<PAGE>
As filed with the Securities and Exchange Commission on February 23, 2000
Securities Act File No. 33-4806
Investment Company Act File No. 811-4636
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 43 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 44 /X/
The Galaxy Fund
(Exact Name of Registrant as Specified in Charter)
4400 Computer Drive
Westborough, Massachusetts 01581-5108
(Address of Principal Executive Officers)
Registrant's Telephone Number:
(877) 289-4252
W. Bruce McConnel, III
DRINKER BIDDLE & REATH LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103
(Name and Address of Agent for Service)
Copy to:
Jylanne Dunne, Vice President
PFPC Inc.
4400 Computer Drive
Westborough, Massachusetts 01581-5108
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE>
[Front cover page]
The Galaxy Fund
Prospectus
May __, 2000
Galaxy Intermediate Tax-Exempt Bond Fund
Galaxy Connecticut Intermediate Municipal Bond Fund
Galaxy Massachusetts Intermediate Municipal Bond Fund
Galaxy Growth Fund II
Retail A Shares and Retail B Shares
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.
<PAGE>
Contents
<TABLE>
<S> <C>
1 Risk/return summary
1 Introduction
2 Galaxy Intermediate Tax-Exempt Bond Fund
8 Galaxy Connecticut Intermediate Municipal Bond Fund
13 Galaxy Massachusetts Intermediate Municipal Bond Fund
18 Galaxy Growth Fund II
23 Additional information about risk
24 Investor guidelines
26 Fund management
27 How to invest in the Funds
27 How sales charges work
30 Buying, selling and exchanging shares
31 How to buy shares
33 How to sell shares
35 How to exchange shares
35 Other transaction policies
37 Dividends, distributions and taxes
40 Galaxy investor programs
40 Retirement plans
40 Other programs
42 How to reach Galaxy
43 Financial highlights
</TABLE>
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Intermediate Tax-Exempt Bond Fund, Galaxy
Connecticut Intermediate Municipal Bond Fund, Galaxy Massachusetts Intermediate
Municipal Bond Fund and Galaxy Growth Fund II. Each Fund commenced operations as
a separate portfolio (the "Predecessor Fund") of the Boston 1784 Funds. On May
__, 2000, each Predecessor Fund was reorganized as a new portfolio of Galaxy.
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 past performance of the Fund measured on both a year-by-year and
long-term basis
- - the fees and expenses that you will pay as an investor in the Fund.
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. The Adviser, an
indirect wholly-owned subsidiary of FleetBoston Corporation, was established in
1984 and has its main office at 75 State Street, Boston, Massachusetts 02109.
The Adviser also provides investment management and advisory services to
individual and institutional clients and manages the other Galaxy investment
portfolios. As of December 31, 1999, the Adviser managed over $96 billion in
assets.
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN ANY OF THE FUNDS.
<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from federal
income tax, consistent with preservation of capital.
[Sidenote:]
PRESERVATION OF CAPITAL
Preservation of capital means protecting the amount of money you invest in a
Fund. If a Fund seeks to preserve capital, it will try to maintain a relatively
stable share price so your investment is protected.
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt securities
in a Fund come due or mature. It is calculated by averaging the time to maturity
of all debt securities held by a Fund with each maturity "weighted" according to
the percentage of assets it represents.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in a diversified portfolio of 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 circumstances, at least 80% of the Fund's net
assets are invested in municipal securities or in mutual funds or other
investment companies that invest in municipal securities. The Fund may also
invest up to 20% of its net assets in debt securities that pay interest that is
not exempt from federal tax, such as U.S. Government obligations, corporate
bonds, money market instruments, including commercial paper and bank
obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
-2-
<PAGE>
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various geographic regions, issuers and
industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the four ratings assigned by Standard & Poor's
Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are unrated
securities determined by the Adviser to be of comparable quality. The Adviser
expects, however, that most of the securities purchased by the Fund will have
one of the top three ratings assigned by S&P or Moody's, or will be unrated
securities determined by the Adviser to be of comparable quality. Occasionally,
the rating of a security held by the Fund may be downgraded to below investment
grade. If that happens, the Fund doesn't have to sell the security unless the
Adviser determines that under the circumstances the security is no longer an
appropriate investment for the Fund. However, the Fund will sell promptly any
securities that are not rated investment grade by either S&P or Moody's if the
securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[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.
-3-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates are
falling, the prices of debt securities tend to rise. Generally, the longer
the time until maturity, the more sensitive the price of a debt security is
to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make payments
of principal and interest than is the case with higher-rated securities. 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. Some
municipal obligations are payable only from limited revenue sources or by
private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund may
suffer from the inability to invest in higher-yielding securities.
- - HEDGING - The Fund may invest in derivatives, such as futures and options on
futures, to hedge against market risk. There is no guarantee hedging will
always work. It can also prevent the Fund from making a gain if markets move
in the opposite direction to the hedge.
- - 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.
[Sidenote:]
DERIVATIVES
A derivative is an investment whose value is based on or derived from the
performance of other securities or interest or currency exchange rates or
indices. Derivatives are considered to carry a higher degree of risk than other
types of securities.
-4-
<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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has have varied
from year to year.
[Sidenote:]
Best quarter: ____% for the quarter ending ________, ____
Worst quarter: ____% for the quarter ending ________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -3.02% 14.31% 4.20% 9.10% 6.41% ____%
- -------------------------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
-5-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 year 5 years Since inception
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares ____% ____% ____% (6/14/93)
- -------------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal Bond Index
____% ____% ____% (since 5/31/93)
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Maximum deferred sales charge
Maximum sales charge (load) (load) shown as a % of the
on purchases shown as a % of offering price or sale
the offering price price, whichever is less
- -------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- -------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.30% 1.05%(3)
- -------------------------------------------------------------------------------
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the
Funds -- How sales charges work."
-6-
<PAGE>
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.63%. Total Fund operating expenses after this waiver are
expected to be 0.93% for Retail A Shares. This fee waiver may be revised or
discontinued at any time.
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 o 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>
Retail A Shares $478 $697 $933 $1,609
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-7-
<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income exempt from both federal
and Connecticut personal income tax, with a secondary goal of preserving
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Connecticut municipal securities.
Connecticut municipal securities are securities issued by the State of
Connecticut and other government issuers and that pay interest which is exempt
from both federal income tax and Connecticut personal income tax. Under normal
conditions, the Fund will invest no more than 20% of its net assets in taxable
debt securities, such as U.S. Government obligations, corporate bonds, money
market instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-8-
<PAGE>
unrated securities determined by the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by S&P or Moody's if
the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-9-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Connecticut
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Connecticut. Other
considerations affecting the Fund's investments in Connecticut municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on August 1, 1994 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-10-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14.66% 3.63% 8.53% 6.67% _____%
- -------------------------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
______%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 year 5 years Since inception
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares _____% _____% _____% (8/1/94)
- -------------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal Bond Index _____% _____% _____% (since 7/31/94)
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Maximum deferred sales charge
Maximum sales charge (load) (load) shown as a % of the
on purchases shown as a % of offering price or sale
the offering price price, whichever is less
- -------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- -------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.32% 1.07%(3)
- -------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the Funds
- How sales charges work."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.63%. Total Fund operating expenses after this waiver
are expected to be 0.95% for Retail A Shares. This fee waiver may be revised
or discontinued at any time.
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>
Retail A Shares $480 $703 $943 $1,632
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-12-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from both
federal and Massachusetts personal income tax, consistent with preservation of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Massachusetts municipal securities.
Massachusetts municipal securities are securities issued by the Commonwealth of
Massachusetts and other government issuers and that pay interest which is exempt
from both federal income tax and Massachusetts personal 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, corporate bonds, money market
instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-13-
<PAGE>
unrated securities determined the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by S&P or Moody's if
the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances the Fund's average weighted maturity will be
between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-14-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Massachusetts
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Massachusetts. Other
considerations affecting the Fund's investments in Massachusetts municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-15-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-5.45% 13.73% 3.32% 8.89% 5.91% ____%
- -------------------------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 year Since inception
- -------------------------------------------------------------------------------
<S> <C> <C>
Trust Shares _____% _____% (6/14/93)
- -------------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal Bond Index _____% _____% (since 5/31/93)
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Maximum deferred sales charge
Maximum sales charge (load) (load) shown as a % of the
on purchases shown as a % of offering price or sale
the offering price price, whichever is less
- -------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- -------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.32% 1.07%(3)
- -------------------------------------------------------------------------------
</TABLE>
-16-
<PAGE>
(1) Reduced sales charges may be available. See "How to invest in Funds - How
sales charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the Funds
- How sales charges work."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.63%. Total Fund operating expenses after this waiver
are expected to be 0.95% for Retail A Shares. This fee waiver may be
revised or discontinued at any time.
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>
Retail A Shares $480 $703 $943 $1,632
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-17-
<PAGE>
Galaxy Growth Fund II
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with capital appreciation. Dividend income,
if any, is incidental to capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in common stock (including depositary receipts) of
U.S. and foreign companies which the Adviser believes have above-average growth
potential. The Fund normally invests 80% to 90% or more of its total assets in
these securities, although the Fund may invest up to 35% of its total assets in
other securities, such as convertible and non-convertible debt securities,
preferred stock, warrants and money market instruments.
The Fund principally invests in U.S. companies with market capitalizations of at
least $250 million, although the Fund also may invest in companies with smaller
capitalizations. The Fund may invest up to 25% of its total assets in the
securities of foreign companies, including companies in developing countries.
While some of the Fund's investments may pay dividends, current income is not a
consideration when selecting investments.
In selecting securities for the Fund, the Adviser uses a "bottom-up" approach.
It looks for companies that it believes are in dynamic high-growth sectors of
the world economy and that are thought to have dominant or strong competitive
positions within their sectors. The Adviser also looks for companies thought to
have quality management and that are expected to have strong earnings growth
potential.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
The Fund will sell a security if there is an adverse change in the projected
earnings growth of the company issuing the security. A security will also be
sold when, as a result of changes in the economy or the performance of the
security or other circumstances, the Adviser believes that holding the security
is no longer consistent with the Fund's investment objective.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
-18-
<PAGE>
[Sidenote:]
MARKET CAPITALIZATION
A company's market capitalization is the price of a share of its stock,
multiplied by the number of shares held by investors.
THE MAIN RISKS OF INVESTING IN THE FUND
Changes in the U.S. or foreign economies can cause the value of stocks and other
investments held by the Fund to fall. Stock prices may decline over short or
extended periods. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
The value of your investment in the Fund will go up and down with the value of
the investments which the Fund holds. The Fund's investments may not perform as
well as other investments, even in times of rising markets.
In addition, the Fund also carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies (generally, those with market
capitalizations below $1.5 billion) tend to have limited resources, product
lines and market share. As a result, their share prices tend to fluctuate
more than those of larger companies. Their shares may also trade less
frequently and in limited volume, making them potentially less liquid. The
price of small company stocks might fall regardless of trends in the
broader market.
- - CONVERTIBLE SECURITIES - Securities that can be converted into common
stock, such as certain debt securities and preferred stock, are subject to
the usual risks associated with fixed income investments, such as interest
rate risk and credit risk. In addition, because they react to changes in
the value of the equity securities into which they will convert,
convertible securities are also subject to stock market risk.
- - FOREIGN INVESTMENTS - Foreign investments may be riskier than U.S.
investments because of factors such as foreign government restrictions,
changes in currency exchange rates, incomplete financial information about
the issuers of securities, and political or economic instability. Foreign
stocks may be more volatile and less liquid than U.S. stocks.
- - EMERGING MARKETS - The risks associated with foreign investments are
heightened when investing in emerging markets. The governments and
economies of emerging market countries feature greater instability than
those of more developed countries. Such investments tend to fluctuate in
price more widely and to be less liquid than other foreign investments.
- - HEDGING - The Fund may engage in foreign currency transactions to hedge
against the currency risk of its foreign investments. There's no guarantee
hedging will always work. It can also prevent the Fund from making a gain
if markets move in the opposite direction to the hedge.
- - 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.
-19-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and the 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.
The Fund began operations on March 28, 1996 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares and BKB Shares of the Fund. The returns shown below are
for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
----------------------------------
1997 1998 1999
----------------------------------
<S> <C> <C>
13.92% 1.36% _____%
----------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 year Since inception
- -------------------------------------------------------------------------------
<S> <C> <C>
Trust Shares _____% _____% (3/28/96)
- -------------------------------------------------------------------------------
Russell 2000 Index _____% _____% (since 3/31/96)
- -------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index which tracks the performance of the
2000 smallest of the 3000 largest U.S. companies, based on market
capitalization. Companies included in the Russell 2000 Index have market
capitalizations that currently range between $30 million and $1.4 billion.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Maximum deferred sales charge
Maximum sales charge (load) (load) shown as a % of the
on purchases shown as a % of offering price or sale
the offering price price, whichever is less
- -------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- -------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- -------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.49% 1.24%
- -------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95% ____% ____%
- -------------------------------------------------------------------------------
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in Funds - How
sales charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the Funds
- How sales charges work."
(3) This amount applies if you sell your shares in the first year after purchase
and gradually declines to 1% in the sixth year after purchase. After six
years, your Retail B Shares will automatically convert to Retail A Shares.
See "How to invest in the Funds - How sales charges work."
-21-
<PAGE>
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
- - your Retail B Shares convert to Retail A Shares after six years
- - 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>
Retail A Shares $497 $754 $1,030 $1,819
- -------------------------------------------------------------------------------
Retail B Shares $___ $___ $_____ $_____
- -------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio managers are Theodore E. Ober and Eugene D. Takach. They
are primarily responsible for the day-to-day management of the Fund's investment
portfolio. Mr. Ober, who has over 11 years of experience in investment
management and research analysis, has been a Research Analyst, Fund Manager and
Senior Fund Manager with the Adviser and its affiliated organizations since
1987. Mr. Takach, who has over 30 years of experience in investment
management, research analysis and securities trading, has been a portfolio
manager with the Adviser and its affiliated organizations since 1971.
Mr. Ober and Mr. Takach have co-managed the Predecessor Fund since it began
operations.
-22-
<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 are not part of its principal investment strategy to try to avoid losses
during unfavorable market conditions. These investments may include cash (which
will not earn any income) and taxable investments, such as money market
instruments and debt securities issued or guaranteed by the U.S. Government or
its agencies. These strategies could prevent a Fund from achieving its
investment objective and could reduce the Fund's return and affect its
performance during a market upswing.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund may,
from time to time, pursue other investment strategies and make other types of
investments in support of its overall investment goal. These supplemental
investment strategies, which are not considered to be main investment strategies
of the Funds - and the risks involved - are described in detail in the Statement
of Additional Information (SAI) which is referred to on the back cover of this
prospectus.
YEAR 2000 RISKS
Over the past several years, the Adviser and the Funds' other major service
providers expended considerable time and money in addressing the computer and
technology problems associated with the transition to the Year 2000. As a result
of those efforts, the Funds did not experience any material disruptions in their
operations as a result of the transition to the 21st century. The Adviser and
the Funds' other major service providers are continuing to monitor the Year 2000
or Y2K problem, however, and there can be no assurances that there will be no
adverse impact to the Funds as a result of future computer-related Y2K
difficulties.
-23-
<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 financial institution or plan
administrator for help in deciding which Fund is right for you.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Galaxy Fund May be best suited for investors who...
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Galaxy Intermediate Tax-Exempt Bond Fund - are seeking current income that is exempt
from federal income tax
- are seeking a higher yield than is
available from shorter-term tax-exempt
securities or money market funds
- ----------------------------------------------------------------------------------------------------------
Galaxy Connecticut Intermediate Municipal - reside in Connecticut and are seeking current
Bond Fund income that is exempt from federal income tax
and Connecticut personal income tax
- are seeking a higher yield then is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------------------------------------------------------------
Galaxy Massachusetts Intermediate Municipal - reside in Massachusetts and are seeking
Bond Fund current income that is exempt from federal
income tax and Massachusetts personal income
tax
- are seeking a higher yield then is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------------------------------------------------------------
Galaxy Growth Fund II - are seeking long-term growth
- are able to tolerate the additional risks of
investing in smaller companies
- are not seeking income
- ----------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
TAX-EQUIVALENT YIELD
One way to understand the tax advantages of a tax-exempt fund is to compare its
after-tax return to that of a taxable investment. For example, suppose a taxable
fund pays a return of 10%. If you're in the 36% federal income tax bracket, the
fund's return after taxes is 6.4%. When a tax-exempt fund pays a return of 10%,
you don't pay tax. So if you're in the 36% tax bracket, that's
-24-
<PAGE>
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.
-25-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
its portfolio securities, and maintains related records. Prior to the
reorganization, BankBoston N.A. ("BankBoston") served as the investment adviser
to each of the Predecessor Funds. BankBoston is an indirect wholly-owned
subsidiary of FleetBoston Corporation and an affiliate of the Adviser.
The management fees paid to BankBoston by each Predecessor Fund during the
fiscal year ended May 31, 1999 are set forth below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Management fee as a % of
Fund average net assets
- -------------------------------------------------------------------------------
<S> <C>
Intermediate Tax-Exempt Bond .68%
- -------------------------------------------------------------------------------
Connecticut Intermediate Municipal Bond .67%
- -------------------------------------------------------------------------------
Massachusetts Intermediate Municipal Bond .67%
- -------------------------------------------------------------------------------
Growth II .74%
- -------------------------------------------------------------------------------
</TABLE>
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 they believe that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
-26-
<PAGE>
HOW TO INVEST IN THE FUNDS
All of the Funds offer Retail A Shares. The Growth Fund II also offers Retail B
Shares.
HOW SALES CHARGES WORK
You will normally pay a sales charge to invest in the Funds. If you buy Retail A
Shares of a Fund, you'll usually pay a sales charge (sometimes called a
front-end load) at the time you buy your shares. If you buy Retail B Shares of
the Growth Fund II, you may have to pay a contingent deferred sales charge
(sometimes called a back-end load or CDSC) when you sell your shares. This
section explains these two options.
[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 attributable to Retail A Shares or
Retail B Shares, minus the value of the Fund's liabilities attributable to
Retail A Shares or Retail B Shares, divided by the number of Retail A Shares or
Retail B Shares held by investors.
RETAIL A SHARES
The table below shows the sales charge you'll pay if you buy Retail A Shares of
the Funds. The offering price is the NAV of the shares purchased, plus any
applicable sales charge.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Total sales charge
- -------------------------------------------------------------------------------
Amount of your investment As a % of the offering As a % of your
price per share investment
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.75% 3.90%
- -------------------------------------------------------------------------------
$50,000 but less than $100,000 3.50% 3.63%
- -------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- -------------------------------------------------------------------------------
$250,000 but less than $500,000 2.50% 2.56%
- -------------------------------------------------------------------------------
$500,000 and over 0.00%(1) 0.00%(1)
- -------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE>
(1) There is no front-end sales charge on investments in Retail A Shares of
$500,000 or more. However, if you sell the shares within one year after
buying them, you'll pay a CDSC of 1% of the offering price or 1% of the net
asset value of your shares, whichever is less, unless the shares were sold
because of the death or disability of the shareholder. However, Galaxy will
waive the 1% CDSC the first time you sell shares during this one-year
period. If you reinvest the proceeds of this sale within one year, the
waiver of the CDSC won't apply to any sale of shares purchased with such
reinvested proceeds.
Galaxy's distributor may from time to time implement programs under which a
broker-dealer's sales force may be eligible to win nominal awards for certain
sales efforts. If any such program is made available to any broker-dealer, it
will be made available to all broker-dealers on the same terms. Payments made
under such programs are made by Galaxy's distributor out of its own assets and
not out of the assets of the Funds. These programs will not change the price of
Retail A Shares or the amount that the Funds will receive from such sales.
Certain affiliates of the Adviser may, at their own expense, provide additional
compensation to affiliated broker-dealers whose customers purchase significant
amounts of Retail A Shares of one or more Funds and to unaffiliated
broker-dealers whose customers purchase Retail A Shares of one or more of the
Funds. Such compensation will not represent an additional expense to the Funds
or their shareholders, since it will be paid from the assets of the Adviser's
affiliates.
There's no sales charge when you buy Retail A Shares if:
- - You buy shares by reinvesting your dividends and distributions.
- - You were a Galaxy shareholder before December 1, 1995.
- - You buy shares for a 401(k) or SIMPLE IRA retirement account (applicable only
for the Growth Fund II).
- - You buy shares for any retirement account provided that you held Retail A
Shares in a retirement account prior to January 1, 1999 (applicable only for
the Growth Fund II).
- - You buy shares for any retirement account and your total cumulative Retail A
Share retirement account balance was $30,000 or more between January 1, 1999
and June 30, 1999 (applicable only for the Growth Fund II).
- - You buy shares with money from another Galaxy Fund on which you've already
paid a sales charge (as long as you buy the new shares within 90 days after
selling your other shares).
- - You previously paid a sales charge for the shares of another mutual fund
company (as long as You buy the Galaxy shares within 60 days of selling your
other shares).
- - You're an investment professional who places trades for your clients and
charges them a fee.
- - You buy shares under an all-inclusive fee program (sometimes called a "wrap
fee program") offered by a broker-dealer or other financial institution.
- - You were a shareholder of the Boston 1784 Funds on the date when the Boston
1784 Funds were reorganized into Galaxy.
-28-
<PAGE>
[Sidenote:]
SALES CHARGE WAIVERS
Ask your investment professional or Galaxy's distributor, or consult the SAI,
for other instances in which the sales load on Retail A Shares is waived. When
you buy your shares, you must tell your investment professional or Galaxy's
distributor that you qualify for a sales load waiver. To contact Galaxy's
distributor call 1-877-BUY- GALAXY (1-877-289-4252).
RETAIL B SHARES
If you buy Retail B Shares of the Growth Fund II, you won't pay a CDSC unless
you sell your shares within six years of buying them. The following table shows
the schedule of CDSC charges:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
If you sell your shares You'll pay a CDSC of
<S> <C>
- -------------------------------------------------------------------------------
during the first year 5.00%
- -------------------------------------------------------------------------------
during the second year 4.00%
- -------------------------------------------------------------------------------
during the third year 3.00%
- -------------------------------------------------------------------------------
during the fourth year 3.00%
- -------------------------------------------------------------------------------
during the fifth year 2.00%
- -------------------------------------------------------------------------------
during the sixth year 1.00%
- -------------------------------------------------------------------------------
after the sixth year None
- -------------------------------------------------------------------------------
</TABLE>
For purposes of calculating the CDSC, all purchases made during a calendar month
are considered to be made on the first day of that month. The CDSC is based on
the value of the Retail B Shares on the date that they are sold or the original
cost of the shares, whichever is lower. To keep your CDSC as low as possible
each time you sell shares, Galaxy will first sell any shares in your account
that are not subject to a CDSC. If there are not enough of these, Galaxy will
sell those shares that have the lowest CDSC. There is no CDSC on Retail B Shares
that you acquire by reinvesting your dividends and distributions. In addition,
there's no CDSC when Retail B Shares are sold because of the death or disability
of a shareholder and in certain other circumstances such as exchanges. Ask your
investment professional or Galaxy's distributor, or consult the SAI, for other
instances in which the CDSC is waived. To contact Galaxy's distributor, call
1-877-BUY-GALAXY (1-877-289-4252).
DISTRIBUTION AND SHAREHOLDER SERVICE FEES
Retail A Shares of the Funds can pay shareholder service fees at an annual rate
of up to 0.50% of each Fund's Retail A Share assets. The Funds do not intend to
pay more than 0.30% in shareholder service fees with respect to Retail A Shares
during the current fiscal year.
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<PAGE>
Retail B Shares of the Growth Fund II pay distribution and shareholder service
(12b-1) fees at an annual rate of up to 1.15% of the Fund's Retail B Share
assets. The Fund does not intend to pay more than 0.95% in distribution and
shareholder service (12b-1) fees during the current fiscal year. Galaxy has
adopted a plan under Rule 12b-1 that allows the Growth Fund II to pay fees from
its Retail B Share assets for selling and distributing Retail B Shares and for
services provided to shareholders. 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.
CONVERTING RETAIL B SHARES TO RETAIL A SHARES
Six years after you buy Retail B Shares of the Growth Fund II, they will
automatically convert to Retail A Shares of the Fund. This allows you to benefit
from the lower annual expenses of Retail A Shares.
CHOOSING BETWEEN RETAIL A SHARES AND RETAIL B SHARES
Retail B Shares are subject to higher fees than Retail A Shares. For this
reason, Retail A Shares can be expected to pay higher dividends than Retail B
Shares. However, because Retail A Shares are subject to an initial sales charge
which is deducted at the time you purchase Retail A Shares (unless you qualify
for a sales load waiver), you will have less of your purchase price invested in
a particular Fund if you purchase Retail A Shares than if you purchase Retail B
Shares of the Fund.
In deciding whether to buy Retail A Shares or Retail B Shares of the Growth Fund
II, you should consider how long you plan to hold the shares. Over time, the
higher fees on Retail B Shares may equal or exceed the initial sales charge and
fees for Retail A Shares. Retail A Shares may be a better choice if you qualify
to have the sales charge reduced or eliminated or if you plan to sell your
shares within one or two years. Consult your financial professional for help in
choosing the appropriate share class.
BUYING, SELLING AND EXCHANGING SHARES
You can buy and sell Retail A Shares and Retail B Shares of the Funds on any day
that the Funds are open for business, which is any day that the New York Stock
Exchange is open. The New York Stock Exchange is generally open for trading
every Monday through Friday, except for national holidays.
Retail A Shares and Retail B Shares have different prices. The price at which
you buy shares is the NAV next determined after your order is accepted, plus any
applicable sales charge. The price at which you sell shares is the NAV next
determined after receipt of your order in proper
-30-
<PAGE>
form as described below, less any applicable CDSC in the case of Retail B Shares
of the Growth Fund II. NAV is determined on each day the New York Stock Exchange
is open for trading at the close of regular trading that day (usually 4:00 p.m.
Eastern time). If market prices are readily available for securities owned by
the Fund, they're valued at those prices. If market prices are not readily
available for some securities, they are valued at fair value under the
supervision of Galaxy's Board of Trustees.
[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is:
- - $2,500 for regular accounts
- - $500 for retirement plan accounts such as IRA, SEP and Keogh Plan
accounts
- - $100 for college savings accounts
There is generally no minimum initial investment if you participate in the
Automatic Investment Program or in a salary reduction retirement plan such as a
SIMPLE IRA or 401(k). You generally can make additional investments for as
little as $100. See GALAXY INVESTOR PROGRAMS below for information on other
minimums for initial and additional investments.
Usually, you must keep at least $250 in your account. If your account falls
below $250 because you sell or exchange shares, Galaxy may redeem your shares
and close your account. Galaxy will give you 60 days' notice in writing before
closing your account.
HOW TO BUY SHARES
You can buy shares through your financial institution or directly from Galaxy's
distributor by calling 1-877-BUY-GALAXY (1-877-289-4252). A broker or agent who
places orders on your behalf may charge you a separate fee for their services.
BUYING BY MAIL
Complete an account application and mail it, together with a check payable to
each Fund in which you want to invest, to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
To make additional investments, send your check to the address above along with
one of the following:
- - The detachable form that's included with your Galaxy statement or your
confirmation of a prior transaction
-31-
<PAGE>
- - A letter stating the amount of your investment, the name of the Fund you
want to invest in, and your account number.
If your check is returned because of insufficient funds, Galaxy will cancel your
order.
BUYING BY WIRE
To make an initial or additional investment by wire, send U.S. funds through the
Federal Reserve System to Fleet National Bank as agent for Galaxy's distributor.
You should wire money and registration instructions to:
Fleet National Bank
75 State Street
Boston, MA 02109
ABA #0110-0013-8
DDA #79673-5702
Ref: The Galaxy Fund
(Account number)
(Account registration)
Before making an initial investment by wire, you must complete an account
application and send it to The Galaxy Fund, P.O. Box 6520, Providence, RI
02940-6520. Your order will not be effected until the completed account
application is received by Galaxy. Call Galaxy's distributor at 1-877-BUY-GALAXY
(1-877-289-4252) for an account application.
Your financial institution may charge you a fee for sending funds by wire.
CUSTOMERS OF FINANCIAL INSTITUTIONS
If you are a customer of a financial institution such as a bank, savings and
loan association or broker-dealer, including a financial institution affiliated
with the Adviser, you should place your order through your financial
institution. Your financial institution is responsible for sending your order to
Galaxy's distributor and wiring the money to Galaxy's custodian. For details,
please contact your financial institution.
DISCOUNT PLANS
You may have the sales charges on purchases of Retail A Shares reduced or waived
completely through the discount plans described below:
- - RIGHTS OF ACCUMULATION - You can add the value of the Retail A Shares that
you already own in any Galaxy Fund that charges a sales load to your next
investment in Retail A Shares for purposes of calculating the sales charge.
-32-
<PAGE>
- - LETTER OF INTENT - You can purchase Retail A Shares of any Galaxy Fund that
charges a sales load over a 13-month period and receive the same sales
charge as if all of the shares had been purchased at the same time. To
participate, complete the Letter of Intent section on the account
application. Galaxy's administrator will hold in escrow Retail A Shares
equal to 5% of the amount you indicate in the Letter of Intent for payment
of a higher sales charge if you don't purchase the full amount indicated in
the Letter of Intent. See the SAI for more information on this escrow
feature.
- - REINVESTMENT PRIVILEGE - You can reinvest some or all of the money that you
receive when you sell Retail A Shares of the Funds in Retail A Shares of
any Galaxy Fund within 90 days without paying a sales charge.
- - GROUP SALES - If you belong to a qualified group with 50,000 or more
members, you can buy Retail A Shares at a reduced sales charge, based on
the number of qualified group members.
[Sidenote:]
DISCOUNT PLANS
You must tell your investment professional or Galaxy's distributor when you buy
your shares that you want to take advantage of any of these discount plans. See
the SAI for additional requirements that may apply. To contact Galaxy's
distributor call 1-877-BUY-GALAXY (1-877-289-4252).
HOW TO SELL SHARES
You can sell your shares in several ways: by mail, by telephone, by wire, or
through your financial institution.
SELLING BY MAIL
Send your request in writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
You must include the following:
- - The name of the Fund
- - The number of shares or the dollar amount you want to sell
- - Your account number
- - Your Social Security number or tax identification number
- - The signatures of each registered owner of the account (the signatures must
match the names on the account registration).
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<PAGE>
Additional documents may be required for certain types of shareholders, such as
corporations, partnerships, executors, trustees, administrators or guardians.
[Sidenote:]
SIGNATURE GUARANTEES
When selling your shares by mail or by phone, you must have your signature
guaranteed if:
- - you're selling shares worth more than $50,000
- - you want Galaxy to send your money to an address other than the address on
your account, unless your assets are transferred to a successor custodian
- - you want Galaxy to send your money to the address on your account that's
changed within the last 30 days, or
- - you want Galaxy to make the check payable to someone else.
Your signature must be guaranteed by a bank that's a member of the FDIC, a trust
company, a member firm of a national securities exchange or any other eligible
institution. A notarized signature is not sufficient.
SELLING BY PHONE
You can sell shares by calling Galaxy's distributor at 1-877-BUY-GALAXY
(1-877-289-4252) unless you tell Galaxy on the account application or in writing
that you don't want this privilege. If you have difficulty getting through to
Galaxy because of unusual market conditions, consider selling your shares by
mail or wire.
