PATRICIA FUSCO
112 E. CHAPEL AVENUE
CHERRY HILL, NJ 08034-1204 8.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 238-97175-19
MARIE GOTTFRIED
10208 ANDOVER COACH
CIRCLE H-2
LAKE WORTH, FL 33467-8158 6.21%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 31.45%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 56.13%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 11.84%
--------------------------------------------------------------------------------
</TABLE>
-61-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
CHELSEA POLICE RELIEF ASSOC.
JOHN R. PHILLIPS TREAS.
&MICHAEL MCCONA CLERK
180 CRESCENT AVENUE
CHELSEA, MA 02150-3017 16.91%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JOSUE COLON CUST
HAZEL COLON UGMA CT
400 LASALLE ST.
NEW BRITAN, CT 06051-1315 9.42%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ELIZABETH MUGAR
10 CHESTNUT ST.
APT. 1808
SPRINGFIELD, MA 01103-1709 8.70%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 38.90%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 24.46%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 36.33%
--------------------------------------------------------------------------------
</TABLE>
-62-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
CHARLES DAGRACA & BARBARA
DAGRACA
JT WROS 20 WILLIAM PENN RD.
WARREN, NJ 07059 8.23%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL B SHARES
--------------------------------------------------------------------------------
SYLVIA FENDLER
72 BRINKERHOFF AVE.
STAMFORD, CT 06905 11.58%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FRANCES E STADY
P.O. BOX 433
3176 MAIN ST.
YORKSHIRE, NY 14173-0433 5.97%
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
US CLEARING A DIVISION OF
FLEET SECURITIES INC.
FBO# 978-02869-11 CAROL GUY & ALI E GUY
14 THOMAS ST.
SCARSDALE, NY 10583-1031 5.16%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERMEDIATE TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 5.80%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 92.01%
--------------------------------------------------------------------------------
</TABLE>
-63-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
LYNNE P ELDRIDGE REV. LIVING TRUST
LYNNE P ELDRIDGE TRUSTEE
U/T/A DATED 2/24/00
12 TIDES END LANE
PO BOX 576
EAST ORLEANS, MA 02643-0576 99.26%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
CHARLES SCHWAB & CO.
ATTN: MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104-4122 36.59%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RICHARD F MESSING
3310 SOUTH OCEAN BLVD.
APT. 532
HIGHLAND BEACH, FL 33487 5.14%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONNECTICUT MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 71.33%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 28.46%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
THEODORE KONSTANTINO
JEAN N. KONSTANTINO JT WROS
49 SHORE RD.
CLINTON, CT 06413-2363 11.38%
--------------------------------------------------------------------------------
PRIME A SHARES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
</TABLE>
-64-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT -
NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638 93.05%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
MARIA GUARNA & NAZZARENO
GUARNA JT WROS
147 WOODBURY AVE.
STAMFORD, CT 06907 31.56%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CATHERINE J. FELLOWS
7 PENT ROAD
BLOOMFIELD, CT 06002-1518 11.40%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MCGRATH FAMILY LIVING TRUST
GEORGE MCGRATH TRUSTEE
35 RIDGEWOOD ROAD
MERIDEN, CT 06450-4459 56.98%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
CHARLES SCHWAB & CO.
ATTN: MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104-4122 25.20%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLORIDA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 89.42%
--------------------------------------------------------------------------------
</TABLE>
-65-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 9.54%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 42.94%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 54.88%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 84.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 14.97%
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
</TABLE>
-66-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
EDWARD S. KONDI &
WENJA S. KONDI JT WROS
501 LEXINGTON ST.
UNIT 1
WALTHAM, MA 02462 22.38%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WILLIAM J. TEDOLDI & BETSY M. TEDOLDI JT WROS
68 HIGH ST.
NEEDHAM, MA 02492 44.57%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 245-00100-00
MARC P. HAYES & HELEN HAYES JTTEN
52 PHILLIP FARM RD.
MARSHFIELD, MA 02050 21.84%
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
CORPORATE BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 37.64%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 34.42%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 21.52%
--------------------------------------------------------------------------------
</TABLE>
-67-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
RHODE ISLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 90.44%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 9.21%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 33.93%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 24.64%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JAMES R MCCULLOCH
C/O MICROFIBRE
P.O. BOX 1208
PAWTUCKET, RI 02862-1208 7.29%
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BKB SHARES
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO# 245-26616-10
PENN & CURREN MATERIALS
75 PENNSYLVANIA AVENUE
WARWICK, RI 02888-3028 9.18%
--------------------------------------------------------------------------------
</TABLE>
-68-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
CHARLES SCHWAB & CO.