SELLING BY WIRE
Notify Galaxy's distributor by phone or wire that you wish to sell shares and
have the sale proceeds wired to your account at any financial institution in the
U.S. To be eligible to use this privilege, you must complete the appropriate
section on the account application or notify Galaxy in writing (with a signature
guarantee). Your sale proceeds must be more than $1,000.
The sale proceeds must be paid to the same bank and account you named on your
application or in your written instructions.
CUSTOMERS OF FINANCIAL INSTITUTIONS
Please contact your financial institution for information on how to sell your
shares. The financial institution 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 your financial institution, but
your financial institution may charge you a fee.
-34-
<PAGE>
HOW TO EXCHANGE SHARES
You may exchange Retail A Shares of a Fund having a value of at least $100 for
Retail A Shares of any other Galaxy Fund or for shares of any other Fund that's
managed by the Adviser or any of its affiliates in which you have an existing
account. You won't pay a sales charge for exchanging your Retail A Shares.
You may exchange Retail B Shares of the Growth Fund II for Retail B Shares of
any other Galaxy Fund. You won't pay a CDSC when you exchange your Retail B
Shares. However, when you sell the Retail B Shares you acquired in the exchange,
you'll pay a contingent deferred sales charge based on the date you bought the
Retail B Shares which you exchanged.
TO EXCHANGE SHARES:
- - call Galaxy's distributor or use the InvestConnect voice response line at
1-877-BUY-GALAXY (1-877-289-4252)
- - send your request in writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
- - ask your financial institution.
Galaxy doesn't charge any fee for making exchanges but your financial
institution might do so. You are generally limited to three exchanges per year.
Galaxy may change or cancel the exchange privilege with 60 days' advance written
notice to shareholders.
OTHER TRANSACTION POLICIES
If Galaxy doesn't receive full payment for your order to buy shares within three
business days of the order date, Galaxy won't accept your order. Galaxy will
advise you if this happens and return any payment it may eventually receive. You
can only invest in shares of the Funds that are legally available in your state.
Galaxy may refuse any order to buy shares. Galaxy doesn't issue a certificate
when you buy shares but it does keep a record of shares issued to investors.
Galaxy may refuse your order to sell or exchange shares by wire or telephone if
it believes it is advisable to do so. Galaxy or its distributor may change or
cancel the procedures for selling or exchanging shares by wire or telephone at
any time without notice.
-35-
<PAGE>
If you sell or exchange shares by telephone, you may be responsible for any
fraudulent telephone orders as long as Galaxy has taken reasonable precautions
to verify your identity, such as requesting information about the way in which
your account is registered or about recent transactions in your account.
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 you within three business days but Galaxy
reserves the right to send sales proceeds within seven days if sending proceeds
earlier could adversely affect a Fund.
If any shares that you're selling are part of an investment you've paid for with
a personal check, Galaxy will delay sending your sales proceeds until the check
clears, which can take up to 15 days from the purchase date.
Galaxy reserves the right to vary or waive any minimum investment requirement.
-36-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund, except the Growth Fund II, generally declares dividends from net
investment income daily and pays them monthly. The Growth Fund II generally pays
dividends from net investment income on a semi-annual basis. It is expected that
the annual distributions of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond and Massachusetts Intermediate Municipal Bond Funds
will be mainly income dividends. It is expected that the annual distributions of
the Growth Fund II will normally - but not always - consist primarily of capital
gains rather than ordinary income. Each of the Funds normally pays any realized
capital gains at least once a year. Dividends and distributions are paid in cash
unless you indicate in a letter to Galaxy that you want to have dividends and
distributions reinvested in additional shares.
FEDERAL TAXES
GROWTH FUND II
The Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of the Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions will
generally be taxable as ordinary income. You will be subject to income tax on
these distributions regardless of whether they are paid in cash or reinvested in
additional shares. Taxable dividends paid to you in January may be taxable as if
they had been paid the previous December. You will be notified annually of the
tax status of distributions to you.
Dividends paid by the Growth Fund II to its corporate shareholders and that are
attributable to qualifying dividends the Fund receives from U.S. corporations
may be eligible, in the hands of the corporate shareholders, for the corporate
dividends-received deduction, subject to certain holding period requirements and
debt financing limitations.
INTERMEDIATE TAX-EXEMPT BOND FUND, CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
AND MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
It is expected that the Funds will distribute dividends derived from interest
earned on exempt securities, and these "exempt-interest dividends" will be
exempt income for shareholders for federal income tax purposes. However,
distributions, if any, derived from net capital gains of each Fund will
generally be taxable to you as capital gains. Dividends, if any, derived from
short-term capital gains or taxable interest income will be taxable to you as
ordinary income. You will be notified annually of the tax status of
distributions to you.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Fund generally will not be deductible for federal income tax purposes.
-37-
<PAGE>
You should note that a portion of the exempt-interest dividends paid by each
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
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Generally,
this gain or loss will be long-term or short-term depending on whether your
holding period for the shares exceeds 12 months except that any loss realized on
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends that were received on the shares. If
you receive an exempt-interest dividend with respect to any share and the share
is held by you for six months or less, any loss on the sale or exchange of the
share will be disallowed to the extent of such dividend amount.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions,
redemptions and exchanges. State income taxes may not apply however to the
portions of a Fund's distributions, if any, that are attributable to interest on
U.S. Government securities or on securities of the particular state or
localities within the state. Each state-specific Fund intends to comply with
certain state and/or local tax requirements so that its income and dividends
will be exempt from the applicable state and/or local taxes described above in
the description for such Fund. Dividends, if any, derived from interest on
securities other than the state-specific municipal securities in which each Fund
primarily invests, or from any capital gains, will be subject to the particular
state's taxes. However, with respect to the Connecticut Intermediate Municipal
Bond Fund, dividends, if any, derived from long-term capital gains on
Connecticut municipal securities of issuers in Connecticut will not be subject
to the Connecticut state income tax on individuals, trusts and estates if paid
on Fund shares held as capital assets.
-38-
<PAGE>
MISCELLANEOUS
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
-39-
<PAGE>
GALAXY INVESTOR PROGRAMS
RETIREMENT PLANS
Retail A Shares and Retail B Shares of the Growth Fund II are available for
purchase in connection with any of the following retirement plans:
- - Individual Retirement Arrangements (IRAs), including Traditional, Roth,
Rollover and Education IRAs
- - Simplified Employee Pension Plans (SEPs)
- - Keogh money purchase and profit sharing plans
- - Salary reduction retirement plans set up by employers for their employees,
which are qualified under Section 401(k) and 403(b) of the Internal Revenue
Code
- - SIMPLE IRA plans which are qualified under Section 408(p) of the Internal
Revenue Code
For information about eligibility requirements and other matters concerning
these plans and to obtain an application, call Galaxy's distributor at
1-877-BUY-GALAXY (1-877-289-4252).
OTHER PROGRAMS
It's also easy to buy or sell shares of the Funds by using one of the programs
described below. Just tell Galaxy the amount and how frequently you want to buy
or sell shares and Galaxy does the rest. For further information on any of these
programs, call Galaxy's distributor at 1-877-BUY-GALAXY (1-877-289-4252) or your
financial institution.
AUTOMATIC INVESTMENT PROGRAM
You can make automatic investments from your bank account every month or every
quarter. You can choose to make your investment on any day of the month or
quarter. The minimum investment is $50 a month or $150 a quarter except for
Education IRAs, in which case the minimum investment is $40 a month or $125 per
quarter.
PAYROLL DEDUCTION PROGRAM
You can make regular investments from your paycheck. The minimum investment is
$25 per pay period. Send a completed Galaxy Payroll Deduction Application to
your employer's payroll department. They'll arrange to have your investment
deducted from your paycheck.
-40-
<PAGE>
COLLEGE INVESTMENT PROGRAM
The minimum for initial and additional investments through the College
Investment Program is $100 unless you participate in the Automatic Investment
Program, in which case the minimum for initial and additional investments is
$50. You can also save for college by opening an Education IRA. The minimum for
initial and additional investments in an Education IRA is $100 unless you
participate in the Automatic Investment Program, in which case the minimum for
initial and additional investments if $40.
DIRECT DEPOSIT PROGRAM
This program lets you deposit your social security payments in your Fund account
automatically. There's no minimum deposit. You can cancel the program by
notifying the Social Security Administration in writing.
SYSTEMATIC WITHDRAWAL PLAN
You can make regular withdrawals from your investment account every month, every
quarter, every six months or once a year. You need a minimum account balance of
$10,000 to participate in the plan. No CDSC will be charged on withdrawals of
Retail B Shares of the Growth Fund II made through the plan that don't annually
exceed 12% of your account's value.
You may cancel your participation in any of these programs, other than the
Direct Deposit Program, by writing to Galaxy at:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
Please allow at least five days for the cancellation to be processed.
-41-
<PAGE>
HOW TO REACH GALAXY
THROUGH YOUR FINANCIAL INSTITUTION
Your financial institution can help you buy, sell or exchange shares and can
answer questions about your account.
GALAXY SHAREHOLDER SERVICES
Call Galaxy's distributor at 1-877-BUY-GALAXY (1-877-289-4252), Monday through
Friday, 8 a.m. to 6 p.m. (Eastern time) for help from a Galaxy representative.
INVESTCONNECT
InvestConnect is Galaxy's shareholder voice response system. Call
1-877-BUY-GALAXY (1-877-289-4252) from any touch-tone phone for automated access
to account information and current Fund prices and performance, or to place
orders to sell or exchange shares. It's available 24 hours a day, seven days a
week.
If you live outside the United States, you can contact Galaxy by calling
1-508-871-4121.
THE INTERNET
Please visit Galaxy's website at:
www.galaxyfunds.com
[Sidenote:]
HEARING IMPAIRED
Galaxy also offers a TDD service for the hearing impaired. Just call
1-800-696-6515, 24 hours a day, seven days a week.
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<PAGE>
FINANCIAL HIGHLIGHTS
Each Fund began operations as a separate portfolio (the Predecessor Fund) of the
Boston 1784 Funds. On May ___, 2000, each Predecessor Fund was reorganized as a
new portfolio of Galaxy. As discussed above in each Fund's risk/return summary,
prior to the reorganization, each Predecessor Fund offered and sold a single
class of shares. The financial highlights tables shown below will help you
understand the financial performance for each Predecessor Fund for the six-month
period ended November 30, 1999 and for the past five fiscal years (or the period
since a particular Predecessor Fund began operations). Certain information
reflects the financial performance of a single share. The total returns in the
tables represent the rate that an investor would have earned (or lost) on an
investment in each Predecessor Fund, assuming all dividends and distributions
were reinvested. The information for the semi-annual period ended November 30,
1999 is unaudited and such information, along with the Predecessor Fund's
financial statements, is included in the Predecessor Funds' Semi-Annual Reports
and incorporated by reference into the SAI. The information for the past five
fiscal years or periods has been audited by [____________], independent
auditors, whose report, along with the Predecessor Funds' financial statements,
are included in the Predecessor Funds' Annual Reports and are incorporated by
reference into the SAI. The Annual and Semi-Annual Reports and SAI are available
free of charge upon request.
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<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ ------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.52 $10.18 $9.99 $10.14 $9.90
------ ------ ----- ------ -----
Income from investment
operations:
Net investment income......... 0.45 0.48 0.50 0.51 0.48
Net realized and unrealized
gain (loss) on investments.... (0.01) 0.44 0.19 (0.09) 0.24
------ ---- ---- ------ ----
Total from investment
operations....................... 0.44 0.92 0.69 0.42 0.72
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.45) (0.48) (0.50) (0.51) (0.48)
Dividends from net
realized capital gains..... (0.18) (0.10) -- (0.06) --
------ ------ ------ ------ ------
Total dividends..................... (0.63) (0.58) (0.50) (0.57) (0.48)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.19) 0.34 0.19 (0.13) 0.24
------ ------ ------ ------ ------
Net asset value, end of period...... $ 10.33 $ 10.52 $ 10.18 $ 9.99 $ 10.14
========= ========= ========= ============= ===========
Total return........................ 4.24% 9.24% 7.74% 4.31% 7.58%
Ratios/supplemental data:
Net assets, end of period
(000's)................. $356,995 $303,578 $250,526 $ 196,787 $176,345
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.31% 4.62% 4.92% 4.90% 5.02%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.30% 4.55% 4.48% 4.56%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.80% 0.79% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.11% 1.12% 1.17% 1.21% 1.26%
Portfolio turnover rate............. 68.58% 34.06% 33.24% 37.35% 74.74%
- -------------------------------
</TABLE>
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
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<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ --------------------------------------------------------------
1999 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.81 $10.38 $10.17 $10.27 $10.00
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income......... 0.48 0.50 0.51 0.53 0.45
Net realized and unrealized
gain (loss) on investments.... (0.08) 0.45 0.21 (0.10) 0.27
------ ---- ---- ------ ----
Total from investment
operations....................... 0.40 0.95 0.72 0.43 0.72
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.48) (0.50) (0.51) (0.53) (0.45)
Dividends from net
realized capital gains..... (0.06) (0.02) -- -- --
------ ------ ------ ------ ------
Total dividends..................... (0.54) (0.52) (0.51) (0.53) (0.45)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.14) 0.43 0.21 (0.10) 0.27
------ ------ ------ ------ ------
Net asset value, end of period...... $ 10.67 $ 10.81 $ 10.38 $ 10.17 $ 10.27
========= ========= ========= ============= ===========
Total return........................ 3.72% 9.29% 7.26% 4.20% 7.45%(2)
Ratios/supplemental data:
Net assets, end of period
(000's)................. $187,725 $142,107 $103,104 $ 81,441 $ 61,369
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.37% 4.66% 4.94% 5.02% 5.44%(3)
Net investment income
excluding reimbursement/
waiver..................... 4.05% 4.32% 4.53% 4.48% 4.56%(3)
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.76% 0.75% 0.52%(3)
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.17% 1.29% 1.40%(3)
Portfolio turnover rate............. 19.10% 16.81% 4.28% 20.41% 35.56%
- ----------------------------------
</TABLE>
* The Portfolio commenced operations on August 1, 1994 as a separate
portfolio (the "Predecessor Fund") of the Boston 1784 Funds. On May __,
2000, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold one
class of shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for Trust Shares and BKB Shares of
the Fund.
(1) Period from commencement of operations.
(2) Not annualized.
(3) Annualized.
-45-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond
Fund* (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ -----------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.42 $10.01 $9.78 $9.90 $9.81
------ ------ ----- ----- -----
Income from investment
operations:
Net investment income......... 0.45 0.47 0.47 0.48 0.47
Net realized and unrealized
gain (loss) on investments.... (0.03) 0.41 0.23 (0.12) 0.09
------ ---- ---- ------ ----
Total from investment
operations....................... 0.42 0.88 0.70 0.36 0.56
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.45) (0.47) (0.47) (0.48) (0.47)
Dividends from net
realized capital gains..... -- -- -- -- --
------ ------ ------ ------ ------
Total dividends..................... (0.45) (0.47) (0.47) (0.48) (0.47)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.03) 0.41 0.23 (0.12) 0.09
------ ------ ------ ------ ------
Net asset value, end of period...... $ 10.39 $ 10.42 $ 10.01 $ 9.78 $ 9.90
========= ========= ========= ============= ===========
Total return........................ 4.10% 8.91% 7.30% 3.64% 6.00%
Ratios/supplemental data:
Net assets, end of period
(000's)................. $267,871 $206,137 $147,459 $ 106,619 $ 82,058
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.32% 4.54% 4.74% 4.73% 4.93%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.20% 4.35% 4.25% 4.38%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.79% 0.80% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.18% 1.28% 1.35%
Portfolio turnover rate............. 9.32% 6.45% 9.47% 47.00% 34.59%
- -------------------------------------------
</TABLE>
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
-46-
<PAGE>
Galaxy Growth Fund II*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the period For the period
Ended ended
November 30, For the year ended May 31
------------ ------------------------------------------- ---------------
1999 1999 1998 1997 1996(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $12.93 $12.20 $11.27 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income................ (0.08) (0.05) 0.02 0.02
Net realized and unrealized gain
(loss) on investments............ (0.41) 1.59 0.96 1.25
------ ---- ---- ----
Total from investment operations.......... (0.49) 1.54 0.98 1.27
------ ---- ---- ----
Less dividends:
Dividends from net investment
income........................... -- -- (0.05) (0.00)
Dividends from net realized capital
gains............................ (0.38) (0.81) (0.00) (0.00)
------ ------ ------ ------
Total dividends........................... (0.38) (0.81) (0.05) (0.00)
------ ------ ------ ------
Net increase (decrease) in net asset
value............................ (0.87) 0.73 0.93 1.27
------ ---- ---- ----
Net asset value, end of period............ $12.06 $12.93 $12.20 $11.27
====== ====== ====== ======
Total return.............................. (3.54)% 12.64% 8.77% 12.70%(2)
Ratios/supplemental data:
Net assets, end of period (000's).... $185,476 $257,550 $261,487 $46,026
Ratios to average net assets:
Net investment income including
reimbursement/waiver............. (0.39)% (0.35)% 0.17% 1.75%(3)
Net investment income excluding
reimbursement/waiver............. (0.64)% (0.60)% (0.21)% 0.22%(3)
Operating expenses including
reimbursement/waiver............. 0.93% 0.91% 0.77% 0.20%(3)
Operating expenses excluding
Reimbursement/waiver............. 1.18% 1.16% 1.15% 1.73%(3)
Portfolio turnover rate................... 61.02% 48.60% 57.46% 0.00
- ------------------------------
</TABLE>
* The Fund commenced operations on March 28, 1996 as a separate portfolio
(the "Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized
(3) Annualized.
-47-
<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
and a discussion about the market conditions and investment strategies that had
a significant effect on each Fund's performance during the last fiscal year.
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 calling Galaxy at 1-877-BUY-GALAXY
(1-877-289-4252) or by writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
If you buy your shares through a financial institution, you may contact your
institution for more information.
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090.
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's website at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
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]
The Galaxy Fund
Prospectus
May __, 2000
Galaxy Institutional Money Market Fund
Galaxy Institutional Treasury Money Market Fund
Galaxy Intermediate Tax-Exempt Bond Fund
Galaxy Connecticut Intermediate Municipal Bond Fund
Galaxy Massachusetts Intermediate Municipal Bond Fund
Galaxy Florida Municipal Bond Fund
Galaxy Growth Fund II
Trust Shares
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.
<PAGE>
Contents
1 Risk/return summary
1 Introduction
2 Galaxy Institutional Money Market Fund
6 Galaxy Institutional Treasury Money Market Fund
10 Galaxy Intermediate Tax-Exempt Bond Fund
16 Galaxy Connecticut Intermediate Municipal Bond Fund
21 Galaxy Massachusetts Intermediate Municipal Bond Fund
26 Galaxy Florida Municipal Bond Fund
31 Galaxy Growth Fund II
36 Additional information about risk
37 Investor guidelines
39 Fund management
41 How to invest in the Funds
41 Buying, selling and exchanging shares
42 How to buy shares
43 How to sell shares
43 Other transaction policies
43 How to exchange shares -
Money Market Funds Only
45 Dividends, distributions and taxes
48 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Institutional Money Market Fund, Galaxy
Institutional Treasury Money Market Fund, Galaxy Intermediate Tax-Exempt Bond
Fund, Galaxy Connecticut Intermediate Municipal Bond Fund, Galaxy Massachusetts
Intermediate Municipal Bond Fund, Galaxy Florida Municipal Bond Fund and Galaxy
Growth Fund II. Each Fund commenced operations as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, each Predecessor
Fund was reorganized as a new portfolio of Galaxy.
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 past performance of the Fund measured on both a year-by-year and
long-term basis
- - the fees and expenses that you will pay as an investor in the Fund.
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. The Adviser, an
indirect wholly-owned subsidiary of FleetBoston Corporation, was established in
1984 and has its main office at 75 State Street, Boston, Massachusetts 02109.
The Adviser also provides investment management and advisory services to
individual and institutional clients and manages the other Galaxy investment
portfolios. As of December 31, 1999, the Adviser managed over $96 billion in
assets.
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE GALAXY INSTITUTIONAL MONEY MARKET FUND AND GALAXY
INSTITUTIONAL TREASURY MONEY MARKET FUND SEEK TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT'S POSSIBLE TO LOSE MONEY BY INVESTING IN THE
FUNDS. YOU COULD ALSO LOSE MONEY BY INVESTING IN ANY OF THE OTHER FUNDS.
<PAGE>
Galaxy Institutional Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to preserve the principal value of a shareholder's investment and
to maintain a high degree of liquidity while providing current income.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in high quality short-term debt obligations,
including commercial paper, asset-backed commercial paper, corporate bonds, U.S.
Government agency obligations, taxable municipal securities and repurchase
agreements. The Fund may invest more than 25% of its assets in money market
instruments issued by U.S. and foreign banks, and in U.S. Government
obligations.
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:]
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.
[Sidenote:]
MONEY MARKET INSTRUMENTS
Money market instruments are short-term debt obligations issued by banks,
corporations, the U.S. Government and state and local governments. Money market
instruments purchased by the Galaxy money market funds must meet strict
requirements as to investment quality, maturity and diversification. The Galaxy
money market funds do not 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 Galaxy money market fund must be 90 days or
less. Prior to purchasing a money market instrument for a particular Galaxy
money market fund, Fleet must determine that the instrument carries very little
risk. Each Galaxy money market fund tries to maintain its share price at $1.00
to protect your investment from loss.
-2-
<PAGE>
[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.
- - STRIPS - The Fund may invest up to 5% of its total assets in zero coupon
securities called STRIPS, which are separately traded interest and
principal component parts of U.S. Treasury securities. The interest-only
component is extremely sensitive to the rate of principal payments on the
underlying obligation. The market value of the principal-only component
generally is unusually volatile in response to changes in interest rates.
- - 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. The Fund only offers one class of shares which are referred to in this
prospectus as Trust Shares.
-3-
<PAGE>
The Fund began operations on November 5, 1997 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: ____% for the quarter ending ____________, ____
Worst quarter: ____% for the quarter ending ____________, ____
<TABLE>
<CAPTION>
[bar chart goes here]
--------- ---------
1998 1999
--------- ---------
<S> <C> <C>
45.40% ____%
--------- ---------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999.
<TABLE>
<CAPTION>
------------------- -----------------------
<S> <C>
1 year Since inception
------------------- -----------------------
____% ____% (11/5/97)
------------------- -----------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-4-
<PAGE>
EXPENSES OF THE FUND
The following table shows the expenses you may pay when you buy and hold shares
of the Fund.
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ------------------------ ------------------- ----------------------- ---------------------- ---------------------
Total Fund
Distribution operating
Management fees (12b-1)fees Other expenses expenses
- ------------------------ ------------------- ----------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Trust Shares 0.20% None 0.10%(1) 0.30%(1)
- ------------------------ ------------------- ----------------------- ---------------------- ---------------------
</TABLE>
(1)The Fund's administrator is waiving a portion of its administration fees
(which are included in Other expenses) so that Other expenses are expected to
be 0.08%. Total Fund operating expenses after this waiver are expected to be
0.28%. This fee waiver may be revised or discontinued at any time. However,
the Adviser has agreed to waive fees and reimburse expenses in such amounts
as are necessary to ensure that the Total Fund operating expenses for Trust
Shares of the Fund do not exceed 0.28% for a period of one year following the
reorganization.
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>
Trust Shares $31 $97 $169 $381
- --------------------- ---------------------- ------------------ ------------------ ----------------------
</TABLE>
-5-
<PAGE>
Galaxy Institutional Treasury Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to preserve the principal value of a shareholder's investment and
maintain a high degree of liquidity while providing current income.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in short-term U.S. Government obligations, including
U.S. Treasury securities, U.S. Government agency obligations and repurchase
agreements secured by U.S. Government obligations. Under normal circumstances,
the Fund invests at least 65% of its total assets in money market instruments
issued by the U.S. Treasury, including bills, notes and bonds, and repurchase
agreements secured by U.S. Treasury securities. The Fund invests the rest of its
assets in U.S. Government obligations issued by agencies or instrumentalities,
including mortgage-backed securities.
[Sidenote:]
U.S. TREASURY OBLIGATIONS
U.S. Treasury obligations are among the safest of all investments because they
are backed by the "full faith and credit" of the U.S. Government.
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, particularly U.S.
Treasury 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.
- - STRIPS - The Fund may invest up to 5% of its total assets in zero coupon
securities called STRIPS, which are separately traded interest and
principal component parts of U.S. Treasury securities. The interest-only
component is extremely sensitive to the rate of principal
-6-
<PAGE>
payments on the underlying obligation. The market value of the
principal-only component generally is unusually volatile in response to
changes in interest rates.
- - 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. The Fund only offers one class of shares which are referred to in this
prospectus as Trust Shares.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
<TABLE>
[Sidenote:]
- ----------------- -------------------------------------------------
<S> <C>
Best quarter: ____% for the quarter ending _______, ____
- ----------------- -------------------------------------------------
Worst quarter: ____% for the quarter ending _______, ____
- ----------------- -------------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
- --------------- ------------- ------------- ------------- ------------ ------------
1994 1995 1996 1997 1998 1999
- --------------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
4.04% 5.69% 5.14% 5.30% 5.20% ____%
- --------------- ------------- ------------- ------------- ------------ ------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
-7-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
1 year 5 years Since inception
------------------------------------------------------------------------
<S> <C> <C>
____% ____% ____% (6/14/93)
------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
EXPENSES OF THE FUND
The following table shows the expenses you may pay when you buy and hold shares
of the Fund.
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------- --------------------- -------------------- ---------------------- ----------------------
Total Fund
Distribution operating
Management fees (12b-1) fees Other expenses expenses
- ---------------------- --------------------- -------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Trust Shares 0.20% None 0.10%(1) 0.30%(1)
- ---------------------- --------------------- -------------------- ---------------------- ----------------------
</TABLE>
(1)The Fund's administrator is waiving a portion of its administration fees
(which are included in Other expenses) so that Other expenses are expected to
be 0.06%. Total Fund operating expenses after this waiver are expected to be
0.26%. This fee waiver may be revised or discontinued at any time. However,
the Adviser has agreed to waive fees and reimburse expenses in such amounts
as are necessary to ensure that the Total Fund operating expenses for Trust
Shares of the Fund do not exceed 0.26% for a period of one year following the
reorganization.
-8-
<PAGE>
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>
Trust Shares $31 $97 $169 $381
- -------------------- ---------------------- ------------------- ------------------ ---------------------
</TABLE>
-9-
<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from federal
income tax, consistent with preservation of capital.
[Sidenote:]
PRESERVATION OF CAPITAL
Preservation of capital means protecting the amount of money you invest in a
Fund. If a Fund seeks to preserve capital, it will try to maintain a relatively
stable share price so your investment is protected.
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt securities
in a Fund come due or mature. It is calculated by averaging the time to maturity
of all debt securities held by a Fund with each maturity "weighted" according to
the percentage of assets it represents.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in a diversified portfolio of 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 circumstances, at least 80% of the Fund's net
assets are invested in municipal securities or in mutual funds or other
investment companies that invest in municipal securities. The Fund may also
invest up to 20% of its net assets in debt securities that pay interest that is
not exempt from federal tax, such as U.S. Government obligations, corporate
bonds, money market instruments, including commercial paper and bank
obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
-10-
<PAGE>
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various geographic regions, issuers and
industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the four ratings assigned by Standard & Poor's
Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are unrated
securities determined by the Adviser to be of comparable quality. The Adviser
expects, however, that most of the securities purchased by the Fund will have
one of the top three ratings assigned by S&P or Moody's, or will be unrated
securities determined by the Adviser to be of comparable quality. Occasionally,
the rating of a security held by the Fund may be downgraded to below investment
grade. If that happens, the Fund doesn't have to sell the security unless the
Adviser determines that under the circumstances the security is no longer an
appropriate investment for the Fund. However, the Fund will sell promptly any
securities that are not rated investment grade by either S&P or Moody's if the
securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[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.
-11-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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.
[Sidenote:]
DERIVATIVES
A derivative is an investment whose value is based on or derived from the
performance of other securities or interest or currency exchange rates or
indices. Derivatives are considered to carry a higher degree of risk than other
types of securities.
-12-
<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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. Shareholders of the Predecessor
Fund who purchased their shares through an investment management, trust,
custody, or other agency relationship with BankBoston, N.A. received Trust
Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has have varied
from year to year.
[Sidenote:]
Best quarter: ____% for the quarter ending ________, ____
Worst quarter: ____% for the quarter ending ________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------- ----------- --------- --------- ---------- -----------
1994 1995 1996 1997 1998 1999
- ----------- ----------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
-3.02% 14.31% 4.20% 9.10% 6.41% ____%
- ----------- ----------- --------- --------- ---------- -----------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
-13-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- ------------------------------ ------------------- -------------------- ---------------------------
1 year 5 years Since inception
- ------------------------------ ------------------- -------------------- ---------------------------
<S> <C> <C> <C>
Trust Shares ____% ____% ____% (6/14/93)
- ------------------------------ ------------------- -------------------- ---------------------------
Lehman Brothers
7-Year Municipal
Bond Index
____% ____% ____% (since 5/31/93)
- ------------------------------ ------------------- -------------------- ---------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ------------------------ -------------------- --------------------------- ---------- ------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ------------------------ -------------------- --------------------------- ---------- ------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.13% 0.88%(1)
- ------------------------ -------------------- --------------------------- ---------- ------------------------------
</TABLE>
(1)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.63%. Total Fund operating expenses after this waiver are
expected to be 0.76%. This fee waiver may be revised or discontinued at any
time. However, the Adviser has agreed to waive fees and reimburse expenses in
such amounts as are necessary to ensure that Total Fund operating expenses
for Trust Shares of the Fund do not exceed 0.76% for a period of one year
following the reorganization.
-14-
<PAGE>
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>
Trust Shares $90 $281 $488 $1,084
- --------------------- -------------------- --------------------- ------------------- ------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-15-
<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income exempt from both federal
and Connecticut personal income tax, with a secondary goal of preserving
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Connecticut municipal securities.
Connecticut municipal securities are securities issued by the State of
Connecticut and other government issuers and that pay interest which is exempt
from both federal income tax and Connecticut personal income tax. Under normal
conditions, the Fund will invest no more than 20% of its net assets in taxable
debt securities, such as U.S. Government obligations, corporate bonds, money
market instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-16-
<PAGE>
unrated securities determined by the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by S&P or Moody's if
the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-17-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Connecticut
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Connecticut. Other
considerations affecting the Fund's investments in Connecticut municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on August 1, 1994 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. Shareholders of the Predecessor
Fund who purchased their shares through an investment management, trust,
custody, or other agency relationship with BankBoston, N.A. received Trust
Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
<TABLE>
- ---------------- -------------------------------------------------------
<S> <C>
Best quarter: _____% for the quarter ending __________, ____
- ---------------- -------------------------------------------------------
Worst quarter: _____% for the quarter ending __________, ____
- ---------------- -------------------------------------------------------
</TABLE>
-18-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------ ----------------- ------------------ ----------------- -------------------
1995 1996 1997 1998 1999
- ------------------ ----------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
14.66% 3.63% 8.53% 6.67% _____%
- ------------------ ----------------- ------------------ ----------------- -------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
______%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- --------------------------- ---------------------- -------------------- ---------------------------
1 year 5 years Since inception
- --------------------------- ---------------------- -------------------- ---------------------------
<S> <C> <C> <C>
Trust Shares _____% _____% _____% (8/1/94)
- --------------------------- ---------------------- -------------------- ---------------------------
Lehman Brothers
7-Year Municipal
Bond Index _____% _____% _____% (since 7/31/94)
- --------------------------- ---------------------- -------------------- ---------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.15% 0.90%(1)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
</TABLE>
(1)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.63%. Total Fund operating expenses after this waiver are
expected to be 0.78%. This fee waiver may be revised or discontinued at any
time. However, the Adviser has agreed to waive fees and reimburse expenses in
such amounts as are necessary to ensure that the Total Fund operating
expenses for Trust Shares of the Fund do not exceed 0.78% for a period of one
year following the reorganization.