ATTN: MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104-4122 8.13%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JOHN J ALMEDIA TR
JOHN J ALMEDIA REVOCABLE TRUST
U/A DATED MAY 15, 1997
517 PLEASANT STREET
PAWTUCKET, RI 02860-5725 5.23%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NEW YORK MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 63.16%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 31.08%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 5.70%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
MARILYN J BRANTLEY
5954 VAN ALLEN ROAD
BELFAST, NY 14711-8750 13.59%
--------------------------------------------------------------------------------
</TABLE>
-69-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
TRUST SHARES
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 52.59%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GALES & CO.
FLEET INVESTMENT SERVICES
MUTUAL FUNDS UNIT - NY/RO/TO4A
159 EAST MAIN STREET
ROCHESTER, NY 14638-0001 46.85%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RETAIL A SHARES
--------------------------------------------------------------------------------
JOHN W MAKI & KIMBERLY MCGRATH MAKI
JT WROS
1 CONNET LANE
MENDHAM, NJ 07945-2938 8.96%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 979-08676-19
GEORGE L. GUTIERREZ & NEREIDA GUTIERREZ
8 OLD FARM ROAD
SADDLE RIVER, NJ 07458-3106 26.75%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
US CLEARING A DIVISION OF FLEET SECURITIES
INC.
FBO 979-10688-11
JOHN J. DELUCCA
314 ARDMORE ROAD
HO HO KUS, NJ 07423-1110 59.11%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRIME RESERVES
--------------------------------------------------------------------------------
U.S. CLEARING
26 BROADWAY
NEW YORK, NY 10004-1703 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GOVERNMENT RESERVES
--------------------------------------------------------------------------------
U.S. CLEARING
26 BROADWAY
NEW YORK, NY 10004-1703 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TAX-EXEMPT RESERVES
--------------------------------------------------------------------------------
</TABLE>
-70-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
U.S. CLEARING
26 BROADWAY
NEW YORK, NY 10004-1703 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AS OF NOVEMBER 14, 2000, THE NAME, ADDRESS AND PERCENTAGE OWNERSHIP OF THE
ENTITIES OR PERSONS THAT HELD BENEFICIALLY MORE THAN 5% OF THE OUTSTANDING TRUST
SHARES OF EACH OF GALAXY'S INVESTMENT PORTFOLIOS WERE AS FOLLOWS:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STABLE ASSET FUND
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 13.04%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GOVERNMENT FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MURPHY JOHN DAVIS TRUA
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 6.89%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. TREASURY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LORING WALCOTT CLIENT SWEEP ACCT.
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 28.08%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY VALUE FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LEVITON MFG CO RET SAV PLAN
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 6.34%
--------------------------------------------------------------------------------
</TABLE>
-71-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
EQUITY GROWTH FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS-EQUITY GROWTH
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 23.44%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUSCO RETIREE HEALTH VEBA TRUST
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 6.59%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS-INTL EQUITY
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 8.78%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FFG INTERNATIONAL EQUITY FUND
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 7.18%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STRATEGIC EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FFG RETIREMENT & PENSION VDG
C/O FLEET FINANCIAL GROUP
159 EAST MAIN
ROCHESTER, NY 14638 90.51%
--------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS PLAN-HQ BOND
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 12.42%
--------------------------------------------------------------------------------
</TABLE>
-72-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
SHORT TERM BOND FUND
BROWN SHOE CO.
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 8.84%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSET ALLOCATION FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS-ASSET ALLOCATION
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 31.72%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMALL COMPANY EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS-SMALL COMPANY
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 37.23%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TAX EXEMPT BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NUSCO RETIREE HEALTH VEBA TRUST
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 37.77%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONNECTICUT MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WINNIFRED M PURDY
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 7.83%
--------------------------------------------------------------------------------
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
JOHN H. DVERDEN IMA
C/O NORSTAR TRUST CO.
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 6.88%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CORPORATE BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COLE HERSEE PENSION PLAN
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 7.36%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLEET SAVINGS PLUS-GRTH INCOME
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 38.31%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMALL CAP VALUE FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FFG EMP RET MISC ASSETS SNC
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 23.39%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CVS INC 401K P/S PLN 3
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 12.51%
--------------------------------------------------------------------------------
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INS CORP. OF NEW YORK
LIAB. MATCH PORT
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 6.05%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PERILLO TOURS
C/O NORSTAR TRUST CO/GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 19.40%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ROYAL CHAMBORD IMA
C/O NORSTAR TRUST CO/GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 9.70%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MCKEE WENDELL A. MARITAL TRUST
C/O NORSTAR TRUST CO/GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 9.63%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DOROTHY L. NELSON
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 6.49%
--------------------------------------------------------------------------------
ROBERT LAWRENCE JR.
C/O NORSTAR TRUST CO
GALES & CO
159 EAST MAIN
ROCHESTER, NY 14638 5.49%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RHODE ISLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CP PRITCHARD TR GST NON-EXEMPT
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 13.33%
--------------------------------------------------------------------------------
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REGISTRATION NAME PERCENT OWNERSHIP
--------------------------------------------------------------------------------
<S> <C>
--------------------------------------------------------------------------------
INSTITUTIONAL TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRANSWITCH CAP FOCUS ACCR B
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 9.07%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
T.P. PARKAS TEMP
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 10.51%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
M.G./MICHAEL SENDZIMIR
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 5.34%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FLORIDA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
C. PRITCHARD TR B SH LP HESS
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 6.53%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
WILLIAM M. WOOD TRUST
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638 6.23%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CHARLES G. BANCROFT TR U/WILL 5.74%
C/O NORSTAR TRUST CO.
GALES & CO.
159 EAST MAIN
ROCHESTER, NY 14638
--------------------------------------------------------------------------------
</TABLE>
-76-
<PAGE>
FINANCIAL STATEMENTS
Galaxy's Annual Report to Shareholders with respect to the Funds for
the fiscal year ended July 31, 2000 has been filed with the SEC. The financial
statements in such Annual Report 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 year ended
July 31, 2000 have been audited by Ernst & Young LLP, whose report thereon also
appears in such Annual Report and is incorporated herein by reference. No other
parts of the Annual Report are 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.
-77-
<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
honor senior financial obligations and contracts. These obligations have an
original maturity not exceeding 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 evidenced by many of the following characteristics: leading market
positions in well-established industries; high
A-1
<PAGE>
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.
Fitch short-term ratings apply to 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 for short-term
obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest 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 a
capacity for meeting financial commitments which is solely reliant upon a
sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
A-2
<PAGE>
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.
A-3
<PAGE>
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.
"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" - An obligation rated "C" is currently highly vulnerable to nonpayment.
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" - The 'r' highlights obligations that Standard & Poor's believes have
significant noncredit risks. Examples of such obligations are securities with
principal or interest return indexed to equities, commodities, or currencies;
certain swaps and options; and interest-only and principal-only mortgage
securities. The absence of an 'r' symbol should not be taken as an indication
that an obligation will exhibit no volatility or variability in total return.
- N.R. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
A-4
<PAGE>
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 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" - Bonds are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
"B" - Bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
"Caa " - Bonds are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
"Ca" - Bonds represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
"C" - Bonds are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
A-5
<PAGE>
Con. (...) - Bonds for which the security depends on 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 operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. The parenthetical rating denotes probable credit stature upon
completion of construction or elimination of the basis of the 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 ratings used by Fitch.
"AAA" - Securities 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" - Securities 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" - Securities 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" - Securities 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. This is the lowest
investment grade category.
"BB" - Securities 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.
"B" - Securities 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.
A-6
<PAGE>
"CCC," "CC" and "C" - Securities 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" - Securities 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.
NOTES TO FITCH LONG-TERM AND SHORT-TERM RATINGS
- To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "CCC" and "F1" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major
rating categories.
- `NR' indicates that Fitch does not rate the issuer or issue in question.
- `Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
- Rating Watch: Ratings are placed on RatingWatch to notify investors that
there is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. RatingWatch is typically resolved over a relatively short
period.
- A Rating Outlook indicates the direction a rating is likely to move
over a one to two-year period. Outlooks may be positive, stable or negative.
A positive or negative Rating Outlook does not imply a rating change is
inevitable. Similarily, companies whose outlooks are "stable" could be
upgraded or downgraded before an outlook moves to positive or negative if
circumstances warrant such an action. Occasionally, Fitch may be unable to
identify the fundamental trend. In these cases, the Rating Outlook may be
described as evolving.
A-7
<PAGE>
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.
A-8
<PAGE>
"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:
"MIG-1"/"MIG-1" - This designation denotes superior credit quality.
Excellent protection afforded by established cash flows, highly reliable
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - This designation denotes strong credit quality. Margins
of protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes acceptable credit quality.
Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
"SG" - This designation denotes speculative-grade credit quality. Debt
instruments in this category lack sufficient margins of protection.
Fitch uses the short-term ratings described under Commercial Paper Ratings
for municipal notes.
A-9