-19-
<PAGE>
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>
Trust Shares $92 $287 $498 $1,108
- ----------------- ----------------- ------------------- ------------------- ------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-20-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from both
federal and Massachusetts personal income tax, consistent with preservation of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Massachusetts municipal securities.
Massachusetts municipal securities are securities issued by the Commonwealth of
Massachusetts and other government issuers and that pay interest which is exempt
from both federal income tax and Massachusetts personal 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, corporate bonds, money market
instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-21-
<PAGE>
unrated securities determined the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by S&P or Moody's if
the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances the Fund's average weighted maturity will be
between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-22-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Massachusetts
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Massachusetts. Other
considerations affecting the Fund's investments in Massachusetts municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. Shareholders of the Predecessor
Fund who purchased their shares through an investment management, trust,
custody, or other agency relationship with BankBoston, N.A. received Trust
Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-23-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- --------------- ------------- ------------- ------------- ------------ ------------
1994 1995 1996 1997 1998 1999
- --------------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
-5.45% 13.73% 3.32% 8.89% 5.91% ____%
- --------------- ------------- ------------- ------------- ------------ ------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- ------------------------------ ------------------- ---------------------------
1 year Since inception
- ------------------------------ ------------------- ---------------------------
<S> <C> <C>
Trust Shares ____% ____% (6/14/93)
- ------------------------------ ------------------- ---------------------------
Lehman Brothers
7-Year Municipal
Bond Index ____% ____% (since 5/31/93)
- ------------------------------ ------------------- ---------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.15% 0.90%(1)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
</TABLE>
(1)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.63%. Total Fund operating expenses after this waiver are
expected to be 0.78%. This fee waiver may be revised or discontinued at any
time. However, the Adviser has agreed to waive fees and reimburse expenses in
such amounts as are necessary to ensure that the Total Fund operating
expenses for Trust Shares of the Fund do not exceed 0.78% for a period of one
year following the reorganization.
-24-
<PAGE>
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>
Trust Shares $92 $287 $498 $1,108
- ----------------- ----------------- ------------------- ------------------- ------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-25-
<PAGE>
Galaxy Florida Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income exempt from federal
income tax through Fund shares which are exempt from Florida intangible personal
property tax, with a secondary goal of preserving capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Florida municipal securities. Florida
municipal securities are securities issued by the State of Florida and other
government issuers that pay interest which is exempt from federal income tax and
that are exempt from Florida intangible personal property tax. Under normal
conditions, the Fund will invest no more than 20% of its net assets in taxable
debt securities such as U.S. Government obligations, corporate bonds, money
market instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-26-
<PAGE>
unrated securities determined by the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by either S&P or
Moody's if the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal securities,
also depends on the ability of issuers to make principal and interest
payments. If an issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will fall. Debt
securities which have the lowest of the top four ratings assigned by S&P or
Moody's have speculative characteristics. Changes in the economy are more
likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-27-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Florida municipal
securities, it is likely to be especially susceptible to economic,
political and regulatory events that affect Florida. Other considerations
affecting the Fund's investments in Florida municipal securities are
summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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. The Fund only offers one class of shares which are referred to in this
prospectus as Trust Shares.
The Fund began operations on June 30, 1997 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares of the Fund. The returns shown below are for the
Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-28-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
--------- ---------
1998 1999
--------- ---------
<S> <C> <C>
6.37% ____%
--------- ---------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- ------------------------------ ------------------- ---------------------------
1 year Since inception
- ------------------------------ ------------------- ---------------------------
<S> <C> <C>
Trust Shares ____% ____% (6/30/97)
- ------------------------------ ------------------- ---------------------------
Lehman Brothers
7-Year Municipal
Bond Index ____% ____% (since 6/30/97)
- ------------------------------ ------------------- ---------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.22% 0.97%(1)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
</TABLE>
(1)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.58%. Total Fund operating expenses after this waiver are
expected to be 0.80%. This fee waiver may be revised or discontinued at any
time. However, the Adviser has agreed to waive fees and reimburse expenses in
such amounts as are necessary to ensure that the Total Fund operating
expenses for Trust Shares of the Fund do not exceed 0.80% for a period of one
year following the reorganization.
-29-
<PAGE>
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>
Trust Shares $99 $309 $536 $1,190
- ----------------- ----------------- ------------------- ------------------- ------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-30-
<PAGE>
Galaxy Growth Fund II
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with capital appreciation. Dividend income,
if any, is incidental to capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in common stock (including depositary receipts) of
U.S. and foreign companies which the Adviser believes have above-average growth
potential. The Fund normally invests 80% to 90% or more of its total assets in
these securities, although the Fund may invest up to 35% of its total assets in
other securities, such as convertible and non-convertible debt securities,
preferred stock, warrants and money market instruments.
The Fund principally invests in U.S. companies with market capitalizations of at
least $250 million, although the Fund also may invest in companies with smaller
capitalizations. The Fund may invest up to 25% of its total assets in the
securities of foreign companies, including companies in developing countries.
While some of the Fund's investments may pay dividends, current income is not a
consideration when selecting investments.
In selecting securities for the Fund, the Adviser uses a "bottom-up" approach.
It looks for companies that it believes are in dynamic high-growth sectors of
the world economy and that are thought to have dominant or strong competitive
positions within their sectors. The Adviser also looks for companies thought to
have quality management and that are expected to have strong earnings growth
potential.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
The Fund will sell a security if there is an adverse change in the projected
earnings growth of the company issuing the security. A security will also be
sold when, as a result of changes in the economy or the performance of the
security or other circumstances, the Adviser believes that holding the security
is no longer consistent with the Fund's investment objective.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
-31-
<PAGE>
[Sidenote:]
MARKET CAPITALIZATION
A company's market capitalization is the price of a share of its stock,
multiplied by the number of shares held by investors.
THE MAIN RISKS OF INVESTING IN THE FUND
Changes in the U.S. or foreign economies can cause the value of stocks and other
investments held by the Fund to fall. Stock prices may decline over short or
extended periods. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
The value of your investment in the Fund will go up and down with the value of
the investments which the Fund holds. The Fund's investments may not perform as
well as other investments, even in times of rising markets.
In addition, the Fund also carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies (generally, those with market
capitalizations below $1.5 billion) tend to have limited resources, product
lines and market share. As a result, their share prices tend to fluctuate
more than those of larger companies. Their shares may also trade less
frequently and in limited volume, making them potentially less liquid. The
price of small company stocks might fall regardless of trends in the
broader market.
- - CONVERTIBLE SECURITIES - Securities that can be converted into common
stock, such as certain debt securities and preferred stock, are subject to
the usual risks associated with fixed income investments, such as interest
rate risk and credit risk. In addition, because they react to changes in
the value of the equity securities into which they will convert,
convertible securities are also subject to stock market risk.
- - FOREIGN INVESTMENTS - Foreign investments may be riskier than U.S.
investments because of factors such as foreign government restrictions,
changes in currency exchange rates, incomplete financial information about
the issuers of securities, and political or economic instability. Foreign
stocks may be more volatile and less liquid than U.S. stocks.
- - EMERGING MARKETS - The risks associated with foreign investments are
heightened when investing in emerging markets. The governments and
economies of emerging market countries feature greater instability than
those of more developed countries. Such investments tend to fluctuate in
price more widely and to be less liquid than other foreign investments.
- - HEDGING - The Fund may engage in foreign currency transactions to hedge
against the currency risk of its foreign investments. There's no guarantee
hedging will always work. It can also prevent the Fund from making a gain
if markets move in the opposite direction to the hedge.
- - 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.
-32-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and the 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.
The Fund began operations on March 28, 1996 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares and BKB Shares of the Fund. Shareholders of the
Predecessor Fund who purchased their shares through an investment management,
trust, custody, or other agency relationship with BankBoston, N.A. received
Trust Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
--------- ---------- -----------
1997 1998 1999
--------- ---------- -----------
<S> <C> <C> <C>
13.92% 1.36% ____%
--------- ---------- -----------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
-33-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ ------------------- ---------------------------
1 year Since inception
- ------------------------------ ------------------- ---------------------------
<S> <C> <C>
Trust Shares ____% ____% (3/28/96)
- ------------------------------ ------------------- ---------------------------
Russell 2000 Index ____% ____% (since 3/31/96)
- ------------------------------ ------------------- ---------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index which tracks the performance of the
2000 smallest of the 3000 largest U.S. companies, based on market
capitalization. Companies included in the Russell 2000 Index have market
capitalizations that currently range between $30 million and $1.4 billion.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.15% 0.90%(1)
- ---------------------- ------------------- -------------------------- ---------------- -------------------------
</TABLE>
(1)The Adviser has agreed to waive fees and reimburse expenses in such amounts
as are necessary to ensure that the Total Fund operating expenses for Trust
Shares of the Fund do not exceed 0.90% for a period of one year following the
reorganization.
-34-
<PAGE>
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>
Trust Shares $92 $287 $498 $1,108
- ----------------- ----------------- ------------------- ------------------- ------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio managers are Theodore E. Ober and Eugene D. Takach. They
are primarily responsible for the day-to-day management of the Fund's investment
portfolio. Mr. Ober, who has over 11 years of experience in investment
management and research analysis, has been a Research Analyst, Fund Manager and
Senior Fund Manager with the Adviser and its affiliated organizations since
1987. Mr. Takach, who has over 30 years of experience in investment
management, research analysis and securities trading, has been a portfolio
manager with the Adviser and its affiliated organizations since 1971. Mr.
Ober and Mr. Takach co-managed the Predecessor Fund since it began operations.
-35-
<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 are not part of its principal investment strategy to try to avoid losses
during unfavorable market conditions. These investments may include cash (which
will not earn any income) and, in the case of the Intermediate Tax-Exempt Bond
Fund, Connecticut Intermediate Municipal Bond Fund, Florida Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Growth Fund II, taxable
investments, such as money market instruments and debt securities issued or
guaranteed by the U.S. Government or its agencies. These strategies could
prevent a Fund from achieving its investment objective and could reduce the
Fund's return and affect its performance during a market upswing.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund may,
from time to time, pursue other investment strategies and make other types of
investments in support of its overall investment goal. These supplemental
investment strategies, which are not considered to be main investment strategies
of the Funds - and the risks involved - are described in detail in the Statement
of Additional Information (SAI) which is referred to on the back cover of this
prospectus.
YEAR 2000 RISKS
Over the past several years, the Adviser and the Funds' other major service
providers expended considerable time and money in addressing the computer and
technology problems associated with the transition to the Year 2000. As a result
of those efforts, the Funds did not experience any material disruptions in their
operations as a result of the transition to the 21st century. The Adviser and
the Funds' other major service providers are continuing to monitor the Year 2000
or Y2K problem, however, and there can be no assurances that there will be no
adverse impact to the Funds as a result of future computer-related Y2K
difficulties.
-36-
<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 financial institution or plan
administrator for help in deciding which Fund is right for you.
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Fund May be best suited for investors who...
- ----------------------------------------------------- ----------------------------------------------------
<S> <C>
Galaxy Institutional Money Market Fund - are investing for a short period of time
- are looking for higher returns than are
usually available from Treasury money
market funds
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Institutional Treasury Money Market Fund - are investing for a short period of time
- want the added safety of U.S. Government
securities
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Intermediate Tax-Exempt Bond Fund - are seeking current income that is exempt
from federal income tax
- are seeking a higher yield than is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Connecticut Intermediate Municipal - reside in Connecticut and are seeking
Bond Fund current income that is exempt from federal
income tax and Connecticut personal
income tax
- are seeking a higher yield then is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Massachusetts Intermediate Municipal - reside in Massachusetts and are seeking
Bond Fund current income that is exempt from federal
income tax and Massachusetts personal
income tax
- are seeking a higher yield then is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------- ----------------------------------------------------
</TABLE>
-37-
<PAGE>
<TABLE>
- ----------------------------------------------------- ----------------------------------------------------
<S> <C>
Galaxy Florida Municipal Bond Fund - reside in Florida and are seeking current
income that is exempt from federal income
tax through an investment that is exempt
from Florida intangible personal property
tax
- are seeking a higher yield than is available
from shorter-term tax-exempt securities or
money market funds
- ----------------------------------------------------- ----------------------------------------------------
Galaxy Growth Fund II - are seeking long-term growth
- are able to tolerate the additional risks of
investing in smaller companies
- are not seeking income
- ----------------------------------------------------- ----------------------------------------------------
</TABLE>
[Sidenote:]
TAX-EQUIVALENT YIELD
One way to understand the tax advantages of a tax-exempt fund is to compare its
after-tax return to that of a taxable investment. For example, suppose a taxable
fund pays a return of 10%. If you're in the 36% federal income tax bracket, the
fund's return after taxes is 6.4%. When a tax-exempt fund pays a return of 10%,
you don't pay tax. So if you're in the 36% tax bracket, that's the equivalent of
earning about 15.6% on a taxable fund. If you're in a low tax bracket, however,
it may not be helpful to invest in a tax-exempt fund if you can achieve a higher
after-tax return from a taxable investment.
-38-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
its portfolio securities, and maintains related records. Prior to the
reorganization, BankBoston N.A. ("BankBoston") served as the investment adviser
to each of the Predecessor Funds. BankBoston is an indirect wholly-owned
subsidiary of FleetBoston Corporation and an affiliate of the Adviser.
The management fees paid to BankBoston by each Predecessor Fund during the
fiscal year ended May 31, 1999 are set forth below.
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------------------------------------------
Fund Management fee as a % of average net assets
- ----------------------------------------------------- ----------------------------------------------------
<S> <C>
Institutional Money Market 0.15%
- ----------------------------------------------------- ----------------------------------------------------
Institutional Treasury Money Market 0.20%
- ----------------------------------------------------- ----------------------------------------------------
Intermediate Tax-Exempt Bond 0.68%
- ----------------------------------------------------- ----------------------------------------------------
Connecticut Intermediate Municipal Bond 0.67%
- ----------------------------------------------------- ----------------------------------------------------
Massachusetts Intermediate Municipal
Bond 0.67%
- ----------------------------------------------------- ----------------------------------------------------
Florida Municipal Bond 0.65%
- ----------------------------------------------------- ----------------------------------------------------
Growth II 0.74%
- ----------------------------------------------------- ----------------------------------------------------
</TABLE>
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 they believe that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
SUB-ACCOUNT SERVICES
Affiliates of the Adviser and certain other parties may receive fees from
Galaxy's transfer agent for providing certain sub-accounting and administrative
services to participant sub-accounts with respect to Trust Shares of the Funds
(other than the Galaxy Intermediate Tax-Exempt Bond Fund, Galaxy Connecticut
Intermediate Municipal Bond Fund, Galaxy Massachusetts Intermediate Municipal
Bond Fund and Galaxy Florida Municipal Bond Fund) held by defined
-39-
<PAGE>
contribution plans. The transfer agency fees payable by Trust Shares of the
Funds have been increased by an amount equal to these fees, so that the holders
of Trust Shares indirectly bear these fees.
-40-
<PAGE>
HOW TO INVEST IN THE FUNDS
BUYING, SELLING AND EXCHANGING SHARES
Trust Shares of the Funds (other than the Institutional Money Market Fund and
Institutional Treasury Money Market Fund) are available for purchase by the
following types of investors:
- - Investors maintaining a qualified account at a bank or trust institution,
including subsidiaries of FleetBoston Corporation.
- - Participants in employer-sponsored defined contribution plans.
Qualified accounts include discretionary investment management accounts,
custodial accounts, agency accounts and different types of tax-advantaged
accounts. Your institution can provide more information about which types of
accounts are eligible.
Trust Shares of the Institutional Money Market Fund and Institutional Treasury
Money Market Fund (referred to as the Money Market Funds) are available for
purchase by financial institutions, such as banks, savings and loan associations
and broker-dealers, including financial institutions affiliated with the
Adviser, that are purchasing shares of the Fund on behalf of their customers.
You can buy and sell Trust Shares of the Funds on any business day. A business
day is any day that Galaxy's distributor, Galaxy's custodian and your financial
institution or employer-sponsored plan are open for business.
If you order to buy shares of a Money Market Fund is received and accepted by
Galaxy's distributor by 11:00 a.m. (Eastern time) on a business day, the price
you pay will be the next asset value (NAV) per share next determined (and you'll
receive that day's dividend) if Galaxy's custodian receives the purchase price
in immediately available funds by 11:00 a.m. that day. If you order to buy
shares of a Money Market Fund is received and accepted by Galaxy's distributor
after 11:00 a.m. (Eastern time) on a business day, the price you pay will be the
NAV per share next determined (and you'll begin receiving dividends the next
day) if Galaxy's custodian receives the purchase price in immediately available
funds by 4:00 p.m. on the day of your order. The price at which you buy shares
of each of the other Funds is the NAV per share next determined after your order
is accepted. The price at which you sell shares of each Fund, including the
Money Market Funds, is the NAV per share next determined after receipt of your
order.
NAV is determined on each day the New York Stock Exchange is open for trading as
of 11:00 a.m. (for the Money Market Funds only) and at the close of regular
trading that day (usually 4:00
-41-
<PAGE>
p.m. Eastern time) for each Fund, including the Money Market Funds. The New York
Stock Exchange is generally open for trading every Monday through Friday, except
for national holidays.
The Money Market Funds' assets are valued at amortized cost, which is
approximately equal to market value. For each of the other Funds, if market
prices are readily available for securities owned by the Fund, they're valued at
those prices. If market prices are not readily available for some securities,
they are valued at fair value under the supervision of Galaxy's Board of
Trustees.
Sometimes, the price of a security trading on a foreign stock exchange may be
affected by events that happen after that exchange closes. If this happens, the
fair value of the security may be determined using other factors and may not
reflect the security's last quoted price. In addition, foreign securities may
trade on days when shares of the Funds are not priced. As a result, the NAV per
share of a Fund holding these securities may change on days when you won't be
able to buy or sell Fund shares.
[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 attributable to Trust Shares, minus the
value of the Fund's liabilities attributable to Trust Shares, divided by the
number of Trust Shares held by investors.
HOW TO BUY SHARES
You can buy Trust Shares by following the procedures established by your
financial institution or your employer-sponsored plan. Your financial
institution or plan administrator is responsible for sending your order to
Galaxy's distributor and wiring payment to Galaxy's custodian. The financial
institution or employer-sponsored plan holds the shares in your name and
receives all confirmations of purchases and sales.
[Sidenote:]
INVESTMENT MINIMUMS
Except for the Money Market Funds, Galaxy does not have any minimum
investment requirements for initial or additional investments in Trust Shares
but financial institutions and employer-sponsored plans may do so. They may
also require you to maintain a minimum account balance.
The minimum initial aggregate investment by a financial institution purchasing
shares of a Money Market Fund on behalf of its customers is $2,000,000. There is
no minimum investment requirement for additional purchases.
-42-
<PAGE>
HOW TO SELL SHARES
You can sell Trust Shares by following the procedures established by your
financial institution or your employer-sponsored plan. Your financial
institution or plan administrator is responsible for sending your order to
Galaxy's distributor and for crediting your account with the proceeds. Galaxy
doesn't charge for wiring the proceeds, but your financial institution or
employer-sponsored plan may do so. Contact your financial institution or plan
administrator 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.
Sales proceeds are normally wired to your financial institution or plan
administrator on the next business day but Galaxy reserves the right to send
sales proceeds within seven days if sending proceeds earlier could adversely
affect a Fund.
Galaxy may ask for any information it might reasonably need to make sure that
you've authorized a sale of shares.
With respect to the Money Market Funds, Galaxy requires that a financial
institution maintain an average account balance of $2,000,000. If the balance in
the account falls below $2,000,000, Galaxy may require the financial institution
to sell all shares in the account. With respect to the other Funds, Galaxy may
close any account after 60 days' written notice if the value of the account
drops below $250 as a result of selling shares.
HOW TO EXCHANGE SHARES - MONEY MARKET FUNDS ONLY
If you are a customer of a financial institution, you may exchange Trust Shares
of the Institutional Money Market Fund and/or the Institutional Treasury Money
Market Fund having a value of at least $100 for Retail A Shares of any other
Galaxy Fund or for shares of any other Fund that's managed by the Adviser or any
of its affiliates in which you have an existing account. Unless you qualify for
a waiver, you'll have to pay a sales charge when you exchange your Trust Shares
of a Money Market Fund for Retail A Shares of another Galaxy Fund that imposes a
sales charge on purchases.
-43-
<PAGE>
TO EXCHANGE SHARES:
- - call Galaxy's distributor or use the InvestConnect voice response line at
1-877-BUY-GALAXY (1-877-289-4252)
- - send your request in writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
- - ask your financial institution.
Galaxy doesn't charge any fee for making exchanges but your financial
institution might do so. You are generally limited to three exchanges per year.
Galaxy may refuse any exchange request and may change or cancel the exchange
privilege by giving 60 days' advance written notice to shareholders.
-44-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund, except the Growth Fund II, generally declares dividends from net
investment income daily and pays them monthly. The Growth Fund II generally pays
dividends from net investment income on a semi-annual basis. The Money Market
Funds expect that all, or substantially all, of their distributions will consist
of ordinary income. It is expected that the annual distributions of the
Intermediate Tax-Exempt Bond, Connecticut Intermediate Municipal Bond,
Massachusetts Intermediate Municipal Bond and Florida Municipal Bond Funds will
be mainly income dividends. It is expected that the annual distributions of the
Growth Fund II will normally - but not always - consist primarily of capital
gains rather than ordinary income. Each of the Funds normally pays any realized
capital gains at least once a year, although the Money Market Funds do not
expect to realize net long-term capital gains. Dividends and distributions are
paid in cash unless you indicate in a letter to Galaxy that you want to have
dividends and distributions reinvested in additional shares.
FEDERAL TAXES
MONEY MARKET FUNDS AND GROWTH FUND II
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of a Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions will
generally be taxable as ordinary income. You will be subject to income tax on
these distributions regardless of whether they are paid in cash or reinvested in
additional shares. Taxable dividends paid to you in January may be taxable as if
they had been paid the previous December. You will be notified annually of the
tax status of distributions to you.
Dividends paid by the Growth Fund II to its corporate shareholders and that are
attributable to qualifying dividends the Fund receives from U.S. corporations
may be eligible, in the hands of the corporate shareholders, for the corporate
dividends-received deduction, subject to certain holding period requirements and
debt financing limitations.
INTERMEDIATE TAX-EXEMPT BOND FUND, CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND,
MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND AND FLORIDA MUNICIPAL BOND FUND
It is expected that the Funds will distribute dividends derived from interest
earned on exempt securities, and these "exempt-interest dividends" will be
exempt income for shareholders for federal income tax purposes. However,
distributions, if any, derived from net capital gains of each Fund will
generally be taxable to you as capital gains. Dividends, if any, derived from
short-term capital gains or taxable interest income will be taxable to you as
ordinary income. You will be notified annually of the tax status of
distributions to you.
-45-
<PAGE>
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Fund generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by each
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
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Generally,
this gain or loss will be long-term or short-term depending on whether your
holding period for the shares exceeds 12 months except that any loss realized on
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends that were received on the shares. If
you receive an exempt-interest dividend with respect to any share and the share
is held by you for six months or less, any loss on the sale or exchange of the
share will be disallowed to the extent of such dividend amount.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions,
redemptions and exchanges. State income taxes may not apply however to the
portions of a Fund's distributions, if any, that are attributable to interest on
U.S. Government securities or on securities of the particular state or
localities within the state. Each state-specific Fund intends to comply with
certain state and/or local tax requirements so that its income and dividends
will be exempt from the applicable state and/or local taxes described above in
the description for such Fund. Dividends, if any, derived from interest on
securities other than the state-specific municipal securities in which each Fund
primarily invests, or from any capital gains, will be subject to the particular
state's taxes. However, with respect to the Connecticut Intermediate Municipal
Bond Fund, dividends, if any, derived from long-term capital gains on
Connecticut municipal securities
-46-
<PAGE>
of issuers in Connecticut will not be subject to the Connecticut state income
tax on individuals, trusts and estates if paid on Fund shares held as capital
assets.
MISCELLANEOUS
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
-47-
<PAGE>
FINANCIAL HIGHLIGHTS
Each Fund began operations as a separate portfolio (the Predecessor Fund) of the
Boston 1784 Funds. On May ___, 2000, each Predecessor Fund was reorganized as a
new portfolio of Galaxy. As discussed above in each Fund's risk/return summary,
prior to the reorganization, each Predecessor Fund offered and sold a single
class of shares. The financial highlights tables shown below will help you
understand the financial performance for each Predecessor Fund for the six-month
period ended November 30, 1999 and for the past five fiscal years (or the period
since a particular Predecessor Fund began operations). Certain information
reflects the financial performance of a single share. The total returns in the
tables represent the rate that an investor would have earned (or lost) on an
investment in each Predecessor Fund, assuming all dividends and distributions
were reinvested. The information for the semi-annual period ended November 30,
1999 is unaudited and such information, along with the Predecessor Fund's
financial statements, is included in the Predecessor Funds' Semi-Annual Reports
and incorporated by reference into the SAI. The information for the past five
fiscal years or periods has been audited by [____________], independent
auditors, whose report, along with the Predecessor Funds' financial statements,
are included in the Predecessor Funds' Annual Reports and are incorporated by
reference into the SAI. The Annual and Semi-Annual Reports and SAI are available
free of charge upon request.
-48-
<PAGE>
Galaxy Institutional Money Market Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Period Ended
November 30, May 31 May 31
--------------- ----------- ----------
1999 1999 1998(1)
---- ---- ----
<S> <C> <C> <C>
Net asset value, beginning of period $1.00 $ 1.00
----- ------
Income from investment operations:
Net investment income1....... 0.05 0.03
Net realized and unrealized gain
(loss)
on investments............. -- --
-------- -----
Total from investment operations 0.05 0.03
---- ----
Less dividends:
Dividends from net investment
income................
(0.05) (0.03)
Dividends from net realized capital
gains................. -- --
-------- -----
Total dividends................ (0.05) (0.03)
Net increase (decrease) in net asset
value.......................... -- --
-------- -----
Net asset value, end of period... $ 1.00 $ 1.00
-------- --------
-------- --------
Total return..................... 5.10% 5.55%(2)
Ratios/supplemental data:
Net assets, end of period (000's) $516,901 $302,338
Ratios to average net assets:
Net investment income including
reimbursement/ waiver.......... 4.93% 5.36%(2)
Net investment income excluding
reimbursement/ waiver.......... 4.88% 5.21%(2)
Operating expenses including
reimbursement/waiver........ 0.30% 0.27%(2)
Operating expenses excluding
reimbursement/waiver........ 0.35% 0.42%(2)
</TABLE>
-------------------------------------------
* The Fund commenced operations on November 5, 1997 as a separate
portfolio (the "Predecessor Fund") of the Boston 1784 Funds. On
May __, 2000, the Predecessor Fund was reorganized as a new
portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold one class of shares. In
connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for shares of the Fund.
(1)For the period from commencement of operations.
(2)Annualized.
-49-
<PAGE>
Galaxy Institutional Treasury Money Market Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
Period ended
November 30, For the Year Ended May 31,
------------- -------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income(1)....... 0.05 0.05 0.05 0.05 0.05
Net realized and unrealized
gain (loss) on investments. -- -- -- -- --
------------ ------------ ----------- ----------- -----------
Total from investment
operations................ 0.05 0.05 0.05 0.05 0.05
------------ ------------ ----------- ----------- -----------
Less dividends:
Dividends from net investment
income...................... (0.05) (0.05) (0.05) (0.05) (0.05)
Dividends from net realized
capital gains............... -- -- -- -- --
Total dividends............. (0.05) (0.05) (0.05) (0.05) (0.05)
------------ ------------ ----------- ----------- -----------
Net increase (decrease) in net
asset value.................... -- -- -- -- --
------------ ------------ ----------- ----------- -----------
Net asset value, end of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Total return..................... 4.90% 5.36% 5.16% 5.45% 5.05%
Ratios/supplemental data:
Net assets, end of period (000's) $4,346,037 $4,285,801 $2,591,487 $644,733 $395,585
Ratios to average net assets:
Net investment income including
reimbursement/ waiver....... 4.79% 5.24% 5.05% 5.29% 5.12%
Net income excluding
reimbursement/waiver 4.79% 5.24% 5.04% 5.22% 5.01%
Operating expenses including
reimbursement/waiver........ 0.31% 0.33% 0.33% 0.32% 0.30%
Operating expenses excluding
reimbursement/waiver....... 0.31% 0.33% 0.34% 0.39% 0.41%
</TABLE>
- --------------------
* The Fund began operations on June 14, 1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to
the reorganization, the Predecessor Fund offered and sold one class of
shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for shares of the Fund.
(1) For the period from commencement of operations.
-50-
<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the Year Ended May 31,
------------ ---------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.52 $10.18 $9.99 $10.14 $9.90
------ ------ ----- ------ -----
Income from investment
operations:
Net investment income......... 0.45 0.48 0.50 0.51 0.48
Net realized and unrealized
gain (loss) on investments.... (0.01) 0.44 0.19 (0.09) 0.24
------ ---- ---- ------ ----
Total from investment
operations....................... 0.44 0.92 0.69 0.42 0.72
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.45) (0.48) (0.50) (0.51) (0.48)
Dividends from net
realized capital gains..... (0.18) (0.10) -- (0.06) --
------ ------ -------- ------ -----
Total dividends..................... (0.63) (0.58) (0.50) (0.57) (0.48)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.19) 0.34 0.19 (0.13) 0.24
------ ---- ---- ------ ----
Net asset value, end of period...... $ 10.33 $ 10.52 $ 10.18 $ 9.99 $ 10.14
--------- --------- --------- ---------- -----------
--------- --------- --------- ---------- -----------
Total return........................ 4.24% 9.24% 7.74% 4.31% 7.58%
Ratios/supplemental data:
Net assets, end of period
(000's)................. $356,995 $303,578 $250,526 $196,787 $176,345
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.31% 4.62% 4.92% 4.90% 5.02%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.30% 4.55% 4.48% 4.56%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.80% 0.79% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.11% 1.12% 1.17% 1.21% 1.26%
Portfolio turnover rate............. 68.58% 34.06% 33.24% 37.35% 74.74%
</TABLE>
- -------------------------------
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares through an
investment management, trust, custody, or other agency relationship with
BankBoston, N.A. received Trust Shares of the Fund.
-51-
<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
Period Ended
November 30, For the Year Ended May 31,
------------ --------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.81 $10.38 $10.17 $10.27 $10.00
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income......... 0.48 0.50 0.51 0.53 0.45
Net realized and unrealized
gain (loss) on investments.... (0.08) 0.45 0.21 (0.10) 0.27
------ ---- ---- ------ ----
Total from investment
operations....................... 0.40 0.95 0.72 0.43 0.72
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.48) (0.50) (0.51) (0.53) (0.45)
Dividends from net
realized capital gains..... (0.06) (0.02) -- -- --
------ ------ -------- -------- -----
Total dividends..................... (0.54) (0.52) (0.51) (0.53) (0.45)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.14) 0.43 0.21 (0.10) 0.27
------ ---- ---- ------ ----
Net asset value, end of period...... $ 10.67 $ 10.81 $ 10.38 $ 10.17 $ 10.27
--------- ---------- ---------- ------------ ------------
Total return........................ 3.72% 9.29% 7.26% 4.20% 7.45%(2)
Ratios/supplemental data:
Net assets, end of period
(000's)................. $187,725 $142,107 $103,104 $ 81,441 $ 61,369
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.37% 4.66% 4.94% 5.02% 5.44%(3)
Net investment income
excluding reimbursement/
waiver..................... 4.05% 4.32% 4.53% 4.48% 4.56%(3)
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.76% 0.75% 0.52%(3)
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.17% 1.29% 1.40%3
Portfolio turnover rate............. 19.10% 16.81% 4.28% 20.41% 35.56%
</TABLE>
- ----------------------------------
* The Portfolio commenced operations on August 1, 1994 as a separate
portfolio (the "Predecessor Fund") of the Boston 1784 Funds. On May __,
2000, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold one
class of shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for Trust Shares and BKB Shares of
the Fund. Shareholders of the Predecessor Fund who purchased their shares
through an investment management, trust, custody, or other agency
relationship with BankBoston, N.A. received Trust Shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized.
(3) Annualized.
-52-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the Year Ended May 31,
------------ --------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.42 $10.01 $9.78 $9.90 $9.81
------ ------ ----- ----- -----
Income from investment
operations:
Net investment income......... 0.45 0.47 0.47 0.48 0.47
Net realized and unrealized
gain (loss) on investments.... (0.03) 0.41 0.23 (0.12) 0.09
------ ---- ---- ------ ----
Total from investment
operations....................... 0.42 0.88 0.70 0.36 0.56
---- ---- ---- ---- ----
Less dividends:
Dividends from net
investment income.......... (0.45) (0.47) (0.47) (0.48) (0.47)
Dividends from net
realized capital gains..... -- -- -- -- --
-------- -------- -------- -------- -----
Total dividends..................... (0.45) (0.47) (0.47) (0.48) (0.47)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.03) 0.41 0.23 (0.12) 0.09
------ ---- ---- ------ ----
Net asset value, end of period...... $ 10.39 $ 10.42 $ 10.01 $ 9.78 $ 9.90
--------- --------- --------- ----------- --------
--------- --------- --------- ----------- --------
Total return........................ 4.10% 8.91% 7.30% 3.64% 6.00%
Ratios/supplemental data:
Net assets, end of period
(000's)................. $267,871 $206,137 $147,459 $ 106,619 $ 82,058
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.32% 4.54% 4.74% 4.73% 4.93%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.20% 4.35% 4.25% 4.38%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.79% 0.80% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.18% 1.28% 1.35%
Portfolio turnover rate............. 9.32% 6.45% 9.47% 47.00% 34.59%
</TABLE>
- ---------------------------
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares through an
investment management, trust, custody, or other agency relationship with
BankBoston, N.A. received Trust Shares of the Fund.
-53-
<PAGE>
Galaxy Florida Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period For the For the
ended Year ended Period ended
November 30, May 31, May 31,
----------- ----------- -----------
1999 1999 1998(1)
---- ---- -------
<S> <C> <C> <C>
Net asset value, beginning of period......... $10.30 $ 10.00
------ ------
Income from investment operations:
Net investment income.................. 0.44 0.43
Net realized and unrealized gain (loss)
on investments.................... (0.04) 0.32
------ ----
Total from investment operations............. 0.40 0.75
------ ----
Less dividends:
Dividends from net investment income... (0.44) (0.43)
Dividends from net realized capital gains (0.14) (0.02)
-------- ------
Total dividends.............................. (0.58) (0.45)
------ ------
Net increase (decrease) in net asset value... (0.18) 0.30
------ ----
Net asset value, end of period............... $10.12 $ 10.30
====== ======
Total return 3.88% 7.63%(2)
Ratios/supplemental data:
Net assets, end of period (000's)...... $68,796 $51,793
Ratios to average net assets:
Net investment income including reimbursement/waiver
4.25% 4.59%
Net investment income including reimbursement/waiver
3.91% 4.20%(3)
Operating expenses including
Reimbursement/waiver.............. 0.80% 0.80%
Operating expenses excluding
Reimbursement/waiver.............. 1.14% 1.19%(3)
Portfolio turnover rate...................... 10.88% 21.35%
</TABLE>
- ----------------------------------
* The Fund commenced operations on June 30, 1997 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized.
(3) Annualized.
-54-
<PAGE>
GALAXY GROWTH FUND II*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Period For the Period
Ended ended
November 30, For the Year ended May 31
------------ -------------------------------------------- --------------
1999 1999 1998 1997 1996(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $12.93 $12.20 $11.27 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income................ (0.08) (0.05) 0.02 0.02
Net realized and unrealized gain
(loss) on investments............ (0.41) 1.59 0.96 1.25
------ ---- ---- ----
Total from investment operations.......... (0.49) 1.54 0.98 1.27
------ ---- ---- ----
Less dividends:
Dividends from net investment
income........................... -- -- (0.05) (0.00)
Dividends from net realized capital
gains............................ (0.38) (0.81) (0.00) (0.00)
------ ------ ------ ------
Total dividends........................... (0.38) (0.81) (0.05) (0.00)
------ ------ ------ ------
Net increase (decrease) in net asset
value............................ (0.87) 0.73 0.93 1.27
------ ---- ---- ----
Net asset value, end of period............ $ 12.06 $ 12.93 $ 12.20 $ 11.27
====== ====== ====== ======
Total return.............................. (3.54)% 12.64% 8.77% 12.70%(2)
Ratios/supplemental data:
Net assets, end of period (000's).... $185,476 $257,550 $261,487 $46,026
Ratios to average net assets:
Net investment income including
reimbursement/waiver............. (0.39)% (0.35)% 0.17% 1.75%(3)
Net investment income excluding
reimbursement/waiver............. (0.64)% (0.60)% (0.21)% 0.22%(3)
Operating expenses including
reimbursement/waiver............. 0.93% 0.91% 0.77% 0.20%(3)
Operating expenses excluding
Reimbursement/waiver............. 1.18% 1.16% 1.15% 1.73%(3)
Portfolio turnover rate................... 61.02% 48.60% 57.46% 0.00
</TABLE>
- ------------------------------
* The Fund commenced operations on March 28, 1996 as a separate portfolio
(the "Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares through an
investment management, trust, custody, or other agency relationship with
BankBoston, N.A. received Trust Shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized
(3) Annualized.
-55-
<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
and a discussion about the market conditions and investment strategies that had
a significant effect on each Fund's performance during the last fiscal year.
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 calling Galaxy at 1-877-BUY-GALAXY
(1-877-289-4252) or by writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
If you buy your shares through a financial institution, you may contact your
institution for more information.
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC Washington, DC 20549-0102 1-202-942-8090.
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's website at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
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]
The Galaxy Fund
Prospectus
May __, 2000
Galaxy Intermediate Tax-Exempt Bond Fund
Galaxy Connecticut Intermediate Municipal Bond Fund
Galaxy Massachusetts Intermediate Municipal Bond Fund
Galaxy Growth Fund II
BKB Shares
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.
<PAGE>
Contents
1 Risk/return summary
1 Introduction
2 Galaxy Intermediate Tax-Exempt Bond Fund
9 Galaxy Connecticut Intermediate Municipal Bond Fund
15 Galaxy Massachusetts Intermediate Municipal Bond Fund
21 Galaxy Growth Fund II
26 Additional information about risk
27 Investor guidelines
29 Fund management
30 How to invest in the Funds
30 How sales charges work
33 Buying, selling and exchanging BKB Shares
34 How to buy BKB Shares
35 How to sell BKB Shares
37 Exchange privilege
37 Other transaction policies
39 Dividends, distributions and taxes
42 Galaxy investor programs
42 Retirement plans
42 Other programs
44 How to reach Galaxy
45 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the BKB Shares of the Galaxy Intermediate Tax-Exempt
Bond Fund, Galaxy Connecticut Intermediate Municipal Bond Fund, Galaxy
Massachusetts Intermediate Municipal Bond Fund and Galaxy Growth Fund II. BKB
Shares are offered through this prospectus without a sales charge (sometimes
called a front-end load) only to those shareholders of the Boston 1784 Funds who
are not eligible to receive Trust Shares of their corresponding Galaxy Funds at
the time the Boston 1784 Funds are reorganized into Galaxy. BKB Shares of each
Fund will convert into Retail A Shares of the same Fund on the first anniversary
of the closing of the reorganization of the Boston 1784 Funds into Galaxy,
provided that prior thereto the Board of Trustees of Galaxy has determined that
such conversion is in the best interest of the holders of BKB Shares. Because of
this conversion feature, some information is provided in this prospectus for
Retail A Shares of the Funds. Retail A Shares of the Funds are offered through a
separate prospectus available from Galaxy by calling the phone number on the
back cover of this prospectus. Prior to the date of this prospectus, the Funds
had not offered BKB Shares.
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 past performance of the Fund measured on both a year-by-year and
long-term basis
- - the fees and expenses that you will pay as an investor in the Fund.
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. The Adviser, an
indirect wholly-owned subsidiary of FleetBoston Corporation, was established in
1984 and has its main office at 75 State Street, Boston, Massachusetts 02109.
The Adviser also provides investment management and advisory services to
individual and institutional clients and manages the other Galaxy investment
portfolios. As of December 31, 1999, the Adviser managed over $96 billion in
assets.
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN ANY OF THE FUNDS.
<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from federal
income tax, consistent with preservation of capital.
[Sidenote:]
PRESERVATION OF CAPITAL
Preservation of capital means protecting the amount of money you invest in a
Fund. If a Fund seeks to preserve capital, it will try to maintain a relatively
stable share price so your investment is protected.
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt securities
in a Fund come due or mature. It is calculated by averaging the time to maturity
of all debt securities held by a Fund with each maturity "weighted" according to
the percentage of assets it represents.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in a diversified portfolio of 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 circumstances, at least 80% of the Fund's net
assets are invested in municipal securities or in mutual funds or other
investment companies that invest in municipal securities. The Fund may also
invest up to 20% of its net assets in debt securities that pay interest that is
not exempt from federal tax, such as U.S. Government obligations, corporate
bonds, money market instruments, including commercial paper and bank
obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
-2-
<PAGE>
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various geographic regions, issuers and
industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the four ratings assigned by Standard & Poor's
Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are unrated
securities determined by the Adviser to be of comparable quality. The Adviser
expects, however, that most of the securities purchased by the Fund will have
one of the top three ratings assigned by S&P or Moody's, or will be unrated
securities determined by the Adviser to be of comparable quality. Occasionally,
the rating of a security held by the Fund may be downgraded to below investment
grade. If that happens, the Fund doesn't have to sell the security unless the
Adviser determines that under the circumstances the security is no longer an
appropriate investment for the Fund. However, the Fund will sell promptly any
securities that are not rated investment grade by either S&P or Moody's if the
securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[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.
-3-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal
securities, also depends on the ability of issuers to make principal and
interest payments. If an issuer can't meet its payment obligations or if
its credit rating is lowered, the value of its debt securities will fall.
Debt securities which have the lowest of the top four ratings assigned by
S&P or Moody's have speculative characteristics. Changes in the economy are
more likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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.
[Sidenote:]
DERIVATIVES
A derivative is an investment whose value is based on or derived from the
performance of other securities or interest or currency exchange rates or
indices. Derivatives are considered to carry a higher degree of risk than other
types of securities.
-4-
<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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. Shareholders of the Predecessor
Fund who purchased their shares other than through an investment management,
trust, custody, or other agency relationship with BankBoston, N.A. received BKB
Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has have varied
from year to year.
[Sidenote:]
Best quarter: ____% for the quarter ending ________, ____
Worst quarter: ____% for the quarter ending ________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-3.02% 14.31% 4.20% 9.10% 6.41% ____%
- ------------------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
-5-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1 year 5 years Since inception
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares ____% ____% ____% (6/14/93)
- ---------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal
Bond Index
____% ____% ____% (since 5/31/93)
- ---------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund. It is expected that your BKB Shares will convert into
Retail A Shares of the Fund on the first anniversary of the closing of the
reorganization of the Boston 1784 Funds into Galaxy, provided that prior thereto
the Board of Trustees of Galaxy has determined that such conversion is in the
best interest of the holders of BKB Shares. Because of this conversion feature,
information is also provided as to the fees and expenses you may pay when you
buy and hold Retail A Shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees (fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------
Maximum sales charge (load) on Maximum deferred sales charge
purchases shown as a % of the (load) shown as a % of the offering
offering price price or sale price, whichever is less
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
BKB Shares None None
- ------------------------------------------------------------------------------------------------------
Retail A Shares* 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
- ---------------------------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BKB Shares 0.75%(3) None 0.30%(3) 1.05%(3,4)
- ---------------------------------------------------------------------------------------------------
Retail A Shares* 0.75%(3) None 0.30% 1.05%(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Galaxy does not currently intend to offer Retail A Shares of the Fund until
the conversion of BKB Shares into Retail A Shares.
(1) There will be no sales charge imposed on the conversion of BKB Shares into
Retail A Shares. Reduced sales charges may be available for certain other
investors in Retail A Shares. See "How to invest in the Funds -- How sales
charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the
Funds -- How sales charges work."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.63%. Affiliates of the Adviser are waiving a portion
of the shareholder servicing fees (that are included in Other expenses)
with respect to BKB Shares so that Other expenses for BKB Shares are
expected to be 0.17%. Total Fund operating expenses after these waivers are
expected to be 0.80% for BKB Shares and 0.93% for Retail A Shares. These
fee waivers may be revised or discontinued at any time.
(4) The Adviser and/or its affiliates have agreed to waive fees and
reimburse expenses in such amounts as are necessary to ensure that the
Total Fund operating expenses for BKB Shares of the Fund do not exceed
0.80% for a period of one year following the reorganization.
-7-
<PAGE>
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
- - your BKB Shares convert into Retail A Shares after one 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>
BKB Shares $107 N/A N/A N/A
- ----------------------------------------------------------------------
Retail A Shares $478 $697 $933 $1,609
- ----------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-8-
<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income exempt from both federal
and Connecticut personal income tax, with a secondary goal of preserving
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Connecticut municipal securities.
Connecticut municipal securities are securities issued by the State of
Connecticut and other government issuers and that pay interest which is exempt
from both federal income tax and Connecticut personal income tax. Under normal
conditions, the Fund will invest no more than 20% of its net assets in taxable
debt securities, such as U.S. Government obligations, corporate bonds, money
market instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-9-
<PAGE>
unrated securities determined by the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the security
is no longer an appropriate investment for the Fund. However, the Fund will sell
promptly any securities that are not rated investment grade by S&P or Moody's if
the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances, the Fund's average weighted maturity will
be between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal
securities, also depends on the ability of issuers to make principal and
interest payments. If an issuer can't meet its payment obligations or if
its credit rating is lowered, the value of its debt securities will fall.
Debt securities which have the lowest of the top four ratings assigned by
S&P or Moody's have speculative characteristics. Changes in the economy are
more likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-10-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Connecticut
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Connecticut. Other
considerations affecting the Fund's investments in Connecticut municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on August 1, 1994 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold a single class of
shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for Trust Shares and BKB Shares of
the Fund. Shareholders of the Predecessor Fund who purchased their shares
other than through an investment management, trust, custody, or other agency
relationship with BankBoston, N.A. received BKB Shares of the Fund. The
returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-11-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------
14.66% 3.63% 8.53% 6.67% _____%
- ----------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
______%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 year 5 years Since inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares _____% _____% _____% (8/1/94)
- --------------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal
Bond Index _____% _____% _____% (since 7/31/94)
- --------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund. It is expected that your BKB Shares will convert into
Retail A Shares of the Fund on the first anniversary of the closing of the
reorganization of the Boston 1784 Funds into Galaxy, provided that prior thereto
the Board of Trustees of Galaxy has determined that such conversion is in the
best interest of the holders of BKB Shares. Because of this conversion feature,
information is also provided as to the fees and expenses you may pay when you
buy and hold Retail A Shares of the Fund.
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Maximum sales charge (load) on Maximum deferred sales charge
purchases shown as a % of the (load) shown as a % of the offering
offering price price or sale price, whichever is less
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
BKB Shares None None
- --------------------------------------------------------------------------------------------------
Retail A Shares* 3.75%(1) None(2)
- --------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BKB Shares 0.75%(3) None 0.32%(3) 1.07%(3),(4)
- ---------------------------------------------------------------------------------------------------
Retail A Shares* 0.75%(3) None 0.32% 1.07%(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Galaxy does not currently intend to offer Retail A Shares of the Fund
until the conversion of BKB Shares into Retail A Shares.
(1) There will be no sales charge imposed on the conversion of BKB Shares
into Retail A Shares. Reduced sales charges may be available for certain
other investors in Retail A Shares. See "How to invest in the Funds - How
sales charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the
Funds - How sales charges work."
(3) The Adviser is waiving a portion of the Management fees so that such
fees are expected to be 0.63%. Affiliates of the Adviser are waiving a
portion of the shareholder servicing fees (that are included in Other
expenses) with respect to BKB Shares so that Other expenses for BKB Shares
are expected to be 0.17%. Total Fund operating expenses after these waivers
are expected to be 0.80% for BKB Shares and 0.95% for Retail A Shares.
These fee waivers may be revised or discontinued at any time.
(4) The Adviser and/or its affiliates have agreed to waive fees and
reimburse expenses in such amounts as are necessary to ensure that the
Total Fund operating expenses for BKB Shares of the Fund do not exceed
0.80% for a period of one year following the reorganization.
-13-
<PAGE>
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
- - your BKB Shares convert to Retail A Shares after one 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>
BKB Shares $109 N/A N/A N/A
- ----------------------------------------------------------------------
Retail A Shares $480 $703 $943 $1,632
- ----------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-14-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with current income, exempt from both
federal and Massachusetts personal income tax, consistent with preservation of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily 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. The Fund
normally invests at least 80% of its net assets in municipal securities or in
mutual funds or other investment companies that invest in municipal securities,
and at least 65% of its net assets in Massachusetts municipal securities.
Massachusetts municipal securities are securities issued by the Commonwealth of
Massachusetts and other government issuers and that pay interest which is exempt
from both federal income tax and Massachusetts personal 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, corporate bonds, money market
instruments, including commercial paper and bank obligations, 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 may, from time to time, invest as a hedging strategy in a limited
amount of futures contracts or options on futures contracts. The Fund may only
use futures contracts and options on futures contracts, commonly referred to as
derivatives, in an effort to offset unfavorable changes in the value of
securities held by the Fund for investment purposes.
In selecting portfolio securities for the Fund, the Adviser evaluates the
suitability of available bonds according to such factors as creditworthiness,
maturity, liquidity and interest rates. It also determines the appropriate
allocation of the Fund's assets among various issuers and industry sectors.
Nearly all of the Fund's investments will be of investment grade quality. These
are securities which have one of the top four ratings assigned by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), or are
unrated securities determined by the Adviser to be of comparable quality. The
Adviser expects, however, that most of the securities purchased by the Fund will
have one of the top three ratings assigned by S&P or Moody's, or will be
-15-
<PAGE>
unrated securities determined the Adviser to be of comparable quality.
Occasionally, the rating of a security held by the Fund may be downgraded to
below investment grade. If that happens, the Fund doesn't have to sell the
security unless the Adviser determines that under the circumstances the
security is no longer an appropriate investment for the Fund. However, the
Fund will sell promptly any securities that are not rated investment grade by
S&P or Moody's if the securities exceed 5% of the Fund's net assets.
The Fund is permitted to invest in municipal securities with any maturity.
However, under normal circumstances the Fund's average weighted maturity will be
between five and ten years.
The Fund will sell a portfolio security when, as a result of changes in the
economy or the performance of the security or other circumstances, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets.
In addition, the Fund also carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities, including municipal
securities, tend to move in the opposite direction to interest rates. When
rates are rising, the prices of debt securities tend to fall. When rates
are falling, the prices of debt securities tend to rise. Generally, the
longer the time until maturity, the more sensitive the price of a debt
security is to interest rate changes.
- - CREDIT RISK - The value of debt securities, including municipal
securities, also depends on the ability of issuers to make principal and
interest payments. If an issuer can't meet its payment obligations or if
its credit rating is lowered, the value of its debt securities will fall.
Debt securities which have the lowest of the top four ratings assigned by
S&P or Moody's have speculative characteristics. Changes in the economy are
more likely to affect the ability of issuers of these securities to make
payments of principal and interest than is the case with higher-rated
securities. 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. Some municipal obligations are payable only from limited revenue
sources or by private entities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
municipal securities held by the Fund to be paid off much sooner or later
than expected, which could adversely affect the Fund's value. In the event
that a security is paid off sooner than expected because of a decline in
interest rates, the Fund may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in lower-yielding
securities. In the event of a later than expected payment because of a rise
in interest rates, the value of the obligation will decrease and the Fund
may suffer from the inability to invest in higher-yielding securities.
-16-
<PAGE>
- - LACK OF DIVERSIFICATION - The Fund is not diversified, which means that it
can invest a large percentage of its assets in a small number of issuers.
As a result, a change in the value of any one investment held by the Fund
may affect the overall value of the Fund more than it would affect a
diversified fund which holds more investments.
- - SINGLE STATE RISK - Because the Fund invests primarily in Massachusetts
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Massachusetts. Other
considerations affecting the Fund's investments in Massachusetts municipal
securities are summarized in the Statement of Additional Information.
- - HEDGING - The Fund may invest in derivatives, such as futures and options
on futures, to hedge against market risk. There is no guarantee hedging
will always work. It can also prevent the Fund from making a gain if
markets move in the opposite direction to the hedge.
- - 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 the 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.
The Fund began operations on June 14, 1993 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000 the Predecessor Fund
was reorganized as a new portfolio of Galaxy. Prior to the reorganization, the
Predecessor Fund offered and sold a single class of shares. In connection with
the reorganization, shareholders of the Predecessor Fund exchanged their shares
for Trust Shares and BKB Shares of the Fund. Shareholders of the Predecessor
Fund who purchased their shares other than through an investment management,
trust, custody, or other agency relationship with BankBoston, N.A. received BKB
Shares of the Fund. The returns shown below are for the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
-17-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-5.45% 13.73% 3.32% 8.89% 5.91% ____%
- ------------------------------------------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1 year Since inception
- -----------------------------------------------------------------------
<S> <C> <C>
Trust Shares _____% _____% (6/14/93)
- -----------------------------------------------------------------------
Lehman Brothers
7-Year Municipal
Bond Index _____% _____% (since 5/31/93)
- -----------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index which
tracks the performance of municipal bonds with remaining maturities of 7 years
or less.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund. It is expected that BKB Shares will convert into Retail
A Shares of the Fund on the first anniversary of the closing of the
reorganization of the Boston 1784 Funds into Galaxy, provided that prior thereto
the Board of Trustees of Galaxy has determined that such conversion is in the
best interest of the holders of BKB Shares. Because of this conversion feature,
information is also provided as to the fees and expenses you may pay when you
buy and hold Retail A Shares of the Fund.
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Maximum sales charge (load) on Maximum deferred sales charge
purchases shown as a % of the (load) shown as a % of the offering
offering price price or sale price, whichever is less
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
BKB Shares None None
- --------------------------------------------------------------------------------------------------
Retail A Shares* 3.75%(1) None(2)
- --------------------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BKB Shares 0.75%(3) None 0.32%(3) 1.07%(3),(4)
- ---------------------------------------------------------------------------------------------------
Retail A Shares* 0.75%(3) None 0.32% 1.07%(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Galaxy does not currently intend to offer Retail A Shares of the Fund
until the conversion of BKB Shares into Retail A Shares.
(1) There will be no sales charge imposed on the conversion of BKB Share
into Retail A Shares. Reduced sales charges may be available for certain
other investors in Retail A Shares. See "How to invest in Funds - How sales
charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the
Funds - How sales charges work."
(3) The Adviser is waiving a portion of the Management fees so that such
fees are expected to be 0.63%. Affiliates of the Adviser are waiving a
portion of the shareholder servicing fees (that are included in Other
expenses) with respect to BKB Shares so that Other expenses for BKB Shares
are expected to be 0.17%. Total Fund operating expenses after these waivers
are expected to be 0.80% for BKB Shares and 0.95% for Retail A Shares.
These fee waivers may be revised or discontinued at any time.
(4) The Adviser and/or its affiliates have agreed to waive fees and
reimburse expenses in such amounts as are necessary to ensure that the
Total Fund operating expenses for BKB Shares of the Fund do not exceed
0.80% for a period of one year following the reorganization.
-19-
<PAGE>
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
- - your BKB Shares convert into Retail A Shares after one 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>
BKB Shares $109 N/A N/A N/A
- ----------------------------------------------------------------------
Retail A Shares $480 $703 $943 $1,632
- ----------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-20-
<PAGE>
Galaxy Growth Fund II
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide investors with capital appreciation. Dividend income,
if any, is incidental to capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in common stock (including depositary receipts) of
U.S. and foreign companies which the Adviser believes have above-average growth
potential. The Fund normally invests 80% to 90% or more of its total assets in
these securities, although the Fund may invest up to 35% of its total assets in
other securities, such as convertible and non-convertible debt securities,
preferred stock, warrants and money market instruments.
The Fund principally invests in U.S. companies with market capitalizations of at
least $250 million, although the Fund also may invest in companies with smaller
capitalizations. The Fund may invest up to 25% of its total assets in the
securities of foreign companies, including companies in developing countries.
While some of the Fund's investments may pay dividends, current income is not a
consideration when selecting investments.
In selecting securities for the Fund, the Adviser uses a "bottom-up" approach.
It looks for companies that it believes are in dynamic high-growth sectors of
the world economy and that are thought to have dominant or strong competitive
positions within their sectors. The Adviser also looks for companies thought to
have quality management and that are expected to have strong earnings growth
potential.
The Fund may engage in foreign currency hedging transactions in an attempt to
minimize the effects of currency fluctuations on the Fund.
The Fund will sell a security if there is an adverse change in the projected
earnings growth of the company issuing the security. A security will also be
sold when, as a result of changes in the economy or the performance of the
security or other circumstances, the Adviser believes that holding the security
is no longer consistent with the Fund's investment objective.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
-21-
<PAGE>
[Sidenote:]
MARKET CAPITALIZATION
A company's market capitalization is the price of a share of its stock,
multiplied by the number of shares held by investors.
THE MAIN RISKS OF INVESTING IN THE FUND
Changes in the U.S. or foreign economies can cause the value of stocks and other
investments held by the Fund to fall. Stock prices may decline over short or
extended periods. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
The value of your investment in the Fund will go up and down with the value of
the investments which the Fund holds. The Fund's investments may not perform as
well as other investments, even in times of rising markets.
In addition, the Fund also carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies (generally, those with market
capitalizations below $1.5 billion) tend to have limited resources, product
lines and market share. As a result, their share prices tend to fluctuate
more than those of larger companies. Their shares may also trade less
frequently and in limited volume, making them potentially less liquid. The
price of small company stocks might fall regardless of trends in the
broader market.
- - CONVERTIBLE SECURITIES - Securities that can be converted into common
stock, such as certain debt securities and preferred stock, are subject to
the usual risks associated with fixed income investments, such as interest
rate risk and credit risk. In addition, because they react to changes in
the value of the equity securities into which they will convert,
convertible securities are also subject to stock market risk.
- - FOREIGN INVESTMENTS - Foreign investments may be riskier than U.S.
investments because of factors such as foreign government restrictions,
changes in currency exchange rates, incomplete financial information about
the issuers of securities, and political or economic instability. Foreign
stocks may be more volatile and less liquid than U.S. stocks.
- - EMERGING MARKETS - The risks associated with foreign investments are
heightened when investing in emerging markets. The governments and
economies of emerging market countries feature greater instability than
those of more developed countries. Such investments tend to fluctuate in
price more widely and to be less liquid than other foreign investments.
- - HEDGING - The Fund may engage in foreign currency transactions to hedge
against the currency risk of its foreign investments. There's no guarantee
hedging will always work. It can also prevent the Fund from making a gain
if markets move in the opposite direction to the hedge.
- - 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.
-22-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and the 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.
The Fund began operations on March 28, 1996 as a separate portfolio (the
Predecessor Fund) of the Boston 1784 Funds. On May __, 2000, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold a single class of shares. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged their
shares for Trust Shares and BKB Shares of the Fund. Shareholders of the
Predecessor Fund who purchased their shares other than through an investment
management, trust, custody, or other agency relationship with BankBoston, N.A.
received BKB Shares of the Fund. The returns shown below are for the Predecessor
Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Predecessor Fund has varied from
year to year.
[Sidenote:]
Best quarter: _____% for the quarter ending __________, ____
Worst quarter: _____% for the quarter ending __________, ____
[bar chart goes here]
<TABLE>
<CAPTION>
------------------------------------
1997 1998 1999
------------------------------------
<S> <C> <C>
13.92% 1.36% _____%
------------------------------------
</TABLE>
The Predecessor Fund's total return for the quarter ended March 31, 2000 was
_____%.
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Predecessor Fund's average annual total returns for the
periods ended December 31, 1999, as compared to a broad-based market index.
-23-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1 year Since inception
- -----------------------------------------------------------------------
<S> <C> <C>
Trust Shares _____% _____% (3/28/96)
- -----------------------------------------------------------------------
Russell 2000 Index _____% _____% (since 3/31/96)
- -----------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index which tracks the performance of the
2000 smallest of the 3000 largest U.S. companies, based on market
capitalization. Companies included in the Russell 2000 Index have market
capitalizations that currently range between $30 million and $1.4 billion.
FEES AND EXPENSES OF THE FUND
The following table shows the fees and expenses you may pay when you buy and
hold shares of the Fund. It is expected that BKB Shares will convert into Retail
A Shares of the Fund on the first anniversary of the closing of the
reorganization of the Boston 1784 Funds into Galaxy, provided that prior thereto
the Board of Trustees of Galaxy has determined that such conversion is in the
best interest of the holders of BKB Shares. Because of this conversion feature,
information is also provided as to the fees and expenses you may pay when you
buy and hold Retail A Shares of the Fund.
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Maximum sales charge (load) on Maximum deferred sales charge
purchases shown as a % of the (load) shown as a % of the offering
offering price price or sale price, whichever is less
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
BKB Shares None None
- --------------------------------------------------------------------------------------------------
Retail A Shares* 3.75%(1) None(2)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Management Distribution and Other Total Fund operating
fees service (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BKB Shares 0.75% None 0.49%(3) 1.24%(3,4)
- ---------------------------------------------------------------------------------------------------
Retail A Shares* 0.75% None 0.49% 1.24%
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Galaxy does not currently intend to offer Retail A Shares of the Fund
until the conversion of BKB Shares into Retail A Shares.
-24-
<PAGE>
(1) There will be no sales charge imposed on the conversion of BKB Share
into Retail A Shares. Reduced sales charges may be available for certain
other investors in Retail A Shares. See "How to invest in Funds - How sales
charges work."
(2) Except for investments of $500,000 or more. See "How to invest in the
Funds - How sales charges work."
(3) Affiliates of the Adviser are waiving a portion of the shareholder
servicing fees (that are included in Other expenses) with respect to BKB
Shares so that Other expenses for BKB Shares are expected to be 0.19%.
Total Fund operating expenses after this waiver are expected to be 0.94%
for BKB Shares. This fee waiver may be revised or discontinued at any time.
(4) The Adviser and/or its affiliates have agreed to waive fees and
reimburse expenses in such amounts as are necessary to ensure that the
Total Fund operating expenses for BKB Shares of the Fund do not exceed
0.94% for a period of one year following the reorganization.
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
- - your BKB Shares convert into Retail A Shares after one 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>
BKB Shares $126 N/A N/A N/A
- ----------------------------------------------------------------------
Retail A Shares $497 $754 $1,030 $1,819
- ----------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio managers are Theodore E. Ober and Eugene D. Takach. They
are primarily responsible for the day-to-day management of the Fund's investment
portfolio. Mr. Ober, who has over 11 years of experience in investment
management and research analysis, has been a Research Analyst, Fund Manager and
Senior Fund Manager with the Adviser and its affiliated organizations since
1987. Mr. Takach, who has over 30 years of experience in investment
management, research analysis and securities trading, has been a portfolio
manager with the Adviser and its affiliated organizations since 1971.
Mr. Ober and Mr. Takach have co-managed the Predecessor Fund since it began
operations.
-25-
<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 are not part of its principal investment strategy to try to avoid losses
during unfavorable market conditions. These investments may include cash (which
will not earn any income) and taxable investments, such as money market
instruments and debt securities issued or guaranteed by the U.S. Government or
its agencies. These strategies could prevent a Fund from achieving its
investment objective and could reduce the Fund's return and affect its
performance during a market upswing.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund may,
from time to time, pursue other investment strategies and make other types of
investments in support of its overall investment goal. These supplemental
investment strategies, which are not considered to be main investment strategies
of the Funds - and the risks involved - are described in detail in the Statement
of Additional Information (SAI) which is referred to on the back cover of this
prospectus.
YEAR 2000 RISKS
Over the past several years, the Adviser and the Funds' other major service
providers expended considerable time and money in addressing the computer and
technology problems associated with the transition to the Year 2000. As a result
of those efforts, the Funds did not experience any material disruptions in their
operations as a result of the transition to the 21st century. The Adviser and
the Funds' other major service providers are continuing to monitor the Year 2000
or Y2K problem, however, and there can be no assurances that there will be no
adverse impact to the Funds as a result of future computer-related Y2K
difficulties.
-26-
<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 financial institution or plan
administrator for help in deciding which Fund is right for you.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Galaxy Fund May be best suited for investors who...
- --------------------------------------------------------------------------------------------------
<S> <C>
Galaxy Intermediate Tax-Exempt Bond Fund - are seeking current income that is exempt
from federal income tax
- are seeking a higher yield than is
available from shorter-term tax-exempt
securities or money market funds
- --------------------------------------------------------------------------------------------------
Galaxy Connecticut Intermediate Municipal
Bond Fund - reside in Connecticut and are seeking
current income that is exempt from federal
income tax and Connecticut personal
income tax
- are seeking a higher yield then is
available from shorter-term tax-exempt
securities or money market funds
- --------------------------------------------------------------------------------------------------
Galaxy Massachusetts Intermediate Municipal - reside in Massachusetts and are seeking
Bond Fund current income that is exempt from federal
income tax and Massachusetts personal
income tax
- are seeking a higher yield then is available
from shorter-term tax-exempt securities or
money market funds
- --------------------------------------------------------------------------------------------------
Galaxy Growth Fund II - are seeking long-term growth
- are able to tolerate the additional risks
of investing in smaller companies
- are not seeking income
- --------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
TAX-EQUIVALENT YIELD
One way to understand the tax advantages of a tax-exempt fund is to compare its
after-tax return to that of a taxable investment. For example, suppose a taxable
fund pays a return of 10%. If you're in the 36% federal income tax bracket, the
fund's return after taxes is 6.4%. When a tax-exempt fund pays a return of 10%,
you don't pay tax. So if you're in the 36% tax bracket, that's
-27-
<PAGE>
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.
-28-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
its portfolio securities, and maintains related records. Prior to the
reorganization, BankBoston N.A. ("BankBoston") served as the investment adviser
to each of the Predecessor Funds. BankBoston is an indirect wholly-owned
subsidiary of FleetBoston Corporation and an affiliate of the Adviser.
The management fees paid to BankBoston by each Predecessor Fund during the
fiscal year ended May 31, 1999 are set forth below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Fund Management fee as a % of average net
assets
- -------------------------------------------------------------------------------------
<S> <C>
Intermediate Tax-Exempt Bond .68%
- -------------------------------------------------------------------------------------
Connecticut Intermediate Municipal Bond .67%
- -------------------------------------------------------------------------------------
Massachusetts Intermediate Municipal
Bond .67%
- -------------------------------------------------------------------------------------
Growth II .74%
- -------------------------------------------------------------------------------------
</TABLE>
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 they believe that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
-29-
<PAGE>
HOW TO INVEST IN THE FUNDS
Each of the Funds offers BKB Shares only to those shareholders of the Boston
1784 Funds who are not eligible to receive Trust Shares of their corresponding
Galaxy Fund at the time the Boston 1784 Funds are reorganized into Galaxy. It is
expected that BKB Shares of each Fund will convert into Retail A Shares of the
same Fund on the first anniversary of the closing of the reorganization of the
Boston 1784 Funds into Galaxy, provided that prior thereto Galaxy's Board of
Trustees has determined that such conversion is in the best interest of the
holders of BKB Shares. Because of this conversion feature, some information is
provided in this prospectus for Retail A Shares of the Fund. The Funds offer
Retail A Shares through a separate prospectus.
HOW SALES CHARGES WORK
There is no sales charge (sometimes called a front-end load) when you acquire
BKB Shares in connection with the reorganization of the Boston 1784 Funds into
Galaxy, when you buy additional BKB Shares or when your BKB Shares convert into
Retail A Shares. Retail A Shares of each Fund are sold with a sales charge.
However, holders of BKB Shares may purchase Retail A Shares of any of the Galaxy
Funds without incurring the sales charge otherwise applicable on the purchase of
Retail A Shares of certain of the Galaxy Funds. When these Retail A Shares are
purchased, you must tell your investment professional or Galaxy's distributor
that you qualify for a sales load waiver.
[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 attributable to BKB Shares or Retail A
Shares, minus the value of the Fund's liabilities attributable to BKB Shares or
Retail A Shares, divided by the number of BKB Shares or Retail A Shares held by
investors.
RETAIL A SHARES
The table below shows the sales charge applicable to Retail A Shares of the
Funds. The offering price for Retail A Shares is the NAV of the shares
purchased, plus any applicable sales charge.
-30-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Total sales charge
- -------------------------------------------------------------------------
As a % of the offering As a % of your
Amount of your investment price per share investment
- -------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.75% 3.90%
- -------------------------------------------------------------------------
$50,000 but less than
$100,000 3.50% 3.63%
- -------------------------------------------------------------------------
$100,000 but less than
$250,000 3.00% 3.09%
- -------------------------------------------------------------------------
$250,000 but less than
$500,000 2.50% 2.56%
- -------------------------------------------------------------------------
$500,000 and over 0.00%(1) 0.00%(1)
- -------------------------------------------------------------------------
</TABLE>
(1) There is no front-end sales charge on investments in Retail A Shares of
$500,000 or more. However, if a shareholder sells the shares within one
year after buying them, a contingent deferred sales charge (sometimes
called a back-end load or CDSC) of 1% of the offering price or 1% of the
net asset value of the shares, whichever is less, will be charged unless
the shares were sold because of the death or disability of the shareholder.
However, Galaxy will waive the 1% CDSC the first time you sell shares
during this one-year period. If you reinvest the proceeds of this sale
within one year, the waiver of the CDSC won't apply to any sale of shares
purchased with such reinvested proceeds.
Galaxy's distributor may, from time to time, implement programs under which a
broker-dealer's sales force may be eligible to win nominal awards for certain
sales efforts. If any such program is made available to any broker-dealer, it
will be made available to all broker-dealers on the same terms. Payments made
under such programs are made by Galaxy's distributor out of its own assets and
not out of the assets of the Funds. These programs will not change the price of
Retail A Shares or the amount that the Funds will receive from such sales.
Certain affiliates of the Adviser may, at their own expense, provide additional
compensation to affiliated broker-dealers whose customers purchase significant
amounts of Retail A Shares of one or more Funds and to unaffiliated
broker-dealers whose customers purchase Retail A Shares of one or more of the
Funds. Such compensation will not represent an additional expense to the Funds
or their shareholders, since it will be paid from the assets of the Adviser's
affiliates.
There's no sales charge when you buy Retail A Shares if:
- - You buy shares by reinvesting your dividends and distributions.
- - You were a Galaxy shareholder before December 1, 1995.
- - You buy shares for a 401(k) or SIMPLE IRA retirement account
(applicable only for the Growth Fund II).
- - You buy shares for any retirement account provided that you held Retail A
Shares in a retirement account prior to January 1, 1999 (applicable only
for the Growth Fund II).
-31-
<PAGE>
- - You buy shares for any retirement account and your total cumulative Retail
A Share retirement account balance was $30,000 or more between January 1,
1999 and June 30, 1999 (applicable only for the Growth Fund II).
- - You buy shares with money from another Galaxy Fund on which you've already
paid a sales charge (as long as you buy the new shares within 90 days after
selling your other shares).
- - You previously paid a sales charge for the shares of another mutual fund
company (as long as You buy the Galaxy shares within 60 days of selling
your other shares).
- - You're an investment professional who places trades for your clients and
charges them a fee.
- - You buy shares under an all-inclusive fee program (sometimes called a "wrap
fee program") offered by a broker-dealer or other financial institution.
- - You were a shareholder of the Boston 1784 Funds on the date when the Boston
1784 Funds were reorganized into Galaxy.
DISCOUNT PLANS
You may have the sales charges on purchases of Retail A Shares reduced or waived
completely through the discount plans described below:
- - RIGHTS OF ACCUMULATION - You can add the value of any Retail A Shares that
you already own in any Galaxy Fund that charges a sales load to your next
investment in Retail A Shares for purposes of calculating the sales charge.
- - LETTER OF INTENT - You can purchase Retail A Shares of any Galaxy Fund that
charges a sales load over a 13-month period and receive the same sales
charge as if all of the shares had been purchased at the same time. To
participate, complete the Letter of Intent section on the account
application. Galaxy's administrator will hold in escrow Retail A Shares
equal to 5% of the amount you indicate in the Letter of Intent for payment
of a higher sales charge if you don't purchase the full amount indicated in
the Letter of Intent. See the SAI for more information on this escrow
feature.
- - REINVESTMENT PRIVILEGE - You can reinvest some or all of the money that you
receive when selling Retail A Shares of the Funds in Retail A Shares of any
Galaxy Fund within 90 days without paying a sales charge.
- - GROUP SALES - If you belong to a qualified group with 50,000 or more
members, you can buy Retail A Shares at a reduced sales charge, based on
the number of qualified group members.
[Sidenote:]
SALES CHARGE WAIVERS/DISCOUNT PLANS
Ask your investment professional or Galaxy's distributor, or consult the SAI,
for other instances in which the sales load on Retail A Shares is waived. When
you buy your shares, you must tell your investment professional or Galaxy's
distributor that you qualify for a sales load waiver or that you want to take
advantage of any of the discount plans. See the SAI for additional
-32-
<PAGE>
requirements that apply to the discount plans. To contact Galaxy's distributor,
call 1-877-BUY-GALAXY (1-877-289-4252).
SHAREHOLDER SERVICE FEES
Retail A Shares of the Funds can pay shareholder service fees at an annual rate
of up to 0.50% of each Fund's Retail A Share assets. The Intermediate Tax-Exempt
Bond, Connecticut Intermediate Municipal Bond and Massachusetts Intermediate
Municipal Bond Funds do not intend to pay more than 0.15% and the Growth Fund II
does not intend to pay more than 0.30%, respectively, in shareholder service
fees with respect to Retail A Shares during the current fiscal year.
BKB Shares of the Funds can pay shareholder service fees at an annual rate of up
to 0.50% of each Fund's BKB Share assets. The Intermediate Tax-Exempt Bond,
Connecticut Intermediate Municipal Bond and Massachusetts Intermediate Municipal
Bond Funds do not intend to pay more than 0.15% and the Growth Fund II does not
intend to pay more than 0.30%, respectively, in shareholder service fees with
respect to BKB Shares during the current fiscal year.
CONVERSION OF BKB SHARES INTO RETAIL A SHARES
BKB Shares of a Fund will convert into Retail A Shares of the same Fund on the
first anniversary of the reorganization of the Boston 1784 Funds into Galaxy,
provided that prior thereto the Board of Trustees of Galaxy has determined that
such conversion is in the best interest of the holders of BKB Shares. The
conversion of BKB Shares to Retail A Shares will take place at NAV, so that the
value of the Retail A Shares you receive in the conversion will be the same as
the value of your BKB Shares that were converted.
BUYING, SELLING AND EXCHANGING BKB SHARES
BKB Shares of the Funds are available for purchase only by those shareholders
who received BKB Shares in connection with the reorganization of the Boston 1784
Funds into Galaxy.
[Sidenote]:
MINIMUM INVESTMENT AMOUNT
You can make additional investments in your BKB Share account for as little at
$100.
Usually, you must keep at least $250 in your account. If your account falls
below $250 because you sell or exchange shares, Galaxy may redeem your shares
and close your account. Galaxy will give you 60 days' notice in writing before
closing your account.
-33-
<PAGE>
You may buy and sell BKB Shares of the Funds on any day that the Funds are open
for business, which is any day that the New York Stock Exchange is open. The New
York Stock Exchange is generally open for trading every Monday through Friday,
except for national holidays.
The price at which you buy shares is the NAV next determined after your order is
accepted. The price at which you sell shares is the NAV next determined, after
receipt of your order in proper form as described below. 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). If market prices are
readily available for securities owned by the Funds, they're valued at those
prices. If market prices are not readily available for some securities, they are
valued at fair value under the supervision of Galaxy's Board of Trustees.
Sometimes, the price of a security trading on a foreign stock exchange may be
affected by events that happen after that exchange closes. If this happens, the
fair value of the security may be determined using other factors and may not
reflect the securities' last quoted price. In addition, foreign securities may
trade on days when shares of the Funds are not priced. As a result, the net
asset value per share of a Fund holding these securities may change on days when
you won't be able to buy or sell Fund shares.
HOW TO BUY BKB SHARES
You can buy shares through your financial institution or directly from Galaxy's
distributor by calling 1-877-BUY-GALAXY (1-877-289-4252). A broker or agent who
places orders on your behalf may charge you a separate fee for their services.
BUYING BY MAIL
To make additional investments, send a check made payable to each Fund in which
you want to invest to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
You must include with your check one of the following:
- - The detachable form that's included with your Galaxy statement or your
confirmation of a prior transaction
- - A letter stating the amount of your investment, the name of the Fund you
want to invest in, and your account number.
If your check is returned because of insufficient funds, Galaxy will cancel your
order.
-34-
<PAGE>
BUYING BY WIRE
To make an additional investment by wire, send U.S. funds through the Federal
Reserve System to Fleet National Bank as agent for Galaxy's distributor. You
should wire money and registration instructions to:
Fleet National Bank
75 State Street
Boston, MA 02109
ABA #0110-0013-8
DDA #79673-5702
Ref: The Galaxy Fund
(Account number)
(Account registration)
Your financial institution may charge you a fee for sending funds by wire.
CUSTOMERS OF FINANCIAL INSTITUTIONS
If you are a customer of a financial institution such as a bank, savings and
loan association or broker-dealer, including a financial institution affiliated
with the Adviser, you should place your order through your financial
institution. Your financial institution is responsible for sending your order to
Galaxy's distributor and wiring the money to Galaxy's custodian. For details,
please contact your financial institution.
HOW TO SELL BKB SHARES
You can sell your shares in several ways: by mail, by telephone, by wire, or
through your financial institution.
SELLING BY MAIL
Send your request in writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
You must include the following:
- - The name of the Fund
- - The number of shares or the dollar amount you want to sell
- - Your account number
- - Your Social Security number or tax identification number
-35-
<PAGE>
- - The signatures of each registered owner of the account (the signatures must
match the names on the account registration).
Additional documents may be required for certain types of shareholders, such as
corporations, partnerships, executors, trustees, administrators or guardians.
[Sidenote:]
SIGNATURE GUARANTEES
When selling your shares by mail or by phone, you must have your signature
guaranteed if:
- - you're selling shares worth more than $50,000
- - you want Galaxy to send your money to an address other than the address on
your account, unless your assets are transferred to a successor custodian
- - you want Galaxy to send your money to the address on your account that's
changed within the last 30 days, or
- - you want Galaxy to make the check payable to someone else.
Your signature must be guaranteed by a bank that's a member of the FDIC, a trust
company, a member firm of a national securities exchange or any other eligible
institution. A notarized signature is not sufficient.
SELLING BY PHONE
You can sell shares by calling Galaxy's distributor at 1-877-BUY-GALAXY
(1-877-289-4252) unless you tell Galaxy in writing that you don't want this
privilege. If you have difficulty getting through to Galaxy because of unusual
market conditions, consider selling your shares by mail or wire.
SELLING BY WIRE
Notify Galaxy's distributor by phone or wire that you wish to sell shares and
have the sale proceeds wired to your account at any financial institution in the
U.S. To be eligible to use this privilege, you must notify Galaxy in writing
(with a signature guarantee). Your sale proceeds must be more than $1,000.
The sale proceeds must be paid to the same bank and account you named in your
written instructions.
CUSTOMERS OF FINANCIAL INSTITUTIONS
Please contact your financial institution for information on how to sell your
shares. The financial institution 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 your financial institution, but
your financial institution may charge you a fee.
-36-
<PAGE>
EXCHANGE PRIVILEGE
Shareholders may exchange BKB Shares of a Fund having a value of at least $100
for BKB Shares of any other Galaxy Fund. Shareholders won't pay a sales charge
for exchanging BKB Shares.
TO EXCHANGE SHARES:
- - call Galaxy's distributor or use the InvestConnect toll-free voice response
line at 1-877-BUY-GALAXY (1-877-289-4252)
- - send your request in writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
- - ask your financial institution.
Galaxy doesn't charge any fee for making exchanges but your financial
institution might do so. You are generally limited to three exchanges per year.
Galaxy may change or cancel the exchange privilege with 60 days' advance written
notice to shareholders.
OTHER TRANSACTION POLICIES
If Galaxy doesn't receive full payment for your order to buy shares within three
business days of the order date, Galaxy won't accept your order. Galaxy will
advise you if this happens and return any payment it may eventually receive. You
can only invest in shares of the Funds that are legally available in your state.
Galaxy may refuse any order to buy shares. Galaxy doesn't issue a certificate
when you buy shares but it does keep a record of shares issued to investors.
Galaxy may refuse your order to sell or exchange shares by wire or telephone if
it believes it is advisable to do so. Galaxy or its distributor may change or
cancel the procedures for selling or exchanging shares by wire or telephone at
any time without notice.
If you sell or exchange shares by telephone, you may be responsible for any
fraudulent telephone orders as long as Galaxy has taken reasonable precautions
to verify your identity, such as requesting information about the way in which
your account is registered or about recent transactions in your account.
-37-
<PAGE>
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 you within three business days but Galaxy
reserves the right to send sales proceeds within seven days if sending proceeds
earlier could adversely affect a Fund.
If any shares that you're selling are part of an investment you've paid for with
a personal check, Galaxy will delay sending your sales proceeds until the check
clears, which can take up to 15 days from the purchase date.
Galaxy reserves the right to vary or waive any minimum investment requirements.
-38-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund, except the Growth Fund II, generally declares dividends from net
investment income daily and pays them monthly. The Growth Fund II generally pays
dividends from net investment income on a semi-annual basis. It is expected that
the annual distributions of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond and Massachusetts Intermediate Municipal Bond Funds
will be mainly income dividends. It is expected that the annual distributions of
the Growth Fund II will normally - but not always - consist primarily of capital
gains rather than ordinary income. Each of the Funds normally pays any realized
capital gains at least once a year. Dividends and distributions are paid in cash
unless you indicate in a letter to Galaxy that you want to have dividends and
distributions reinvested in additional shares.
FEDERAL TAXES
GROWTH FUND II
The Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of the Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions will
generally be taxable as ordinary income. You will be subject to income tax on
these distributions regardless of whether they are paid in cash or reinvested in
additional shares. Taxable dividends paid to you in January may be taxable as if
they had been paid the previous December. You will be notified annually of the
tax status of distributions to you.
Dividends paid by the Growth Fund II to its corporate shareholders and that are
attributable to qualifying dividends the Fund receives from U.S. corporations
may be eligible, in the hands of the corporate shareholders, for the corporate
dividends-received deduction, subject to certain holding period requirements and
debt financing limitations.
INTERMEDIATE TAX-EXEMPT BOND FUND, CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
AND MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
It is expected that the Funds will distribute dividends derived from interest
earned on exempt securities, and these "exempt-interest dividends" will be
exempt income for shareholders for federal income tax purposes. However,
distributions, if any, derived from net capital gains of each Fund will
generally be taxable to you as capital gains. Dividends, if any, derived from
short-term capital gains or taxable interest income will be taxable to you as
ordinary income. You will be notified annually of the tax status of
distributions to you.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Fund generally will not be deductible for federal income tax purposes.
-39-
<PAGE>
You should note that a portion of the exempt-interest dividends paid by each
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
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Generally,
this gain or loss will be long-term or short-term depending on whether your
holding period for the shares exceeds 12 months except that any loss realized on
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends that were received on the shares. If
you receive an exempt-interest dividend with respect to any share and the share
is held by you for six months or less, any loss on the sale or exchange of the
share will be disallowed to the extent of such dividend amount.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
-40-
<PAGE>
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions,
redemptions and exchanges. State income taxes may not apply however to the
portions of a Fund's distributions, if any, that are attributable to interest on
U.S. Government securities or on securities of the particular state or
localities within the state. Each state-specific Fund intends to comply with
certain state and/or local tax requirements so that its income and dividends
will be exempt from the applicable state and/or local taxes described above in
the description for such Fund. Dividends, if any, derived from interest on
securities other than the state-specific municipal securities in which each Fund
primarily invests, or from any capital gains, will be subject to the particular
state's taxes. However, with respect to the Connecticut Intermediate Municipal
Bond Fund, dividends, if any, derived from long-term capital gains on
Connecticut municipal securities of issuers in Connecticut will not be subject
to the Connecticut state income tax on individuals, trusts and estates if paid
on Fund shares held as capital assets.
MISCELLANEOUS
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
-41-
<PAGE>
GALAXY INVESTOR PROGRAMS
RETIREMENT PLANS
BKB Shares of the Growth Fund II are available for purchase in connection with
any of the following retirement plans:
- - Individual Retirement Arrangements (IRAs), including Traditional, Roth,
Rollover and Education IRAs
- - Simplified Employee Pension Plans (SEPs)
- - Keogh money purchase and profit sharing plans
- - Salary reduction retirement plans set up by employers for their employees,
which are qualified under Section 401(k) and 403(b) of the Internal Revenue
Code
- - SIMPLE IRA plans which are qualified under Section 408(p) of the Internal
Revenue Code
For information about eligibility requirements and other matters concerning
these plans and to obtain an application, call Galaxy's distributor at
1-877-BUY-GALAXY (1-877-289-4252).
OTHER PROGRAMS
It's also easy to buy or sell BKB Shares of the Funds by using one of the
programs described below. Just tell Galaxy the amount and how frequently you
want to buy or sell shares and Galaxy does the rest. For further information on
any of these programs, call Galaxy's distributor at 1-877-BUY-GALAXY
(1-877-289-4252) or your financial institution.
AUTOMATIC INVESTMENT PROGRAM
You can make automatic investments from your bank account every month or every
quarter. You can choose to make your investment on any day of the month or
quarter. The minimum investment is $50 a month or $150 a quarter except for
Education IRAs, in which case the minimum investment is $40 a month or $125 per
quarter.
PAYROLL DEDUCTION PROGRAM
You can make regular investments from your paycheck. The minimum investment is
$25 per pay period. Send a completed Galaxy Payroll Deduction Application to
your employer's payroll department. They'll arrange to have your investment
deducted from your paycheck.
-42-
<PAGE>
COLLEGE INVESTMENT PROGRAM
The minimum for initial and additional investments through the College
Investment Program is $100 unless you participate in the Automatic Investment
Program, in which case the minimum for initial and additional investments is
$50. You can also save for college by opening an Education IRA. The minimum for
initial and additional investments in an Education IRA is $100 unless you
participate in the Automatic Investment Program, in which case the minimum for
initial and additional investments if $40.
DIRECT DEPOSIT PROGRAM
This program lets you deposit your social security payments in your Fund account
automatically. There's no minimum deposit. You can cancel the program by
notifying the Social Security Administration in writing.
SYSTEMATIC WITHDRAWAL PLAN
You can make regular withdrawals from your investment account every month, every
quarter, every six months or once a year. You need a minimum account balance of
$10,000 to participate in the plan.
You may cancel your participation in any of these programs, other than the
Direct Deposit Program, by writing to Galaxy at:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
Please allow at least five days for the cancellation to be processed.
-43-
<PAGE>
HOW TO REACH GALAXY
THROUGH YOUR FINANCIAL INSTITUTION
Your financial institution can help you buy, sell or exchange shares and can
answer questions about your account.
GALAXY SHAREHOLDER SERVICES
Call Galaxy's distributor at 1-877-BUY-GALAXY (1-877-289-4252), Monday through
Friday, 8 a.m. to 6 p.m. (Eastern time) for help from a Galaxy representative.
INVESTCONNECT
InvestConnect is Galaxy's shareholder voice response system. Call
1-877-BUY-GALAXY (1-877-289-4252) from any touch-tone phone for automated access
to account information and current Fund prices and performance, or to place
orders to sell or exchange shares. It's available 24 hours a day, seven days a
week.
If you live outside the United States, you can contact Galaxy by calling
1-508-871-4121.
THE INTERNET
Please visit Galaxy's website at:
www.galaxyfunds.com
[Sidenote:]
HEARING IMPAIRED
Galaxy also offers a TDD service for the hearing impaired. Just call
1-800-696-6515, 24 hours a day, seven days a week.
-44-
<PAGE>
FINANCIAL HIGHLIGHTS
Each Fund began operations as a separate portfolio (the Predecessor Fund) of the
Boston 1784 Funds. On May ___, 2000, each Predecessor Fund was reorganized as a
new portfolio of Galaxy. As discussed above in each Fund's risk/return summary,
prior to the reorganization, each Predecessor Fund offered and sold a single
class of shares. The financial highlights tables shown below will help you
understand the financial performance for each Predecessor Fund for the six-month
period ended November 30, 1999 and for the past five fiscal years (or the period
since a particular Predecessor Fund began operations). Certain information
reflects the financial performance of a single share. The total returns in the
tables represent the rate that an investor would have earned (or lost) on an
investment in each Predecessor Fund, assuming all dividends and distributions
were reinvested. The information for the semi-annual period ended November 30,
1999 is unaudited and such information, along with the Predecessor Fund's
financial statements, is included in the Predecessor Funds' Semi-Annual Reports
and incorporated by reference into the SAI. The information for the past five
fiscal years or periods has been audited by [____________], independent
auditors, whose report, along with the Predecessor Funds' financial statements,
are included in the Predecessor Funds' Annual Reports and are incorporated by
reference into the SAI. The Annual and Semi-Annual Reports and SAI are available
free of charge upon request.
-45-
<PAGE>
Galaxy Intermediate Tax-Exempt Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ ------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.52 $10.18 $9.99 $10.14 $9.90
------ ------ ----- ------ -----
Income from investment
operations:
Net investment income......... 0.45 0.48 0.50 0.51 0.48
Net realized and unrealized
gain (loss) on investments.... (0.01) 0.44 0.19 (0.09) 0.24
------ ------ ----- ------ -----
Total from investment
operations....................... 0.44 0.92 0.69 0.42 0.72
------ ------ ----- ------ -----
Less dividends:
Dividends from net
investment income............. (0.45) (0.48) (0.50) (0.51) (0.48)
Dividends from net
realized capital gains........ (0.18) (0.10) -- (0.06) --
------ ------ ----- ------ -----
Total dividends..................... (0.63) (0.58) (0.50) (0.57) (0.48)
------ ------ ----- ------ -----
Net increase (decrease) in net
asset value...................... (0.19) 0.34 0.19 (0.13) 0.24
------ ------ ----- ------ -----
Net asset value, end of period...... $ 10.33 $ 10.52 $ 10.18 $ 9.99 $ 10.14
========= ========= ========= ============= ===========
Total return........................ 4.24% 9.24% 7.74% 4.31% 7.58%
Ratios/supplemental data:
Net assets, end of period
(000's).................... $356,995 $303,578 $250,526 $ 196,787 $176,345
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.31% 4.62% 4.92% 4.90% 5.02%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.30% 4.55% 4.48% 4.56%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.80% 0.79% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.11% 1.12% 1.17% 1.21% 1.26%
Portfolio turnover rate............. 68.58% 34.06% 33.24% 37.35% 74.74%
</TABLE>
- -------------------------------
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares other than
through an investment management, trust, custody, or other agency
relationship with BankBoston, N.A. received BKB Shares of the Fund.
-46-
<PAGE>
Galaxy Connecticut Intermediate Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ ------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.81 $10.38 $10.17 $10.27 $10.00
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income......... 0.48 0.50 0.51 0.53 0.45
Net realized and unrealized
gain (loss) on investments.... (0.08) 0.45 0.21 (0.10) 0.27
------ ------ ------ ------ ------
Total from investment
operations....................... 0.40 0.95 0.72 0.43 0.72
------ ------ ------ ------ ------
Less dividends:
Dividends from net
investment income............. (0.48) (0.50) (0.51) (0.53) (0.45)
Dividends from net
realized capital gains........ (0.06) (0.02) -- -- --
------ ------ ------ ------ ------
Total dividends..................... (0.54) (0.52) (0.51) (0.53) (0.45)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value...................... (0.14) 0.43 0.21 (0.10) 0.27
------ ------ ------ ------ ------
Net asset value, end of period...... $ 10.67 $ 10.81 $ 10.38 $ 10.17 $ 10.27
========= ========= ========= ============= ===========
Total return........................ 3.72% 9.29% 7.26% 4.20% 7.45%(2)
Ratios/supplemental data:
Net assets, end of period
(000's)................. $187,725 $142,107 $103,104 $ 81,441 $ 61,369
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.37% 4.66% 4.94% 5.02% 5.44%(3)
Net investment income
excluding reimbursement/
waiver..................... 4.05% 4.32% 4.53% 4.48% 4.56%(3)
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.76% 0.75% 0.52%(3)
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.17% 1.29% 1.40%(3)
Portfolio turnover rate............. 19.10% 16.81% 4.28% 20.41% 35.56%
</TABLE>
- ----------------------------------
* The Portfolio commenced operations on August 1, 1994 as a separate
portfolio (the "Predecessor Fund") of the Boston 1784 Funds. On May __,
2000, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold one
class of shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their shares for Trust Shares and BKB Shares of
the Fund. Shareholders of the Predecessor Fund who purchased their shares
other than through an investment management, trust, custody, or other
agency relationship with BankBoston, N.A. received BKB Shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized.
(3) Annualized.
-47-
<PAGE>
Galaxy Massachusetts Intermediate Municipal Bond Fund*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the
period ended
November 30, For the year ended May 31,
------------ ------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $10.42 $10.01 $9.78 $9.90 $9.81
------ ------ ----- ----- -----
Income from investment
operations:
Net investment income......... 0.45 0.47 0.47 0.48 0.47
Net realized and unrealized
gain (loss) on investments.... (0.03) 0.41 0.23 (0.12) 0.09
------ ------ ----- ----- -----
Total from investment
operations....................... 0.42 0.88 0.70 0.36 0.56
------ ------ ----- ----- -----
Less dividends:
Dividends from net
investment income............. (0.45) (0.47) (0.47) (0.48) (0.47)
Dividends from net
realized capital gains........ -- -- -- -- --
------ ------ ----- ----- -----
Total dividends..................... (0.45) (0.47) (0.47) (0.48) (0.47)
------ ------ ----- ----- -----
Net increase (decrease) in net
asset value...................... (0.03) 0.41 0.23 (0.12) 0.09
------ ------ ----- ----- -----
Net asset value, end of period...... $ 10.39 $ 10.42 $ 10.01 $ 9.78 $ 9.90
========= ========= ========= ============= ===========
Total return........................ 4.10% 8.91% 7.30% 3.64% 6.00%
Ratios/supplemental data:
Net assets, end of period
(000's)................. $267,871 $206,137 $147,459 $ 106,619 $ 82,058
Ratios to average net assets:
Net investment income
including reimbursement/
waiver..................... 4.32% 4.54% 4.74% 4.73% 4.93%
Net investment income
excluding reimbursement/
waiver..................... 4.00% 4.20% 4.35% 4.25% 4.38%
Operating expenses
including reimbursement/
waiver..................... 0.80% 0.80% 0.79% 0.80% 0.80%
Operating expenses
excluding reimbursement/
waiver..................... 1.12% 1.14% 1.18% 1.28% 1.35%
Portfolio turnover rate............. 9.32% 6.45% 9.47% 47.00% 34.59%
</TABLE>
- ----------------------------------
* The Fund commenced operations on June 14,1993 as a separate portfolio (the
"Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares other than
through an investment management, trust, custody, or other agency
relationship with BankBoston, N.A. received BKB Shares of the Fund.
-48-
<PAGE>
Galaxy Growth Fund II*
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the period For the period
Ended ended
November 30, For the year ended May 31
------------ -------------------------------------------- ---------------
1999 1999 1998 1997 1996(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $12.93 $12.20 $11.27 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income................ (0.08) (0.05) 0.02 0.02
Net realized and unrealized gain
(loss) on investments............ (0.41) 1.59 0.96 1.25
------ ------ ------ ------
Total from investment operations.......... (0.49) 1.54 0.98 1.27
------ ------ ------ ------
Less dividends:
Dividends from net investment
income........................... -- -- (0.05) (0.00)
Dividends from net realized capital
gains............................ (0.38) (0.81) (0.00) (0.00)
------ ------ ------ ------
Total dividends........................... (0.38) (0.81) (0.05) (0.00)
------ ------ ------ ------
Net increase (decrease) in net asset
value............................ (0.87) 0.73 0.93 1.27
------ ------ ------ ------
Net asset value, end of period............ $12.06 $12.93 $12.20 $11.27
====== ====== ====== ======
Total return.............................. (3.54)% 12.64% 8.77% 12.70%(2)
Ratios/supplemental data:
Net assets, end of period (000's).... $185,476 $257,550 $261,487 $46,026
Ratios to average net assets:
Net investment income including
reimbursement/waiver............. (0.39)% (0.35)% 0.17% 1.75%(3)
Net investment income excluding
reimbursement/waiver............. (0.64)% (0.60)% (0.21)% 0.22%(3)
Operating expenses including
reimbursement/waiver............. 0.93% 0.91% 0.77% 0.20%(3)
Operating expenses excluding
Reimbursement/waiver............. 1.18% 1.16% 1.15% 1.73%(3)
Portfolio turnover rate................... 61.02% 48.60% 57.46% 0.00
</TABLE>
- ------------------------------
* The Fund commenced operations on March 28, 1996 as a separate portfolio
(the "Predecessor Fund") of the Boston 1784 Funds. On May __, 2000, the
Predecessor Fund was reorganized as a new portfolio of Galaxy. Prior to the
reorganization, the Predecessor Fund offered and sold one class of shares.
In connection with the reorganization, shareholders of the Predecessor Fund
exchanged their shares for Trust Shares and BKB Shares of the Fund.
Shareholders of the Predecessor Fund who purchased their shares other than
through an investment management, trust, custody, or other agency
relationship with BankBoston, N.A. received BKB Shares of the Fund.
(1) Period from commencement of operations.
(2) Not annualized
(3) Annualized.
-49-
<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
and a discussion about the market conditions and investment strategies that had
a significant effect on each Fund's performance during the last fiscal year.
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 calling Galaxy at 1-877-BUY-GALAXY
(1-877-289-4252) or by writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
If you buy your shares through a financial institution, you may contact your
institution for more information.
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090.
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's website at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
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
MAY __, 2000
GALAXY INSTITUTIONAL MONEY MARKET FUND SHARES
GALAXY INSTITUTIONAL TREASURY MONEY MARKET FUND
GALAXY FLORIDA MUNICIPAL BOND FUND
GALAXY INTERMEDIATE TAX-EXEMPT BOND FUND RETAIL A SHARES,
GALAXY CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND BKB SHARES AND
GALAXY MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND TRUST SHARES
GALAXY GROWTH FUND II RETAIL A SHARES,
RETAIL B SHARES,
BKB SHARES AND
TRUST SHARES
This Statement of Additional Information is not a prospectus. It relates to
the prospectuses dated May __, 2000 for the Funds as listed below, as they may
be supplemented or revised from time to time (the "Prospectuses"). Each Fund
commenced operations as a separate portfolio (the "Predecessor Fund") of the
Boston 1784 Funds. On May __, 2000, each Predecessor Fund was reorganized as a
new portfolio of Galaxy. The Prospectuses, as well as the Predecessor Funds'
Semi-Annual Reports to Shareholders dated November 30, 1999 and Annual Reports
to Shareholders dated May 31, 1999, 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)
CURRENT PROSPECTUSES
- - Prospectus for Retail A Shares of the Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund and Growth Fund II and Retail B Shares of the Growth
Fund II dated May __, 2000.
- - Prospectus for BKB Shares of the Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund and Growth Fund II dated May __, 2000.
<PAGE>
- - Prospectus for Shares of the Institutional Money Market Fund, Institutional
Treasury Money Market Fund and Florida Municipal Bond Fund and Trust Shares
of the Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate
Municipal Bond Fund, Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II dated May ___, 2000.
The Predecessor Funds' unaudited financial statements included in their
Semi-Annual Reports to Shareholders dated November 30, 1999, and the Predecessor
Funds' audited financial statements and the reports thereon of
[_________________________], the Predecessor Funds' independent accountants,
included in their Annual Reports to Shareholders dated May 31, 1999, are
[_______________________] into this Statement of Additional Information. No
other parts of the Predecessor Funds' Semi-Annual Reports to Shareholders or
Annual Reports to Shareholders are [_______________________].
-2-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
GENERAL INFORMATION............................................................1
DESCRIPTION OF GALAXY AND ITS SHARES...........................................2
INVESTMENT STRATEGIES, POLICIES AND RISKS......................................5
Institutional Money Market Fund............................................5
Institutional Treasury Money Market Fund...................................5
Intermediate Tax-Exempt Bond Fund..........................................5
Connecticut Intermediate Municipal Bond Fund...............................6
Massachusetts Intermediate Municipal Bond Fund.............................6
Florida Municipal Bond Fund................................................7
Growth Fund II.............................................................8
Special Risk Considerations................................................8
Foreign Securities.........................................................8
European Currency Unification..............................................9
General Risk Considerations................................................9
Other Investment Policies and Risk Considerations.........................10
Ratings ..................................................................10
U.S. Government Obligations and Money Market Instruments..................11
Variable and Floating Rate Obligations....................................13
Municipal Securities......................................................14
Stand-by Commitments......................................................17
Private Activity Bonds....................................................18
Custodial Receipts and Certificates of Participation......................18
Repurchase and Reverse Repurchase Agreements..............................19
Securities Lending........................................................20
Investment Company Securities.............................................20
Derivative Securities.....................................................21
American, European and Continental Depositary Receipts....................27
Asset-Backed Securities...................................................28
Mortgage-Backed Securities................................................29
Convertible Securities....................................................29
When-Issued Purchases and Forward Commitment Transactions.................30
Guaranteed Investment Contracts...........................................31
Common and Preferred Stock................................................31
Loan Participations.......................................................32
STRIPS ...................................................................32
Warrants .................................................................32
Zero Coupon Securities....................................................32
Portfolio Securities Generally............................................33
Special Considerations Relating to Connecticut Municipal Securities.......33
Special Considerations Relating to Florida Municipal Securities...........36
Portfolio Turnover........................................................40
-i-
<PAGE>
INVESTMENT LIMITATIONS........................................................40
Non-Fundamental Policies..................................................43
VALUATION OF PORTFOLIO SECURITIES.............................................44
Valuation of the Institutional Money Market and Institutional Treasury Money
Market Funds.........................................................44
Valuation of the Intermediate Tax-Exempt Bond, Connecticut Intermediate
Municipal Bond,Massachusetts Intermediate Municipal Bond and Florida
Municipal Bond Funds.................................................46
Valuation of the Growth Fund II...........................................46
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................47
Purchases of Retail A Shares, Retail B Shares and BKB Shares..............47
General ..................................................................47
Customers of Institutions.................................................48
Applicable Sales Charge - Retail A Shares.................................48
Computation of Offering Price - Retail A Shares...........................50
Quantity Discounts........................................................51
Applicable Sales Charge - Retail B Shares.................................53
Characteristics of Retail A Shares and Retail B Shares....................54
Factors to Consider When Selecting Retail A Shares or Retail B Shares.....55
Purchases of Shares of the Institutional Money Market Fund
and Institutional Treasury Money Market Fund.........................56
Purchases of Trust Shares and Shares of the Florida Municipal Bond Fund...57
Other Purchase Information................................................57
Redemptions...............................................................57
INVESTOR PROGRAMS.............................................................58
Exchange Privilege--Retail A Shares, Retail B Shares and BKB Shares and
Shares of the Institutional Money Market and Institutional Treasury
Money Market Funds...................................................58
Retirement Plans..........................................................59
Automatic Investment Program and Systematic Withdrawl Plan -
Retail A Shares, Retail B Shares and BKB Shares......................60
Payroll Deduction Program - Retail A Shares, Retail B Shares and
BKB Shares...........................................................61
College Investment Program - Retail A Shares, Retail B Shares and
BKB Shares...........................................................61
Direct Deposit Program - Retail A Shares, Retail B Shares and BKB Shares..61
TAXES.........................................................................61
In General................................................................61
State and Local...........................................................63
Taxation of Certain Financial Instruments.................................65
Miscellaneous.............................................................66
TRUSTEES AND OFFICERS.........................................................66
Shareholder and Trustee Liability.........................................70
INVESTMENT ADVISER............................................................71
Administrator.............................................................72
CUSTODIAN AND TRANSFER AGENT..................................................74
-ii-
<PAGE>
EXPENSES......................................................................75
PORTFOLIO TRANSACTIONS........................................................75
SHAREHOLDER SERVICES PLANS....................................................77
DISTRIBUTION AND SERVICES PLAN................................................80
DISTRIBUTOR...................................................................81
AUDITORS .....................................................................82
COUNSEL ......................................................................82
PERFORMANCE AND YIELD INFORMATION.............................................83
Institutional Money Market and Institutional Treasury Money Market Funds..83
Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal
Bond Fund, Massachusetts Intermediate Municipal Bond Fund, Municipal
Bond Fund and Growth Fund II.........................................83
Tax-Equivalency Tables - Connecticut Intermediate Municipal Bond,
Massachusetts Intermediate Municipal Bond and Florida Municipal Bond
Funds................................................................87
Performance Reporting.....................................................89
MISCELLANEOUS.................................................................90
FINANCIAL STATEMENTS..........................................................91
APPENDIX A...................................................................A-1
APPENDIX B...................................................................B-1
</TABLE>
-iii-
<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 seven Funds described on the cover page. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectuses. No investment in shares of the Funds should be made without
reading a Prospectus.
The Funds commenced operations as separate portfolios (each a "Predecessor
Fund," and collectively, the "Predecessor Funds") of the Boston 1784 Funds. On
May ___, 2000, each Predecessor Fund was reorganized as a new portfolio of The
Galaxy Fund (the "Reorganization"). Prior to the Reorganization, the Predecessor
Funds offered and sold one class of shares. In connection with the
Reorganization, shareholders of the Predecessor Funds exchanged their shares for
Shares, Trust Shares and BKB Shares of the Funds. Shareholders of the
Predecessor Funds who purchased their shares through an investment management,
trust, custody, or other agency relationship with BankBoston, N.A. received
Shares or Trust Shares of the Funds. BKB Shares were issued to shareholders of
the Predecessor Funds who were not eligible to receive Trust Shares at the time
of the Reorganization. Following the Reorganization, BKB Shares will be
available for purchase only by those shareholders who received BKB Shares in the
Reorganization. BKB Shares of a Fund will convert into Retail A Shares of the
same Fund on the first anniversary of the Reorganization, provided that prior
thereto the Board of Trustees of Galaxy has determined that such conversion is
in the best interests of the holders of BKB Shares.
Prior to the Reorganization, (i) the Institutional Money Market Fund was
named the Boston 1784 Institutional Prime Money Market Fund; (ii) the
Institutional Treasury Money Market Fund was named the Boston 1784 Institutional
U.S. Treasury Money Market Fund; (iii) the Intermediate Tax-Exempt Bond Fund was
named the Boston 1784 Tax-Exempt Medium-Term Income Fund; (iv) the Connecticut
Intermediate Municipal Bond Fund was named the Boston 1784 Connecticut
Tax-Exempt Income Fund; (v) the Massachusetts Intermediate Municipal Bond Fund
was named the Boston 1784 Massachusetts Tax-Exempt Income Fund; (vi) the Florida
Municipal Bond Fund was named the Boston 1784 Florida Tax-Exempt Income Fund;
and (vii) the Growth Fund II was named the Boston 1784 Growth Fund. References
in this Statement of Additional Information are to each Predecessor Fund's
current name. In addition, certain of the financial information contained in
this Statement of Additional Information is that of the Predecessor Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEETBOSTON CORPORATION OR ANY OF ITS AFFILIATES, FLEET INVESTMENT
ADVISORS INC., OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED
BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY AS A
RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE FUNDS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
<PAGE>
ALTHOUGH THE INSTITUTIONAL MONEY MARKET AND INSTITUTIONAL TREASURY MONEY MARKET
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. YOU ALSO COULD LOSE MONEY BY
INVESTING IN ANY OF THE OTHER FUNDS. AN INVESTMENT IN THE FUNDS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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 six 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, 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 each of the series in the Funds as follows: Class
FF Shares (Shares), representing interests in the Institutional Money Market
Fund; Class GG Shares (Shares), representing interests in the Institutional
Treasury Money Market Fund; Class II Shares (Shares), representing interests in
the Florida Municipal Bond Fund; Class JJ-Series 1 shares (Trust Shares), Class
JJ-Series 2 shares (Retail A Shares) and Class JJ-Series 3 shares (BKB Shares),
each series representing interests in the Intermediate Tax-Exempt Bond Fund;
Class KK-Series 1 shares (Trust Shares), Class KK-Series 2 shares (Retail A
Shares) and Class KK-Series 3 shares (BKB Shares), each series representing
interests in the Connecticut Intermediate Municipal Bond Fund; Class LL-Series 1
shares (Trust Shares), Class LL-Series 2 shares (Retail A Shares) and Class
LL-Series 3 shares (BKB Shares), each series representing interests in the
Massachusetts Intermediate Municipal Bond Fund; Class MM-Series 1 shares (Trust
Shares), Class MM-Series 2 shares (Retail A
-2-
<PAGE>
Shares), Class MM-Series 3 shares (BKB Shares) and Class MM-Series 4 shares
(Retail B Shares), each series representing interests in the Growth Fund II.
Each Fund, except for the Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds, are classified as
a diversified company under the Investment Company Act of 1940, as amended (the
"1940 Act"). Each of the Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds are classified as a
non-diversified company under 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. Each series of shares in a Fund (i.e., Retail A Shares, Retail B
Shares, BKB Shares and Trust Shares) bear pro rata the same expenses and are
entitled equally to a Fund's dividends and distributions except as follows. Each
series will bear the expenses of any distribution and/or shareholder servicing
plans applicable to such series. For example, as described below, holders of
Retail A Shares will bear the expenses of the Shareholder Services Plan for
Retail A Shares and Trust Shares (which is currently applicable only to Retail A
Shares), holders of Retail B Shares will bear the expenses of the Distribution
and Services Plan for Retail B Shares and holders of BKB Shares will bear the
expenses of the Shareholder Services Plan for BKB Shares. In addition, each
series may incur differing transfer agency fees and may have differing sales
charges. Standardized yield and total return quotations are computed separately
for each series of shares. The differences in expenses paid by the respective
series will affect their performance. See "Shareholder Services Plans" and
"Distribution and Services Plan" below.
In the event of a liquidation or dissolution of Galaxy or an individual
Fund, shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund, and a proportionate
distribution, based upon the relative asset values of Galaxy's respective Funds,
of any general assets of Galaxy not belonging to any particular Fund, which are
available for distribution. Shareholders of a Fund are entitled to participate
in the net distributable assets of the particular Fund involved in liquidation
based on the number of shares of the Fund that are held by each shareholder,
except that each series of a Fund would be solely responsible for the Fund's
payments under any distribution and/or shareholder servicing plan applicable to
such series.
Holders of all outstanding shares of a particular Fund will vote together
in the aggregate and not by series on all matters, except that only shares of a
particular series of a Fund will be entitled to vote on matters submitted to a
vote of shareholders pertaining to any distribution and/or shareholder servicing
plan for such series (e.g., only Retail A Shares and Trust Shares of a Fund will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
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Galaxy's Shareholder Services Plan for Retail A Shares and Trust Shares, only
Retail B Shares of the Growth Fund II will be entitled to vote on matters
submitted to a vote of shareholders pertaining to Galaxy's Distribution and
Services Plan for Retail B Shares, and only BKB Shares of a Fund will be
entitled to vote on matters submitted to a vote of shareholders pertaining to
Galaxy's Shareholder Services Plan for BKB Shares). Further, shareholders of all
of the Funds, as well as those of any other investment portfolio now or
hereafter offered by Galaxy, will vote together in the aggregate and not
separately on a Fund-by-Fund basis, except as otherwise required by law or when
permitted by the Board of Trustees. Rule 18f-2 under the 1940 Act provides that
any matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as Galaxy shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Fund affected by the matter. A particular Fund is
deemed to be affected by a matter unless it is clear that the interests of each
Fund in the matter are substantially identical or that the matter does not
affect any interest of the Fund. Under the Rule, the approval of an investment
advisory agreement or a distribution plan or any change in an investment
objective or a fundamental investment policy would be effectively acted upon
with respect to a Fund only if approved by a majority of the outstanding shares
of such Fund (irrespective of series designation). However, the Rule also
provides that the ratification of the appointment of independent public
accountants, the approval of principal underwriting contracts, and the election
of trustees may be effectively acted upon by shareholders of Galaxy voting
without regard to class or series.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and will vote in
the aggregate and not by class or series, except as otherwise expressly required
by law or when the Board of Trustees determines that the matter to be voted on
affects only the interests of shareholders of a particular class or series.
Voting rights are not cumulative and, accordingly, the holders of more than 50%
in the aggregate of Galaxy's outstanding shares may elect all of the trustees,
irrespective of the votes of other shareholders.
Galaxy is not required under Massachusetts law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. Shareholders
have the right to remove Trustees. Galaxy's Declaration of Trust provides that a
meeting of shareholders shall be called by the Board of Trustees upon a written
request of shareholders owning at least 10% of the outstanding shares of Galaxy
entitled to vote.
Galaxy's Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of a Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of the Fund involved to be
redeemed at a price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a Fund's assets into
money and, in connection therewith, to cause all outstanding shares of the Fund
involved to be redeemed
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at their net asset value; or (c) combine the assets belonging to a Fund with the
assets belonging to another Fund of Galaxy and, in connection therewith, to
cause all outstanding shares of any Fund to be redeemed at their net asset value
or converted into shares of another class of Galaxy's shares at the net asset
value. In the event that shares are redeemed in cash at their net asset value, a
shareholder may receive in payment for such shares, due to changes in the market
prices of the Fund's portfolio securities, an amount that is more or less than
the original investment. The exercise of such authority by the Board of Trustees
will be subject to the provisions of the 1940 Act, and the Board of Trustees
will not take any action described in this paragraph unless the proposed action
has been disclosed in writing to the Fund's shareholders at least 30 days prior
thereto.
INVESTMENT STRATEGIES, POLICIES AND RISKS
Fleet Investment Advisors Inc. ("Fleet"), the Funds' investment
adviser, will use its best efforts to achieve each Fund's investment objective,
although such achievement cannot be assured. The investment objective of a Fund
as described in its 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 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. The Institutional Money Market Fund and Institutional Treasury Money
Market 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 following investment strategies, policies and risks supplement those
set forth in the Funds' Prospectuses.
INSTITUTIONAL MONEY MARKET FUND
Instruments in which the Institutional Money Market Fund 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.
INSTITUTIONAL TREASURY MONEY MARKET FUND
Portfolio securities held by the Institutional Treasury Money Market Fund
have remaining maturities of 397 days or less (with certain exceptions). The
Fund may also invest in certain variable and floating rate instruments. For more
information, including applicable quality requirements, see "Other Investment
Policies and Risk Considerations" below.
ALTHOUGH THE FUND INVESTS IN U.S. GOVERNMENT OBLIGATIONS, AN INVESTMENT IN
THE FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
INTERMEDIATE TAX-EXEMPT BOND FUND
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Intermediate Tax-Exempt Bond Fund's shareholders, the
Fund will invest, except during temporary defensive periods, at least 80% of its
net assets in debt obligations issued by or on
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behalf of states, territories and possessions of the United States, the District
of Columbia and their respective authorities, agencies, instrumentalities and
political subdivisions, the interest on which, in the opinion of bond counsel to
the issuer, is exempt from regular federal income tax ("Municipal Securities"),
primarily bonds (at least 65% of net assets under normal market conditions). The
Fund may comply with this 80% policy by investing in a partnership, trust,
regulated investment company or other entity which invests in such Municipal
Securities, in which case the Fund's investment in such entity shall be deemed
to be an investment in the underlying Municipal Securities in the same
proportion as such entity's investment in such Municipal Securities bears to its
net assets.
See "Special Considerations and Risks" and "Other Investment Policies and
Risk Considerations" below for information regarding additional investment
policies of the Intermediate Tax-Exempt Bond Fund.
CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Connecticut Intermediate
Municipal Bond Fund will invest, except during temporary defensive periods, at
least 80% of its net assets in Municipal Securities, primarily (at least 65% of
net assets under normal market conditions) in Municipal Securities issued by or
on behalf of the State of Connecticut, its political sub-divisions, or any
public instrumentality, state or local authority, district or similar public
entity created under the laws of Connecticut and certain other governmental
issuers, such as Puerto Rico, the interest on which is, in the opinion of
qualified legal counsel, exempt from federal income tax and from Connecticut
personal income tax by virtue of federal law ("Connecticut Municipal
Securities"). The Fund may comply with these 80% and 65% policies by investing
in a partnership, trust, regulated investment company or other entity which
invests in such Municipal Securities, in which case the Fund's investment in
such entity shall be deemed to be an investment in the underlying Municipal
Securities in the same proportion as such entity's investment in such Municipal
Securities bears to its net assets. See "Other Investment Policies and Risk
Considerations - Special Considerations Relating to Connecticut Municipal
Securities" below, for a discussion of certain risks in investing in Connecticut
Municipal Securities. Dividends derived from interest on Municipal Securities
other than Connecticut Municipal Securities will generally be exempt from
regular federal income tax but may be subject to Connecticut personal income
tax. See "Taxes" below.
See "Special Considerations and Risks" and "Other Investment Policies and
Risk Considerations" below for information regarding additional investment
policies of the Connecticut Intermediate Municipal Bond Fund.
MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Massachusetts Intermediate
Municipal Bond Fund will invest, except during temporary defensive periods, at
least 80% of its net assets in Municipal Securities,
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primarily (at least 65% of net assets under normal market conditions) in
Municipal Securities issued by or on behalf of the Commonwealth of
Massachusetts, its political sub-divisions, authorities, agencies,
instrumentalities and corporations, and certain other governmental issuers such
as Puerto Rico, the interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal and Massachusetts personal income taxes
("Massachusetts Municipal Securities"). The Fund may comply with these 80% and
65% policies by investing in a partnership, trust, regulated investment company
or other entity which invests in such Municipal Securities, in which case the
Fund's investment in such entity shall be deemed to be an investment in the
underlying Municipal Securities in the same proportion as such entity's
investment in such Municipal Securities bears to its net assets. Dividends
derived from interest on Municipal Securities other than Massachusetts Municipal
Securities will generally be exempt from regular federal income tax but may be
subject to Massachusetts personal income tax. See "Taxes" below.
The Fund's ability to achieve its investment objective depends on the
ability of issuers of Massachusetts Municipal Securities to meet their
continuing obligations to pay principal and interest. Since the Fund invests
primarily in Massachusetts Municipal Securities, the value of the Fund's shares
may be especially affected by factors pertaining to the economy of Massachusetts
and other factors specifically affecting the ability of issuers of Massachusetts
Municipal Securities to meet their obligations. As a result, the value of the
Fund's shares may fluctuate more widely than the value of shares of a portfolio
investing in securities of issuers in a number of different states. The ability
of Massachusetts and its political subdivisions to meet their obligations will
depend primarily on the availability of tax and other revenues to those
governments and on their fiscal conditions generally. The amount of tax and
other revenues available to governmental issuers of Massachusetts Municipal
Securities may be affected from time to time by economic, political and
demographic conditions within Massachusetts. In addition, constitutional or
statutory restrictions may limit a government's power to raise revenues or
increase taxes. The availability of federal, state and local aid to an issuer of
Massachusetts Municipal Securities may also affect that issuer's ability to meet
its obligations. Payments of principal and interest on limited obligation bonds
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn could be affected
by economic, political and demographic conditions in Massachusetts or a
particular locality. Any reduction in the actual or perceived ability of an
issuer of Massachusetts Municipal Securities to meet its obligations (including
a reduction in the rating of its outstanding securities) would likely affect
adversely the market value and marketability of its obligations and could affect
adversely the values of other Massachusetts Municipal Securities as well.
See "Special Considerations and Risks" and "Other Investment Policies and
Risk Considerations" below for information regarding additional investment
policies of the Massachusetts Intermediate Municipal Bond Fund.
FLORIDA MUNICIPAL BOND FUND
As a matter of fundamental policy that cannot be changed without the
requisite consent of the Fund's shareholders, the Florida Municipal Bond Fund
will invest, except during temporary
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defensive periods, at least 80% of its net assets in Municipal Securities,
primarily (normally, at least 65% of net assets under normal market conditions)
in Municipal Securities issued by or on behalf of the State of Florida, its
political sub-divisions, authorities, agencies, instrumentalities and
corporations, the interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal income tax, and that are exempt from Florida
intangible personal property tax ("Florida Municipal Securities"). The Fund may
comply with these 80% and 65% policies by investing in a partnership, trust,
regulated investment company or other entity which invests in such Municipal
Securities, in which case the Fund's investment in such entity shall be deemed
to be an investment in the underlying Municipal Securities in the same
proportion as such entity's investment in such Municipal Securities bears to its
net assets. Dividends derived from interest on Municipal Securities other than
Florida Municipal Securities will generally be exempt from regular federal
income tax but may be subject to Florida intangible personal property tax. See
"Taxes" below.
See "Special Considerations and Risks" and "Other Investment Policies and
Risk Considerations" below for information regarding additional investment
policies of the Florida Municipal Bond Fund.
GROWTH FUND II
Convertible securities purchased by the Growth Fund II may include both
debt securities and preferred stock. By investing in convertible securities, the
Fund will seek the opportunity, through the conversion feature, to participate
in the capital appreciation of the common stock into which the securities are
convertible. See "Other Investment Policies and Risk Considerations -Convertible
Securities" below. The Fund may also invest in common stock warrants.
The Fund may invest up to 25% of its total assets in foreign securities.
See "Special Risk Considerations -- Foreign Securities" below. The Fund may also
engage in foreign currency hedging transactions in an attempt to minimize the
effect of currency fluctuations on the Fund. See "Other Investment Policies and
Risk Considerations -- Derivative Securities" below.
See "Other Investment Policies and Risk Considerations" below for
information regarding additional investment policies of the Growth Fund II.
SPECIAL RISK CONSIDERATIONS
FOREIGN SECURITIES
Investments by the Growth Fund II in foreign securities may involve higher
costs than investments in U.S. securities, including higher transaction costs,
as well as the imposition of additional taxes by foreign governments. In
addition, foreign investments may include additional risks associated with
currency exchange rates, less complete financial information about the issuers,
less market liquidity, and political instability. Future political and economic
developments, the possible imposition of withholding taxes on interest income,
the possible
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seizure or nationalization of foreign holdings, the possible establishment of
exchange controls, or the adoption of other governmental restrictions, might
adversely affect the payment of dividends or principal and interest on foreign
obligations.
Although the Growth Fund II may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S. dollars. As
a result, the net asset value of the Fund's shares may fluctuate with U.S.
dollar exchange rates as well as with price changes of the Fund's securities in
the various local markets and currencies. Thus, an increase in the value of the
U.S. dollar compared to the currencies in which the Fund makes its foreign
investments could reduce the effect of increases and magnify the effect of
decreases in the price of the Fund's securities in their local markets.
Conversely, a decrease in the value of the U.S. dollar will have the opposite
effect of magnifying the effect of increases and reducing the effect of
decreases in the prices of the Fund's securities in their local markets. In
addition to favorable and unfavorable currency exchange rate developments, the
Fund is subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.
Certain of the risks associated with investments in foreign securities are
heightened with respect to investments in countries with emerging economies or
emerging securities markets. The risks of expropriation, nationalization and
social, political and economic instability are greater in those countries than
in more developed capital markets.
EUROPEAN CURRENCY UNIFICATION
Many European countries have adopted a single European currency, the euro.
On January 1, 1999, the euro became legal tender for all countries participating
in the Economic and Monetary Union ("EMU"). A new European Central Bank has been
created to manage the monetary policy of the new unified region. On the same
date, the exchange rates were irrevocably fixed between the EMU member
countries. National currencies will continue to circulate until they are
replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets
in which the Growth Fund II may invest and may result in the Fund facing
additional risks. These risks, which include, but are not limited to,
uncertainty as to the proper tax treatment of the currency conversion,
volatility of currency exchange rates as a result of the conversion, uncertainty
as to capital market reaction, conversion costs that may affect issuer
profitability and creditworthiness, and lack of participation by some European
countries, may increase the volatility of the Fund's net asset value per share.
GENERAL RISK CONSIDERATIONS
Generally, the market value of fixed income securities, including Municipal
Securities, can be expected to vary inversely to changes in prevailing interest
rates. During periods of declining interest rates, the market value of
investment portfolios comprised primarily of fixed income securities, such as
the Intermediate Tax-Exempt Bond, Connecticut Intermediate Municipal Bond,
Massachusetts Intermediate Municipal Bond and Florida Municipal Bond
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Funds will tend to increase, and during periods of rising interest rates, the
market value will tend to decrease. In addition, during periods of declining
interest rates, the yields of investment portfolios comprised primarily of fixed
income securities will tend to be higher than prevailing market rates and, in
periods of rising interest rates, yields will tend to be somewhat lower. Fixed
income securities with longer maturities, which tend to produce higher yields,
are subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also offset the
value of these investments. Fluctuations in the market value of fixed income
securities subsequent to their acquisition will not offset cash income from such
securities but will be reflected in a Fund's net asset value.
Although the Intermediate Tax-Exempt Bond, Connecticut Intermediate
Municipal Bond, Massachusetts Intermediate Municipal Bond and Florida Municipal
Bond Funds do not presently intend to do so on a regular basis, each Fund may
invest more than 25% of its assets in Municipal Securities the interest on which
is paid solely from revenues on similar projects if such investment is deemed
necessary or appropriate by Fleet. To the extent that a Fund's assets are
concentrated in Municipal Securities payable from revenues on similar projects,
the Fund will be subject to the particular risks presented by such projects to a
greater extent than it would be if its assets were not so concentrated.
The Connecticut Intermediate Municipal Bond, Massachusetts Intermediate
Municipal Bond and Florida Municipal Bond Funds are each classified as a
non-diversified investment company under the 1940 Act. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio, and thereby subject the market-based net asset value per share of the
non-diversified portfolio to greater fluctuations. In addition, a
non-diversified portfolio may be more susceptible to economic, political and
regulatory developments than a diversified investment portfolio with similar
objectives may be.
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.
RATINGS
The Institutional Money Market and Institutional Treasury Money Market
Funds will purchase only those instruments which meet the applicable quality
requirements described below. The Institutional Money Market Fund 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
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rated by at least two nationally recognized statistical rating organizations
("Rating Agencies") (such as Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or Fitch IBCA, Inc. ("Fitch IBCA") in one of
the two highest categories 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 one of such Rating Agency's two highest categories for short-term
debt, or (iii) if not rated, the security is determined to be of comparable
quality. These rating categories are determined without regard to sub-categories
and gradations. The Funds will follow applicable regulations in determining
whether a security rated by more than one Rating Agency can be treated as being
in one of the two highest short-term rating categories. See "Investment
Limitations" below.
Information on the requisite investment quality of debt obligations,
including Municipal Securities, eligible for purchase by the Intermediate
Tax-Exempt Bond, Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds, is included in the
applicable Prospectuses and under "Other Investment Policies and Risk
Considerations - Municipal Securities" below.
All debt obligations, including convertible bonds, purchased by the Growth
Fund II are rated investment grade by Moody's ("Aaa," "Aa," "A" and "Baa") or
S&P ("AAA," "AA," "A" and "BBB"), or, if not rated, are determined to be of
comparable quality by Fleet. Debt securities rated "Baa" by Moody's or "BBB" by
S&P are generally considered to be investment grade securities although they
have speculative characteristics and changes in economic conditions or
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher rated debt obligations. See
Appendix A to this Statement of Additional Information for a description of
S&P's and Moody's rating categories.
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 also considers other relevant information
in its evaluation of unrated short-term securities.
U.S. GOVERNMENT OBLIGATIONS AND MONEY MARKET INSTRUMENTS
Each Fund may, in accordance with its investment policies, invest from time
to time in obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities and in other money market instruments, including bank
obligations and commercial paper.
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
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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 ten years. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as those of
the Government National Mortgage Association, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law. Some of these instruments may be 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.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit, non-negotiable time deposits (including Eurodollar time deposits)
issued for a definite period of time and earning a specified return by a U.S.
bank which is a member of the Federal Reserve System or is insured by the
Federal Deposit Insurance Corporation ("FDIC"), or by a savings and loan
association or savings bank which is insured by the FDIC, and other short-term
debt obligations issued by banks. With respect to each Fund, bank obligations
also include U.S. dollar-denominated obligations of foreign branches of U.S.
banks, foreign banks or 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. Time deposits with a maturity longer than seven
days or that do not provide for payment within seven days after notice will be
subject to each Fund's limitation on illiquid securities described below under
"Investment Limitations." For the purposes of each Fund's investment policies
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 regulation which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds to
finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and U.S.
branches of foreign banks may subject a Fund to additional risks, including
future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure
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or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of 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. Such investments may also subject the Funds to
investment risks similar to those accompanying direct investments in foreign
securities. See "Special Risk Considerations -- Foreign Securities." The Funds
will invest in the obligations of U.S. branches of foreign banks or foreign
branches of U.S. banks only when Fleet believes that the credit risk with
respect to the instrument is minimal.
Commercial paper is the term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Commercial paper
may include securities issued by corporations and other entities 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 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
Institutional Money Market Fund and Growth Fund II may also purchase Rule 144A
securities. See "Investment Limitations" below.
VARIABLE AND FLOATING RATE OBLIGATIONS
The Funds may purchase variable and floating rate instruments in accordance
with their investment objectives and policies as described in the Prospectuses
and this Statement of Additional Information. Variable rate instruments provide
for periodic adjustments in the interest rate. Floating rate instruments provide
for automatic adjustment of the interest rate whenever some other specified
interest rate changes. Some variable and floating rate obligations are direct
lending arrangements between the purchaser and the issuer and these 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
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consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and will continuously monitor their financial
status in order to meet payment on demand. In determining average weighted
portfolio maturity of each of these Funds, a variable or floating rate
instrument issued or guaranteed by the U.S. Government or an agency or
instrumentality thereof will be deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. Variable and
floating rate obligations with a demand feature will be deemed to have a
maturity equal to the longer of the period remaining to the next interest rate
adjustment or the demand notice period.
Long-term variable and floating rate obligations held by the Institutional
Money Market and Institutional Treasury Money Market 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).
MUNICIPAL SECURITIES
Municipal Securities acquired by the Intermediate Tax-Exempt Bond,
Connecticut Intermediate Municipal Bond, Massachusetts Intermediate Municipal
Bond and Florida Municipal Bond Funds include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses, and the extension of
loans to public institutions and facilities. Private activity bonds that are
issued by or on behalf of public authorities to finance various privately
operated facilities are "Municipal Securities" if the interest paid thereon is
exempt from regular federal income tax and not treated as a specific tax
preference item under the federal alternative minimum tax.
The two principal categories of Municipal Securities which may be held by
the Funds are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a special excise
tax or other specific revenue source such as the user of the facility being
financed.
The Funds' portfolios 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 Funds.
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 and
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S&P, described in the Prospectuses and in Appendix A hereto, represent such
Rating Agencies' opinions as to the quality of Municipal Securities. It should
be emphasized that these ratings are general and are not absolute standards of
quality. Municipal Securities with the same maturity, interest rate and rating
may have different yields. Municipal Securities of the same maturity and
interest rate with different ratings may have the same yield.
Municipal Securities may include rated and unrated variable and floating
rate tax-exempt instruments, such as variable rate demand notes. Variable rate
demand notes are long-term Municipal Securities that have variable or floating
interest rates and provide a Fund with the right to tender the security for
repurchase at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities to
trade at par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on an applicable
interest index or another published interest rate or interest rate index. Most
variable rate demand notes allow a Fund to demand the repurchase of the security
on not more than seven days prior notice. Other notes only permit a Fund to
tender the security at the time of each interest rate adjustment or at other
fixed intervals. 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.
Also included within the general category of Municipal Securities are
participation certificates in leases, installment purchase contracts, or
conditional sales contracts ("lease obligations") entered into by states or
political subdivisions to finance the acquisition or construction of equipment,
land, or facilities. Although lease obligations do not constitute general
obligations of the issuer for which the lessee's unlimited taxing power is
pledged, certain lease obligations are backed by the lessee's covenant to
appropriate money to make the lease obligation payments. However, under certain
lease obligations, the lessee has no obligation to make these payments in future
years unless money is appropriated on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
These securities represent a relatively new type of financing and may not be as
marketable as more conventional securities. To the extent these securities are
illiquid, they are subject to each Fund's applicable limitation on illiquid
securities described under "Investment Limitations" below.
Certificates of participation represent undivided interests in lease
payments by a governmental or nonprofit entity. A lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they become due. In the
event of a default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment. In addition,
certificates of participation are less liquid than other bonds because there is
a limited secondary trading market for such obligations. To alleviate potential
liquidity problems with respect to these investments, a Fund may enter into
remarketing agreements which may provide that the
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seller or a third party will repurchase the obligation within seven days after
demand by the Fund and upon certain conditions such as the Fund's payment of a
fee.
Municipal Securities purchased by the Funds 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 a Fund, 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 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.
The payment of principal and interest on most Municipal Securities
purchased by the Funds will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities and each multistate
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Prospectuses. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer." An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of its
Municipal Securities may be materially adversely affected by litigation or other
conditions.
Among other instruments, the Funds may purchase short-term general
obligation notes, tax anticipation notes, bond anticipation notes, revenue
anticipation notes, commercial paper, construction loan notes and other forms of
short-term loans that are rated in one of the two highest rating categories
assigned by a Rating Agency with respect to such instruments or, if unrated,
determined by Fleet to be of comparable quality. Such instruments are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements or other revenues. In addition, the Funds may invest
in long-term tax-exempt instruments, such as municipal bonds and private
activity bonds to the extent consistent with the limitations set forth in the
Prospectuses.
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
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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 Intermediate Tax-Exempt Bond, Connecticut Intermediate Municipal Bond,
Massachusetts Intermediate Municipal Bond and Florida Municipal Bond Funds and
the liquidity and value of their respective portfolios. In such an event, the
Funds would re-evaluate their investment objectives and policies and consider
possible changes in their 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 Funds nor
Fleet will review the proceedings relating to the issuance of Municipal
Securities or the bases for such opinions.
While the Intermediate Tax-Exempt Bond, Connecticut Intermediate Municipal
Bond, Massachusetts Intermediate Municipal and Florida Municipal Bond Funds will
invest primarily in Municipal Securities, the Institutional Money Market Fund
may also invest in Municipal Securities when such investments are deemed
appropriate by Fleet in light of the Fund's investment objective. As a result of
the favorable tax treatment afforded such obligations under the Internal Revenue
Code of 1986, as amended, yields on Municipal Securities can generally be
expected under normal market conditions to be lower than yields on corporate and
U.S. Government obligations, although from time to time Municipal Securities
have outperformed, on a total return basis, comparable corporate and federal
debt obligations as a result of prevailing economic, regulatory or other
circumstances.
STAND-BY COMMITMENTS
The Institutional Money Market, Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds may acquire "stand-by commitments" with respect to
Municipal Securities held by them. Under a stand-by commitment, a dealer agrees
to purchase, at a Fund's option, specified Municipal Securities at a specified
price. The Funds will acquire stand-by commitments solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. The Funds expect that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield otherwise
available for the same securities). Where a 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. Stand-by commitments acquired by a 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 a Fund. However, without a stand-by
commitment, these securities could be more difficult to sell. A Fund will enter
into stand-by commitments only with those dealers whose credit Fleet believes to
be of high quality.
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Stand-by commitments are exercisable by the Funds 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, a 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 a 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. A 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.
PRIVATE ACTIVITY BONDS
The Institutional Money Market, Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds may invest in "private activity bonds," the
interest on which, although exempt from regular federal income tax, may
constitute an item of tax preference for purposes of the federal alternative
minimum tax. Investments in such securities, however, will not be treated as
investments in Municipal Securities for purposes of the 80% requirement
mentioned above with respect to the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds and, under normal conditions, will not exceed 20%
of each such Fund's net assets when added together with any taxable investments
held by the Fund.
Private activity bonds are or have been issued to obtain funds to provide,
among other things, privately operated housing facilities, pollution control
facilities, convention or trade show facilities, mass transit, airport, port or
parking facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Private activity bonds are also
issued to privately held or publicly owned corporations in the financing of
commercial or industrial facilities. State and local governments are authorized
in most states to issue private activity bonds for such purposes in order to
encourage corporations to locate within their communities. The principal and
interest on these obligations may be payable from the general revenues of the
users of such facilities.
Private activity bonds held by the Funds are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of such private activity bonds is usually
directly related to the credit standing of the corporate user of the facility
involved.
CUSTODIAL RECEIPTS AND CERTIFICATES OF PARTICIPATION
Securities acquired by the Institutional Money Market, Intermediate
Tax-Exempt Bond, Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds may be in the form
of custodial receipts evidencing rights to
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receive a specific future interest payment, principal payment or both on certain
Municipal Securities. Such obligations are held in custody by a bank on behalf
of holders of the receipts. These custodial receipts are known by various names,
including "Municipal Receipts," "Municipal Certificates of Accrual on Tax-Exempt
Securities" ("M-CATS") and "Municipal Zero-Coupon Receipts." The Funds may also
purchase from time to time certificates of participation that, in the opinion of
counsel to the issuer, are exempt from federal income tax. A certificate of
participation gives a Fund an undivided interest in a pool of Municipal
Securities held by a bank. Certificates of participation may have fixed,
floating or variable rates of interest. If a certificate of participation is
unrated, Fleet will have determined that the instrument is of comparable quality
to those instruments in which the Fund may invest pursuant to guidelines
approved by Galaxy's Board of Trustees. For certain certificates of
participation, a Fund will have the right to demand payment, on not more than 30
days' notice, for all or any part of the Fund's participation interest, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment as needed to provide liquidity, to maintain or improve
the quality of its investment portfolio or upon a default (if permitted under
the terms of the instrument).
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Fund may purchase portfolio securities subject to the seller's
agreement to repurchase them at a mutually specified date and price ("repurchase
agreements"). Repurchase agreements will be entered into only with financial
institutions such as banks and broker/dealers which are deemed to be
creditworthy by 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 each Fund's 15% limit (10% with respect to the Institutional
Money Market and Institutional Treasury Money Market Funds) on illiquid
securities described below under "Investment Limitations."
The seller under a repurchase agreement will be required to maintain the
value of the securities which are subject to the agreement and held by a Fund at
not less than the agreed upon repurchase price. If the seller defaulted on its
repurchase obligation, the Fund holding such obligation would suffer a loss to
the extent that the proceeds from a sale of the underlying securities (including
accrued interest) were less than the repurchase price (including accrued
interest) under the agreement. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. Income on repurchase agreements is
taxable. Investments by each of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds in repurchase agreements will be, under normal
market conditions, subject to each 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 agreement). Securities subject to a repurchase agreement will be held
by a Fund's custodian or sub-custodian in a segregated
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account or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
Each Fund may borrow funds for temporary purposes by selling portfolio
securities to financial institutions such as banks and broker/dealers and
agreeing to repurchase them at a mutually specified date and price ("reverse
repurchase agreements"). Reverse repurchase agreements involve the risk that the
market value of the securities sold by a Fund may decline below the repurchase
price. The Funds would pay interest on amounts obtained pursuant to a reverse
repurchase agreement. Whenever a Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account liquid assets such as
cash or liquid portfolio securities equal to the repurchase price (including
accrued interest). The Fund will monitor the account to ensure such equivalent
value is maintained. Reverse repurchase agreements are considered to be
borrowings by a Fund under the 1940 Act.
SECURITIES LENDING
Each Fund may lend its portfolio securities to financial institutions such
as banks and broker/dealers in accordance with the investment limitations
described below. Such loans would involve risks of delay in receiving additional
collateral or in recovering the securities loaned or even loss of rights in the
collateral, should the borrower of the securities fail financially. Any
portfolio securities purchased with cash collateral would also be subject to
possible depreciation. A Fund that loans portfolio securities would continue to
accrue interest on the securities loaned and would also earn income on the
loans. Any cash collateral received by the Funds would be invested in high
quality, short-term money market instruments. Loans will generally be
short-term, 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.
INVESTMENT COMPANY SECURITIES
Each Fund may invest in securities issued by other investment companies and
foreign investment trusts, provided, however, that the Institutional Money
Market Fund and Institutional Treasury Money Market Fund may not invest in the
securities of other investment companies which invest in high quality,
short-term debt securities and which determine their net asset value per share
based on the amortized cost or penny-rounding method ("money market funds").
Each Fund may also invest up to 5% of its total assets in closed-end investment
companies that primarily hold securities of non-U.S. issuers.
Investments in other investment companies will cause a Fund (and,
indirectly, the Fund's shareholders) to bear proportionately the costs incurred
in connection with the investment companies' operations. Securities of other
investment companies will be acquired by a Fund within the limits prescribed by
the 1940 Act. Each Fund currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment
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company; (b) not more than 10% of the value of its total assets will be invested
in the aggregate in securities of other investment companies as a group; (c) not
more than 3% of the outstanding voting stock of any one investment company will
be owned by the Fund; and (d) not more than 10% of the outstanding voting stock
of any one closed-end investment company will be owned in the aggregate by the
Funds, other investment portfolios of Galaxy, or any other investment companies
advised by Fleet.
DERIVATIVE SECURITIES
Each Fund except the Institutional Money Market and Institutional Treasury
Money Market Funds may from time to time, in accordance with its investment
objective and policies, purchase certain "derivative" securities. Derivative
securities are instruments that derive their value from the performance of
underlying assets, interest or currency exchange rates, or indices, and include,
but are not limited to, municipal bond index futures, foreign currency exchange
contracts and certain asset-backed and mortgage-backed securities.
Derivative securities present, to varying degrees, market risk that the
performance of the underlying assets, interest or exchange rates or indices will
decline; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
security will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Fund will be unable to sell a derivative security
when it wants to because of lack of market depth or market disruption; pricing
risk that the value of a derivative security will not correlate exactly to the
value of the underlying assets, rates or indices on which it is based; and
operations risk that loss will occur as a result of inadequate systems and
controls, human error or otherwise. Some derivative securities are more complex
than others, and for those instruments that have been developed recently, data
are lacking regarding their actual performance over complete market cycles.
Fleet will evaluate the risks presented by the derivative securities
purchased by the Funds, and will determine, in connection with their day-to-day
management of the Funds, how such securities will be used in furtherance of the
Funds' investment objectives. It is possible, however, that Fleet's evaluations
will prove to be inaccurate or incomplete and, even when accurate and complete,
it is possible that the Funds will, because of the risks discussed above, incur
loss as a result of their investments in derivative securities.
FUTURES CONTRACTS. Subject to applicable laws, each of the Funds may enter
into bond and interest rate futures contracts. The Funds intend to use futures
contracts only for bona fide hedging purposes. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount of
a specified security at a specified future time and at a specified price. A
"sale" of a futures contract entails a contractual obligation to deliver the
underlying securities called for by the contract, and a "purchase" of a futures
contract entails a contractual obligation to acquire such securities, in each
case in accordance with the terms of the contract. Futures contracts must be
executed through a futures commission merchant, or
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brokerage firm, which is a member of an appropriate exchange designated as a
"contract market" by the Commodity Futures Trading Commission ("CFTC").
When a Fund purchases or sells a future contract, Galaxy must allocate
assets of that Fund as an initial deposit on the contract. The initial deposit
may be as low as approximately 5% or less of the value of the contract. The
futures contract is marked to market daily thereafter and the Fund may be
required to pay or entitled to receive additional "variation margin", based on a
decrease or increase in the value of the futures contract.
Futures contracts call for the actual delivery or acquisition of
securities, or in the case of futures contracts based on indices, the making or
acceptance of a cash settlement at a specified future time; however, the
contractual obligation is usually fulfilled before the date specified in the
contract by closing out the futures contract position through the purchase or
sale, on a commodities exchange, of an identical futures contract. Positions in
futures contracts may be closed out only if a liquid secondary market for such
contract is available, and there can be no assurance that such a liquid
secondary market will exist for any particular futures contract.
A Fund's ability to hedge effectively through transactions in futures
contacts depends on, among other factors, Fleet's judgment as to the expected
price movements in the securities underlying the futures contracts. In addition,
it is possible in some circumstances that a Fund would have to sell securities
from its portfolio to meet "variation margin" requirements at a time when it may
be disadvantageous to do so.
OPTIONS. Each Fund may write covered call options from time to time on its
assets as determined by Fleet to be appropriate in seeking to achieve such
Fund's investment objective, provided that the aggregate value of such options
may not exceed 10% of such Fund's net assets as of the time such Fund enters
into such options. The Growth Fund II may write covered call options, for
hedging purposes and in order to generate additional income. The Intermediate
Tax-Exempt Bond, Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds may write covered
call options for hedging purposes only and will not engage in option writing
strategies for speculative purposes.
The purchaser of a call option has the right to buy, and the writer (in
this case a Fund) of a call option has the obligation to sell, an underlying
security at a specified exercise price during a specified option period. The
advantage to a Fund of writing covered calls is that the Fund receives a premium
for writing the call, which is additional income. However, if the security rises
in value and the call is exercised, the Fund may not participate fully in the
market appreciation of the security.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time at which the writer effects a closing purchase
transaction.
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A closing purchase transaction is one in which a Fund, when obligated as a
writer of an option, terminates its obligation by purchasing an option of the
same series as the option previously written. A closing purchase transaction
cannot be effected with respect to an option once the Fund writing the option
has received an exercise notice for such option. Closing purchase transactions
will ordinarily be effected to realize a profit on an outstanding call option,
to prevent an underlying security from being called, to permit the sale of the
underlying security or to enable a Fund to write another call option on the
underlying security with either a different exercise price or different
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the net amount of the original
premium received on the call option is more or less than the cost of effecting
the closing purchase transaction. Any loss incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a
sale of a different call option on the same underlying security. Such a loss may
also be wholly or partially offset by unrealized appreciation in the market
value of the underlying security. Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part by a decline in the
market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid, even though, in economic terms, such gain may be offset by depreciation in
the market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between (a) the Fund's tax basis in
the underlying security and (b) the proceeds of the sale of the security, plus
the amount of the premium on the option, less the commission paid.
The market value of a call option generally reflects the market price of
the underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
Each of these Funds will write call options only on a covered basis, which
means that the Fund will own the underlying security subject to a call option at
all times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell, or deliver a security it would want to hold.
Options written by a Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
A Fund may also purchase put and call options. Put options are purchased to
hedge against a decline in the value of securities held in the Fund's portfolio.
If such a decline occurs, the put options will permit the Fund to sell the
securities underlying such options at the exercise price, or to close out the
options at a profit. The premium paid for a put or a call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying security rises
or declines sufficiently, the option may expire worthless to the Fund. In
addition, in the event that the price of the security in connection
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with which an option was purchased moves in a direction favorable to the Fund,
the benefits realized by the Fund as a result of such favorable movement will be
reduced by the amount of the premium paid for the option and related transaction
costs.
OPTIONS ON FUTURES CONTRACTS. The Funds may, subject to any applicable
laws, purchase and write options on futures contracts for hedging purposes only.
The holder of a call option on a futures contracts has the right to purchase the
futures contract, and the holder of a put option on a futures contract has the
right to sell the futures contract, in either case at a fixed exercise price up
to a stated expiration date or, in the case of certain options, on a stated
date. Options on futures contracts, like futures contracts, are traded on
contract markets.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities deliverable on exercise of the
futures contract. A Fund will receive an option premium when it writes the call,
and, if the price of the futures contracts at expiration of the option is below
the option exercise price, the Fund will retain the full amount of this option
premium, which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. Similarly, the writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the securities deliverable upon exercise of the futures contract. If a
Fund writes an option on a futures contract and that option is exercised, the
Fund may incur a loss, which loss will be reduced by the amount of the option
premium received, less related transaction costs. A Fund's ability to hedge
effectively through transactions in options on futures contracts depends on,
among other factors, the degree of correlation between changes in the value of
securities held by the Fund and changes in the value of its futures positions.
This correlation cannot be expected to be exact, and the Fund bears a risk that
the value of the futures contract being hedged will not move in the same amount,
or even in the same direction, as the hedging instrument. Thus is may be
possible for a Fund to incur a loss on both the hedging instrument and the
futures contract being hedged.
The ability of a Fund to engage in options and futures strategies depends
also upon the availability of a liquid market for such instruments; there can be
no assurance that such a liquid market will exist for such instruments.
OPTIONS ON STOCK INDICES. The Growth Fund II may engage in transactions
involving options on stock indices. A stock index assigns relative values to the
common stocks included in the index, and the index fluctuates with changes in
the market values of the underlying common stocks. The Fund will not engage in
transactions in options on stock indices for speculative purposes but only to
protect appreciation attained, to offset capital losses and to take advantage of
the liquidity available in the option markets. The aggregate premium paid on all
options on stock indices will not exceed 5% of the Fund's total assets.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the
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underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
option premium received, to make delivery of this amount. Gain or loss to the
Fund on transactions in stock index options will depend on price movements in
the stock market generally (or in a particular industry or segment of the
market) rather than price movements of individual securities.
As with stock options, the Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock
included in the index. Some stock index options are based on a broad market
index such as the Standard & Poor's 500 Index or the New York Stock Exchange
Composite Index, or a narrower market index such as the Standard & Poor's 100
Index. Indices are also based on an industry or market segment such as the AMEX
Oil and Gas Index or the Computer and Business Equipment Index. Options on stock
indices are currently traded on the following exchanges, among others: the
Chicago Board Options Exchange, the New York Stock Exchange and the American
Stock Exchange.
The Fund's ability to hedge effectively all or a portion of its securities
through transactions in options on stock indices depends on the degree to which
price movements in the underlying index correlate with price movements in the
securities held by the Fund. Since the Fund will not duplicate all of the
components of an index, the correlation will not be exact. Consequently, the
Fund bears the risk that the prices of the securities being hedged will not move
in the same amount as the hedging instrument. It is also possible that there may
be a negative correlation between the index or other securities underlying the
hedging instrument and the hedged securities which would result in a loss on
both such securities and the hedging instrument.
Positions in stock index options may be closed out only on an exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on the Fund's ability to effectively
hedge its securities. The Fund will enter into an option position only if there
appears to Fleet, at the time of investment, to be a liquid secondary market for
such options.
CURRENCY SWAPS. Each Fund may engage in currency swaps. Currency swaps
involve the exchange of rights to make or receive payments in specified
currencies. Currency swaps usually involve the delivery of the entire principal
value of one designated currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the other party to the swap will
default on its contractual delivery obligations. The use of currency swaps is a
highly specialized
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activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If Fleet is
incorrect in its forecast of market values and currency exchange rates, the
investment performance of a Fund would be less favorable than it would have been
if this investment technique were not used.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each Fund from time to time may
enter into foreign currency exchange transactions to convert the U.S. dollar to
foreign currencies, to convert foreign currencies to the U.S. dollar and to
convert foreign currencies to other foreign currencies. A Fund either enters
into these transactions on a spot (I.E., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or uses forward contracts to purchase
or sell foreign currencies. Forward foreign currency exchange contracts are
agreements to exchange one currency for another -- for example, to exchange a
certain amount of U.S. dollars for a certain amount of Japanese yen -- at a
future date, which may be any fixed number of days from the date of the
contract, and at a specified price. Typically, the other party to a currency
exchange contract will be a commercial bank or other financial institution. A
forward foreign currency exchange contract generally has no deposit requirement
and is traded at a net price without commission. Neither spot transactions nor
forward foreign currency exchange contracts eliminate fluctuations in the prices
of a Fund's portfolio securities or in foreign exchange rates, or prevent loss
if the prices of these securities should decline.
Forward foreign currency exchange contracts also allows a Fund to hedge the
currency risk of portfolio securities denominated in a foreign currency. This
technique permits the assessment of the merits of a security to be considered
separately from the currency risk. By separating the asset and the currency
decision, it is possible to focus on the opportunities presented by the security
apart from the currency risk. Although forward foreign currency exchange
contracts are of short duration, generally between one and twelve months, such
contracts are rolled over in a manner consistent with a more long-term currency
decision. Because there is a risk of loss to a Fund if the other party does not
complete the transaction, forward foreign currency exchange contracts will be
entered into only with parties approved by Galaxy's Board of Trustees.
Each Fund may maintain "short" positions in forward foreign currency
exchange transactions, which would involve the Fund's agreeing to exchange
currency that it currently does not own for another currency -- for example, to
exchange an amount of Japanese yen that it does not own for a certain amount of
U.S. dollars -- at a future date and at a specified price in anticipation of a
decline in the value of the currency sold short relative to the currency that
the Fund has contracted to receive in the exchange. In order to ensure that the
short position is not used to achieve leverage with respect to a Fund's
investments, the Fund will establish with its custodian a segregated account
consisting of cash or other liquid assets equal in value to the fluctuating
market value of the currency as to which the short position is being maintained.
The value of the securities in the segregated account will be adjusted at least
daily to reflect changes in the market value of the short position.
Forward foreign currency exchange contracts establish an exchange rate at a
future date. These contracts are transferable in the interbank market conducted
directly between currency
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traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of a Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the prices
of these securities should decline.
The Funds may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. Since consideration of the prospect for
currency parities will be incorporated into a Fund's long-term investment
decisions, the Fund will not routinely enter into foreign currency hedging
transactions with respect to portfolio security transactions; however, it is
important to have the flexibility to enter into foreign currency hedging
transactions when it is determined that the transactions would be in the Fund's
best interest. Although these transactions tend to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the
future value of these securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS
The Growth Fund II may invest in depositary receipts. American Depositary
Receipts ("ADRs") are receipts issued in registered form by a U.S. bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. European Depositary Receipts ("EDRs"), which are sometimes referred to
as Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-U.S. banks or trust companies and foreign branches of U.S.
banks that evidence ownership of foreign or U.S. securities. ADRs may be listed
on a national securities exchange or may be traded in the over-the-counter
market. EDRs and CDRs are designed for use in European exchange and
over-the-counter markets. ADRs, EDRs and CDRs traded in the over-the-counter
market which do not have an active or substantial secondary market will be
considered illiquid and therefore will be subject to the Fund's limitation with
respect to such securities. If the Fund invests in an unsponsored ADR, EDR or
CDR there may be less information available to the Fund concerning the issuer of
the securities underlying the unsponsored ADR, EDR or CDR than is available for
an issuer of securities underlying a sponsored ADR, EDR or CDR. ADR prices are
denominated in U.S. dollars although the underlying securities are denominated
in a foreign currency. Investments in ADRs, EDRs and CDRs involve risks similar
to those accompanying direct investments in foreign securities. Certain of these
risks are described above under "Special Risk Considerations -- Foreign
Securities."
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ASSET-BACKED SECURITIES
Each of the Funds except the Institutional Treasury Money Market Fund may
purchase asset-backed securities, which represent a participation in, or are
secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another. Assets generating
such payments will consist of such instruments as motor vehicle installment
purchase obligations, credit card receivables and home equity loans. Payment of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with entities issuing the securities. The estimated life of an asset-backed
security varies with the prepayment experience with respect to the underlying
debt instruments. The rate of such prepayments, and hence the life of the
asset-backed security, will be primarily a function of current market rates,
although other economic and demographic factors will be involved.
Asset-backed securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in an underlying pool
of assets, or as debt instruments, which are also known as collateralized
obligations, and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected prepayments, will
decrease, yield to maturity.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. Like other fixed income securities, when interest rates rise, the
value of an asset-backed security generally will decline; however, when interest
rates decline, the value of an asset-backed security with prepayment features
may not increase as much as that of other fixed income securities.
Asset-backed securities are subject to greater risk of default during
periods of economic downturn. Also, the secondary market for certain
asset-backed securities may not be as liquid as the market for other types of
securities, which could result in a Fund's experiencing difficulty in valuing or
liquidating such securities. For these reasons, under certain circumstances,
asset-backed securities may be considered illiquid securities.
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MORTGAGE-BACKED SECURITIES
Each of the Funds may invest in mortgage-backed securities (including
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMIGs")) that represent pools of mortgage loans assembled for sale
to investors by various governmental agencies and government-related
organizations, such as the Government National Mortgage Association, the Federal
National Mortgage Association, and the Federal Home Loan Mortgage Corporation.
Mortgage-backed securities provide a monthly payment consisting of interest and
principal payments. Additional payment may be made out of unscheduled repayments
of principal resulting from the sale of the underlying residential property,
refinancing or foreclosure, net of fees or costs that may be incurred.
Prepayments of principal on mortgage-backed securities may tend to increase due
to refinancing of mortgages as interest rates decline. To the extent that a Fund
purchases mortgage-backed securities at a premium, mortgage foreclosures and
prepayments of principal by mortgagors (which may be made at any time without
penalty) may result in some loss of the Fund's principal investment to the
extent of the premium paid. The yield of a Fund, should it invest in
mortgage-backed securities, may be affected by reinvestment of prepayments at
higher or lower rates than the original investment.
Each of the Funds, except for the Institutional Money Market Fund and
Institutional Treasury Money Market Fund, may also invest in mortgage-backed
securities not issued by governmental issuers which are rated in one of the top
three rating categories assigned by S&P, Moody's or Fitch IBCA, or if unrated,
determined by Fleet to be of comparable quality. Other mortgage-backed
securities are issued by private issuers, generally originators of and investors
in mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. These private
mortgage-backed securities may be supported by U.S. Government mortgage-backed
securities or some form of non-government credit enhancement. Mortgage-backed
securities have either fixed or adjustable interest rates. The rate of return on
mortgage-backed securities may be affected by prepayments of principal on the
underlying loans, which generally increase as interest rates decline; as a
result, when interest rates decline, holders of these securities normally do not
benefit from appreciation in market value to the same extent as holders of other
non-callable debt securities. In addition, like other debt securities, the value
of mortgage-related securities, including government and government-related
mortgage pools, generally will fluctuate in response to market interest rates.
CONVERTIBLE SECURITIES
Each Fund may from time to time, in accordance with its investment
policies, invest in convertible securities. Convertible securities are fixed
income securities which may be exchanged or converted into a predetermined
number of shares of the issuer's underlying common stock at the option of the
holder during a specified time period. Convertible securities may take the form
of convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features of
several of these securities.
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Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities. The
holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in whole
or in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock. When owned as part of a unit along with warrants, which
are options to buy the common stock, they function as convertible bonds, except
that the warrants generally will expire before the bond's maturity. Convertible
securities are senior to equity securities and therefore have a claim to the
assets of the issuer prior to the holders of common stock in the case of
liquidation. However, convertible securities are generally subordinated to
similar non-convertible securities of the same issuer. The interest income and
dividends from convertible bonds and preferred stocks provide a stable stream of
income with generally higher yields than common stocks, but lower than
non-convertible securities of similar quality. The Fund will exchange or convert
the convertible securities held in its portfolio into shares of the underlying
common stock in instances in which, in Fleet's opinion, the investment
characteristics of the underlying common stock will assist the Fund in achieving
its investment objective. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for a Fund, Fleet evaluates the
investment characteristics of the convertible security as a fixed income
instrument, and the investment potential of the underlying equity security for
capital appreciation. In evaluating these matters with respect to a particular
convertible security, Fleet considers numerous factors, including the economic
and political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENT TRANSACTIONS
Each Fund may purchase eligible securities on a "when-issued" basis. Each
Fund may also purchase or sell securities on a "forward commitment" basis.
When-issued and forward commitment transactions, which involve a commitment by a
Fund to purchase or sell particular securities with payment and delivery taking
place at a future date (perhaps one or two months later), permit the Fund to
lock in a price or yield on a security it owns or intends to purchase,
regardless of future changes in interest rates. When-issued and forward
commitment 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 when-issued purchases and forward commitments will not exceed 25% of the
value of a Fund's total assets absent unusual market conditions. In the event a
Fund's when-issued purchases and forward commitments ever exceeded 25% of the
value of its total assets, the Fund's liquidity and the ability of Fleet to
manage the Fund might be adversely affected. The Funds do not intend to engage
in when-issued purchases and forward commitments for speculative purposes, but
only in furtherance of their investment objectives.
A Fund may dispose of a commitment prior to settlement if Fleet deems it
appropriate to do so. In addition, a Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase
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similar securities at later dates. The Funds may realize short-term profits or
losses upon the sale of such commitments.
When a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Fund's custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account. In the
event of a decline in the value of the securities that the custodian has set
aside, the Fund may be required to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. A Fund's net assets may fluctuate to a greater
degree if it sets aside portfolio securities to cover such purchase commitments
than if it sets aside cash. Because a Fund sets aside liquid assets to satisfy
its purchase commitments in the manner described, its liquidity and ability to
manage its portfolio might be adversely affected in the event its commitment to
purchase securities on a when-issued or forward commitment basis exceeded 25% of
the value of its assets.
When a Fund engages in when-issued or forward commitment transactions, it
relies on the seller to consummate the trade. Failure of the seller to do so may
result in the Fund's incurring a loss or missing an opportunity to obtain a
price considered to be advantageous for a security. For purposes of determining
the average weighted maturity of a Fund's portfolio, the maturity of when-issued
securities is calculated from the date of settlement of the purchase to the
maturity date.
GUARANTEED INVESTMENT CONTRACTS
The Funds may invest in guaranteed investment contracts ("GICs") issued by
insurance companies. Pursuant to GICs, a Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund payments at negotiated, floating or fixed interest
rates. A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the insurance company, and the contract is paid from the company's
general assets. The Funds will only purchase GICs that are issued or guaranteed
by insurance companies that at the time of purchase are rated at least AA by S&P
or receive a similar high quality rating from a nationally recognized service
which provides ratings of insurance companies. GICs are considered illiquid
securities and will be subject to the Funds' limitation on such investments,
unless there is an active and substantial secondary market for the particular
instrument and market quotations are readily available. No Fund will invest more
than 20% of its total assets in GICs.
COMMON AND PREFERRED STOCK
The Growth Fund II may invest in common and preferred stock. Common stocks
are generally more volatile than other securities. Preferred stocks share some
of the characteristics of both debt and equity investments and are generally
preferred over common stocks with respect to dividends and in liquidation.
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LOAN PARTICIPATIONS
Loan participations are interests in loans which are administered by the
lending bank or agent for a syndicate of lending banks, and sold by the lending
bank or syndicate member. The Funds may only purchase interests in loan
participations issued by a bank in the United States with assets exceeding $1
billion and for which the underlying loan is issued by borrowers in whose
obligations the Funds may invest. Because the intermediary bank does not
guarantee a loan participation in any way, a loan participation is subject to
the credit risk generally associated with the underlying corporate borrower. In
addition, in the event the underlying corporate borrower defaults, a Fund may be
subject to delays, expenses and risks that are greater than those that would
have been involved if the Fund had purchased a direct obligation (such as
commercial paper) of the borrower. Under the terms of a loan participation, the
purchasing Fund may be regarded as a creditor of the intermediary bank so that
the Fund may also be subject to the risk that the issuing bank may become
insolvent.
STRIPS
Each of the Funds may invest in Separately Traded Interest and Principal
Securities ("STRIPS"), which are component parts of U.S. Treasury Securities
traded through the Federal Reserve Book-Entry System. Fleet will purchase only
those STRIPS that it determines are liquid or, if illiquid, do not violate a
Fund's investment policy concerning investments in illiquid securities. With
respect to the Institutional Money Market and Institutional Treasury Money
Market Funds, Fleet will purchase only those STRIPS that have a remaining
maturity of 397 days or less. Neither of these Funds may invest more than 5% of
its total assets in STRIPS. While there is no limitation on the percentage of
any other Fund's assets that may be invested in STRIPS, Fleet will monitor the
level of such holdings to avoid the risk of impairing shareholders' redemption
rights. The interest-only component of STRIPS is extremely sensitive to the rate
of principal payments on the underlying obligation. The market value of the
principal-only component generally is usually volatile in response to changes in
interest rates.
WARRANTS
A warrant is an instrument issued by a corporation which gives the holder
the right to subscribe to a specified amount of the corporation's capital stock
at a set price for a specified period of time. The Growth Fund II may invest up
to 5% of its net assets in warrants. Included in this limitation, but not to
exceed 2% of the Fund's net assets, may be warrants not listed on the New York
Stock Exchange or American Stock Exchange.
ZERO COUPON SECURITIES
Each Fund may invest in zero coupon securities. A zero coupon security pays
no interest or principal to its holder during its life. A zero coupon security
is sold at a discount, frequently substantial, and redeemed at face value at its
maturity date. The market prices of zero coupon securities are generally more
volatile than the market prices of securities of similar maturity that
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pay interest periodically, and zero coupon securities are likely to react more
to interest rate changes than non-zero coupon securities with similar maturity
and credit qualities.
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
particular Fund and applicable regulations of the Securities and Exchange
Commission ("SEC").
SPECIAL CONSIDERATIONS RELATING TO CONNECTICUT MUNICIPAL SECURITIES
The following information is a brief summary of factors affecting the
economies and financial strengths of the State of Connecticut, its
municipalities and its political subdivisions and does not purport to be a
complete description of such factors. Other factors will affect issuers. The
summary is based primarily upon one or more publicly available offering
statements relating to debt offerings of the State of Connecticut that were
available prior to the date of this Statement of Additional Information. The
accuracy and completeness of the information contained in such offering
statements have not been independently verified.
The ability of the issuers of Connecticut Municipal Securities to pay the
principal and interest on their obligations may be impacted by a variety of
factors relating to the economy of Connecticut and to the fiscal stability of
issuers of Connecticut Municipal Securities. The latter may include such matters
as the ability of issuers to raise sufficient tax and other revenues to meet
their needs, the availability of aid from other governmental bodies, and the
burdens that may be imposed on issuers by law or necessity. To the extent that
the Fund invests in obligations that are not general obligations of their
issuers, payments of principal and interest will depend on all factors affecting
the revenue sources from which payments thereon are to be derived. The value of
the obligations held by the Fund would be adversely affected not only by any
actual inability of their issuers to pay the principal and interest thereon, but
also by a public perception that such ability is in doubt
Manufacturing has historically been of prime economic importance to
Connecticut (sometimes referred to as the "State"). The State's manufacturing
industry is diversified, with transportation equipment (primarily aircraft
engines, helicopters and submarines) the dominant industry, followed by
fabricated metals, non-electrical machinery, and electrical equipment. As a
result of a rise in employment in service-related industries and a decline in
manufacturing employment, however, manufacturing accounted for only 17.09% of
total non-agricultural employment in Connecticut in 1997. Defense-related
business represents a relatively high proportion of the manufacturing sector. On
a per capita basis, defense awards to Connecticut have traditionally been among
the highest in the nation, and reductions in defense spending have had a
substantially adverse impact on Connecticut's economy.
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The average annual unemployment rate in Connecticut increased from a low of
3.0% in 1988 to a high of 7.6% in 1992 and, after a number of important changes
in the method of calculation, was reported to be 5.8% in 1996. Average per
capita personal income of Connecticut residents increased in every year from
1989 to 1997, rising from $25,443 to $36,434. However, pockets of significant
unemployment and poverty exist in several Connecticut cities and towns.
For the four fiscal years ended June 30, 1991, the General Fund experienced
operating deficits but, for the eight fiscal years ended June 30, 1999, the
General Fund recorded operating surpluses, based on Connecticut's budgetary
method of accounting. General Fund budgets adopted for the biennium ending June
30, 2001, authorize expenditures of $10,581,600,000 for the 1999-2000 fiscal
year and $11,085,200,000 for the 2000-2001 fiscal year and project surpluses of
$64,400,000 and $4,800,000, respectively, for those years. As of August 31,
1999, the Comptroller estimated expenditures of $10,689,600,000 and a surplus of
only $11,200,000 for the 1999-2000 fiscal year. Connecticut's general obligation
bonds are rated Aa3 by Moody's and AA by Fitch. On October 8, 1998, S&P upgraded
its ratings of Connecticut's general obligations bonds from AA- to AA.
The State's primary method for financing capital projects is through the
sale of general obligation bonds. These bonds are backed by the full faith and
credit of the State. As of October 15, 1999, the State had authorized direct
general obligation bond indebtedness totaling $13,310,385,000, of which
$11,144,149,000 had been approved for issuance by the State Bond Commission and
$9,625,537,000 had been issued. As of October 15, 1999, net State direct general
obligation indebtedness outstanding was $6,890,968,000.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The University was authorized to issue bonds totaling $962,000,000
by June 30, 2005, that are secured by a State debt service commitment to finance
the improvements, $359,475,000 of which were outstanding on October 15, 1999.
In addition, the State has limited or contingent liability on a significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Housing Finance Authority, the Connecticut Development
Authority, the Connecticut Higher Education Supplemental Loan Authority, the
Connecticut Resources Recovery Authority and the Connecticut Health and
Educational Facilities Authority. Such bonds have been issued by the cities of
Bridgeport and West Haven and the Southeastern Connecticut Water Authority. As
of December 1, 1998, the amount of bonds outstanding on which the State has
limited or contingent liability totaled $4,154,900,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2002, is currently estimated to be
$12.6 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $5.1 billion share of such cost by
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issuing $4.6 billion of special tax obligation ("STO") bonds. The STO bonds are
payable solely from specific motor fuel taxes, motor vehicle receipts, and
license, permit and fee revenues pledged therefor and credited to the Special
Transportation Fund, which was established to budget and account for such
revenues.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of the
following cases might have a significant impact on the State's financial
position: (i) an action on behalf of all persons with traumatic brain injury who
have been placed in certain State hospitals, and other persons with acquired
brain injury who are in the custody of the Department of Mental Health and
Addiction Services, claiming that their constitutional rights are violated by
placement in State hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; (ii) litigation involving claims by Indian tribes
to portions of the State's land area; (iii) an action by certain students and
municipalities claiming that the State's formula for financing public education
violates the State's Constitution and seeking a declaratory judgment and
injunctive relief; (iv) an action for money damages for the death of a young
physician killed in an automobile accident allegedly as a result of negligence
of the State; and (v) actions by several hospitals claiming partial refunds of
taxes imposed on hospital gross earnings to the extent such taxes related to
tangible personal property transferred in the provision of services to patients.
As a result of litigation on behalf of black and Hispanic school children
in the City of Hartford seeking "integrated education" within the Greater
Hartford metropolitan area, on July 9, 1996, the State Supreme Court directed
the legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The Superior Court ordered the State
to show cause as to whether there has been compliance with the Supreme Court's
ruling and concluded that the State had complied but that the plaintiffs had not
allowed the State sufficient time to take additional remedial steps.
Accordingly, the plaintiffs might be able to pursue their claim at a later date.
The fiscal impact of this matter might be significant but is not determinable at
this time.
The State's Department of Information Technology is reviewing the State's
Year 2000 exposure and developing plans for modification or replacement of
existing software that it believes will prevent significant operations problems.
There is a risk that the plan will not be completed on time, that planned
testing will not reveal all problems, or that systems of others on whom the
State relies will not be timely updated. If the necessary remediations are not
completed in a timely fashion, the Year 2000 problem may have a material impact
on the operations of the State.
General obligation bonds issued by municipalities are payable primarily
from ad valorem taxes on property located in the municipality. A municipality's
property tax base is subject to many factors outside the control of the
municipality, including the decline in Connecticut's manufacturing industry.
Certain Connecticut municipalities have experienced severe fiscal difficulties
and have reported operating and accumulated deficits. The most notable of these
is
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the City of Bridgeport, which filed a bankruptcy petition on June 7, 1991. The
State opposed the petition. The United States Bankruptcy Court for the District
of Connecticut held that Bridgeport had authority to file such a petition but
that its petition should be dismissed on the grounds that Bridgeport was not
insolvent when the petition was filed. State legislation enacted in 1993
prohibits municipal bankruptcy filings without the prior written consent of the
Governor. Regional economic difficulties, reductions in revenues, and increased
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities, and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
In addition to general obligation bonds backed by the full faith and credit
of the municipality, certain municipal authorities finance projects by issuing
bonds that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.
SPECIAL CONSIDERATIONS RELATING TO FLORIDA MUNICIPAL SECURITIES
The financial condition of the State of Florida may be affected by various
financial, social, economic and political factors. Those factors can be very
complex, may vary from fiscal year to fiscal year, and are frequently the result
of actions taken not only by the State and its agencies and instrumentalities
but also by entities that are not under the control of the State. Adverse
developments affecting the State's financing activities, its agencies or its
political subdivisions could adversely affect the State's financial condition.
The State's revenues increased from $32,957,715,000 during the 1996-97
fiscal year ended June 30, 1997 to $35,849,518,000 during the fiscal year ended
June 30, 1998. The State's operating expenditures increased from $31,494,591,000
during the 1996-97 fiscal year ended June 30, 1997 to $33,373,020,000 during the
1997-98 fiscal year ended June 30, 1998. The Office of Economic and Demographic
Research of the Florida Legislature also projected non-agricultural jobs to grow
3.5% and 3.1% in fiscal years 1998-99 and 1999-2000, respectively. The revenue
growth in the 1998-1999 fiscal year is driven by the State's sales tax
collections. The sales tax accounts for close to 75% of total revenues through
March 31, 1999. A March 31, 1999 estimate shows an expected year-end surplus of
$573.8 million. When this is combined with the Budget Stabilization Fund balance
of $786.9 million, Florida's total reserves are $1,360.7 million.
The Constitution of the State of Florida limits the right of the State and
its local governments to tax. The Constitution requires the State to have a
balanced budget and to raise revenues to defray its operating expenses. The
State may not borrow for the purpose of maintaining ordinary operating expenses,
but may generally borrow for capital improvements.
An amendment to the Florida Constitution adopted in 1994 requires that
state revenues in excess of an allowed amount plus a growth factor must be
contributed to a Budget Stabilization Fund until this fund reaches a certain
amount at which time the excess state revenues must be
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distributed to the taxpayers. The growth factor is the average annual rate of
growth in the state personal income over the most recent 20 quarters times the
amount of state revenue allowed under the Constitution for the prior fiscal
year. Included among the categories of revenues that are exempt from this
revenue limitation are revenues pledged to state bonds and other payments
related to debt. A two-thirds vote of the Florida legislature can raise the
amount of the limit on state revenues. It is difficult to predict the impact of
this amendment on Florida state finances, especially since courts have not
interpreted it extensively. To the extent that local governments traditionally
receive revenues from the state which are subject to or limited by this
Constitutional amendment, the further distribution of such state revenues may be
adversely impacted by the amendment.
There are a number of methods by which the State of Florida may incur debt.
The State may issue bonds backed by the State's full faith and credit to finance
or refinance certain capital projects authorized by its voters. The total
outstanding principal of State bonds pledging the full faith and credit of the
State may not exceed 50% of the total tax revenues of the State for the two
preceding fiscal years, excluding any tax revenues held in trust. The State also
may issue certain bonds backed by the State's full faith and credit to finance
or refinance pollution control, solid waste disposal and water facilities for
local governments; county roads; school districts and capital public education
projects without voter authorization. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State's authorities, agencies and instrumentalities. Payments of debt service on
State bonds backed by the State's full faith and credit and State-guaranteed
bonds and notes are legally enforceable obligations of the State. Revenue bonds
to finance or refinance certain capital projects also may be issued by the State
of Florida without voter authorization. However, revenue bonds are payable
solely from funds derived directly from sources other than state tax revenues.
The State of Florida currently imposes, among other taxes, an ad valorem
tax on intangible property and a corporate income tax. The Florida Constitution
prohibits the levying of a personal income tax. Certain other taxes the State of
Florida imposes include: an estate or inheritance tax which is limited by the
State's Constitution to an amount not in excess of the amount allowed to be
credited upon or deducted from federal estate taxes or the estate taxes of
another state; and a 6% sales tax on most goods and certain services with an
option for counties to impose up to an additional 1% sales tax on such goods and
services. In addition, counties chartered before June 1, 1976 or county with a
consolidated county/municipal government may assess up to a 1% discretionary
sales surtax within the county for the development, construction, maintenance
and operation of a fixed guideway rapid transit system.
The Constitution reserves the right to charge an ad valorem tax on real
estate and tangible personal property to Florida's local governments. All other
forms of taxation are preempted to the State of Florida except as may be
provided by general law. Motor vehicles, boats, airplanes, trailers, trailer
coaches and mobile homes, as defined by law, may be subject to a license tax for
their operation, but may not be subject to an ad valorem tax.
Under the Constitution, ad valorem taxes may not be levied in excess of the
following millage upon the assessed value of real estate and tangible personal
property: for all county
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purposes, ten mills; for all municipal purposes, ten mills; for all school
purposes, ten mills; for water management purposes for the northwest portion of
the State, .05 mills; for water management purposes for the remaining portion of
the State, one mill; and for all other special districts a millage authorized by
law and approved by referendum. When authorized by referendum, the above millage
caps may be exceeded for up to two years. Counties, school districts,
municipalities, special districts and local governmental bodies with taxing
powers may issue bonds to finance or refinance capital projects payable from ad
valorem taxes in excess of the above millage cap when approved by referendum. It
should be noted that several municipalities and counties have charters that
further limit either ad valorem taxes or the millage that may be assessed.
The Florida legislature has passed a number of mandates which limit or
place requirements on local governments without providing the local governments
with compensating changes in their fiscal resources. The Florida legislature
enacted a comprehensive growth management act which forces local governments to
establish and implement comprehensive planning programs to guide and control
future development. This legislation prohibits public or private development
that does not conform with the locality's comprehensive plan. Local governments
may face greater requirements for services and capital expenditures than they
had previously experienced if their locality experiences increased growth or
development. The burden for funding these potential services and capital
expenditures which has been left to the local governments may be quite large.
The Florida Constitution limits the assessed value of homestead real
property for ad valorem tax purposes to the lower of (A) three percent (3%) of
the assessed value for the prior year; or (B) the percentage change in the
Consumer Price Index for the preceding calendar year. In addition, no such
assessed value shall exceed "just value" and such just value shall be reassessed
(notwithstanding the 3% cap) as of January 1 of the year following a change of
ownership of the assessed real property.
Florida has grown dramatically since 1980 and as of April 1, 1997 ranked
fourth nationally with an estimated population of 14.7 million. Florida's
substantial population increases over the past few years are expected to
continue. It is anticipated that corresponding increases in State revenues will
be necessary during the next decade to meet increased burdens on the various
public and social services provided by the State. Much of this growth is being
funded by bonded revenues secured by the expanding real property tax base. As of
1997, real property values exceed $724 billion. Residential property values
account for over $400 billion in value while commercial and industrial property
values exceed $100 billion.
Florida's job market continues to reflect strong performance. The
state's March 1999 unemployment rate was 4.1%, 0.3 percentage points lower
than the year ago rate of 4.4% Florida's unemployment rate was one of the
lowest since October 1973 when it was 3.4%. The U.S. unemployment rate was
4.2% in March 1999, just above Florida's rate. Fueled by low interest rates,
construction had the fastest growth rate at 5.8% and added 20,000 jobs over
the year. Similarly, finance, insurance, and real estate and government also
experienced year to year increases of 19,100 jobs and 16,400 jobs,
respectively. The apparel and textiles industries lost 1,500 jobs due to
tariffs and foreign competition. The State is gradually becoming less
dependent on employment related to construction, agriculture and
manufacturing, and more dependent on
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employment related to trade and services. Presently, services
constitute 34.9% and trade 25.6% of the State's total non-farm jobs.
Personal income in the State has been growing strongly the last several
years and has generally outperformed both the nation as a whole and the
Southeast in particular. The reasons for this are strong population growth and
diversification of the economy. From 1992 through 1997, the State's per capita
income rose an average of 5.0% per year, while the national per capita income
increased an average of 4.8%. For 1997, the State's per capita personal income
rose an average of 4.0% while the national per capita personal income rose 4.7%.
In 1997, per capita personal income in Florida was $24,795, while the national
per capita personal income was $25,298. The structure of the State's income
differs from that of the nation and the Southeast. Because the State has a
proportionately greater retirement age population, property income (dividends,
interest and rent) and transfer payments (social security and pension benefits,
among other sources of income) are a relatively more important source of income.
Transfer payments, such as social security, are occasionally subject to
legislative change.
Tourism is one of Florida's most important industries. According to Visit
Florida (formerly the Florida Tourism Commission), about 47 million people
visited the State in 1997. Tourists to Florida effectively represent additional
residents, spending their dollars predominantly at eating and drinking
establishments, hotels and motels, and amusement and recreation parks. Their
expenditures generate additional business activity and State tax revenues. The
State's tourist industry over the years has become more sophisticated,
attracting visitors year-round, thus to a degree, reducing its seasonality.
The State also has a strong construction industry, with single and
multi-family housing starts accounting for approximately 9.2% of total U.S.
housing starts in 1997, while the State's population was only 5.5% of the
nation's total population. The reason for such a dynamic construction industry
was the rapid growth of the State's population. Since 1985, total housing starts
have averaged approximately 148,000 per year. Total housing starts were 132,813
in 1997, and are projected to be 97,600 in 1998-99.
Florida has experienced a diversifying economic base as technology related
industry, healthcare and financial services have grown into leading elements of
Florida's economy, complementing the State's previous reliance primarily on
agriculture and tourism. With the increasing costs and capital needs related to
its growing population, Florida's ability to meet its expenses will be dependent
in part upon the State's continued ability to foster business and economic
growth. Florida has also increased its funding of capital projects through more
frequent debt issuance rather than its historical pay-as-you go method.
At the regional level, local economies within Florida perform differently
according to their urban or rural qualities and level of economic
diversification. The spectrum of local economies spans dense urban centers such
as Miami and Tampa to rural agricultural regions of citrus, cattle ranching and
sugar cane production. For example, Central Florida is a premier world-class
resort/vacation destination with its economy driven by the presence of Disney
World, studio theme parks and other tourist oriented recreational parks with a
laser/optical
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research node and motion picture industries helping to diversify the Central
Florida local economy. In contrast to the highly urban areas of Southeast
Florida, North Florida and the Florida Panhandle are rural in many areas with
local economies is dominated by the logging and paper industries, defense,
tourism, state government and retirement.
Florida has a moderate debt burden. As of June 30, 1998 full faith and
credit bonds totaled $8.7 billion and revenue bonds totaled $5 billion for a
total debt of $13.7 billion. Full faith and credit debt per capita was $577. In
the 1998 fiscal year, debt service as a percent of Governmental Fund
expenditures was 2.0%. In recent years debt issuance for the State has been
increasing. The State brought a new indenture to the market in late Fiscal Year
1998, the Florida Lottery Bonds. These bonds will finance capital improvements
for Florida schools.
The payment on most Florida Municipal Securities held by the Florida
Municipal Bond Fund will depend upon the issuer's ability to meet its
obligations. If the State or any of its political subdivisions were to suffer
serious financial difficulties jeopardizing their ability to pay their
obligations, the marketability of obligations issued by the State or localities
within the State, and the value of the Florida Municipal Bond Fund's portfolio,
could be adversely affected.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment soon after its acquisition if
Fleet believes that such a disposition is consistent with the Fund's investment
objective. Portfolio investments may be sold for a variety of reasons, such as a
more favorable investment opportunity or other circumstances bearing on the
desirability of continuing to hold such investments. A portfolio turnover rate
of 100% or more is considered high, although the rate of portfolio turnover will
not be a limiting factor in making portfolio decisions. A high rate of portfolio
turnover involves correspondingly greater brokerage commission expenses and
other transaction costs, which must be ultimately borne by a Fund's
shareholders. High portfolio turnover may result in the realization of
substantial net capital gains.
INVESTMENT LIMITATIONS
In addition to each Fund's investment objective as stated in the
Prospectuses, the following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of its outstanding shares (as
defined under "Miscellaneous").
1. A Fund may not purchase any securities which would cause more than 25%
of the total assets of the Fund to be invested in the securities of
one or more issuers conducting their principal business activities in
the same industry. This limitation does not apply to investments in
obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities and repurchase agreements involving
such securities and, for each of the Institutional Money Market and
Institutional Treasury
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Money Market Funds, to investments in obligations issued by domestic
banks, foreign branches of domestic banks and U.S. branches of foreign
banks, to the extent that a Fund may under the 1940 Act reserve
freedom of action to concentrate its investments in such securities.
Each of the Institutional Money Market and Institutional Treasury
Money Market Funds has reserved its freedom of action to concentrate
its investments in government securities and bank instruments
described in the foregoing sentence. This limitation also does not
apply to an investment of all of the investable assets of each of the
Institutional Money Market Fund, Florida Municipal Bond Fund and
Growth Fund II in a diversified, open-end management investment
company having the same investment objective and policies and
substantially the same investment restrictions as those applicable to
such Fund (in each case, a "Qualifying Portfolio"). For purposes of
this limitation, (i) utility companies will be divided according to
their services; for example, gas, gas transmission, electric and
telephone will each be considered a separate industry; (ii) financial
service companies will be classified according to the end users of
their services; for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; (iii)
suprantional entities will be considered to be a separate industry;
and (iv) loan participations are considered to be issued by both the
issuing bank and the underlying corporate borrower.
2. A Fund may not make loans, except that a Fund may (a) purchase or hold
debt instruments in accordance with its investment objective and
policies; (b) enter into repurchase agreements; and (c) engage in
securities lending as described in the Prospectuses and in this
Statement of Additional Information.
3. A Fund may not acquire more than 10% of the voting securities of any
one issuer (except securities issued or guaranteed by the United
States, its agencies or instrumentalities and repurchase agreements
involving such securities) or invest more than 5% of the total assets
of the Fund in the securities of an issuer (except securities issued
or guaranteed by the United States, its agencies or instrumentalities
and repurchase agreements involving such securities); provided, that
(a) the foregoing limitation shall not apply to the Massachusetts
Intermediate Municipal Bond Fund, Connecticut Intermediate Municipal
Bond Fund or Florida Municipal Bond Fund; (b) the foregoing limitation
shall not apply to 25% of the total assets of each of the
Institutional Money Market Fund, Intermediate Tax-Exempt Bond Fund and
Growth Fund II; and (c) the foregoing limitation shall not apply to an
investment of all of the investable assets of the Institutional Money
Market Fund, Florida Municipal Bond Fund or Growth Fund II in a
Qualifying Portfolio.
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4. A Fund may not invest in companies for the purpose of exercising
control.
5. A Fund may not borrow, except that a Fund may borrow money from banks
and may enter into reverse repurchase agreements, in either case in an
amount not to exceed 33-1/3% of that Fund's total assets and then only
as a temporary measure for extraordinary or emergency purposes (which
may include the need to meet shareholder redemption requests). This
borrowing provision is included solely to facilitate the orderly sale
of Fund securities to accommodate heavy redemption requests if they
should occur and is not for investment purposes. A Fund will not
purchase any securities for its portfolio at any time at which its
borrowings equal or exceed 5% of its total assets (taken at market
value), and any interest paid on such borrowings will reduce income.
6. In the case of the Institutional Treasury Money Market Fund,
Intermediate Tax-Exempt Bond Fund and Massachusetts Intermediate
Municipal Bond Fund, such a Fund may not pledge, mortgage or
hypothecate assets except to secure temporary borrowings permitted by
Investment Limitation No. 5 above in aggregate amounts not to exceed
10% of total assets taken at current value at the time of the
incurrence of such loan, except as permitted with respect to
securities lending.
7. A Fund may not purchase or sell real estate, including real estate
limited partnership interests, commodities and commodities contracts,
but excluding interest in a pool of securities that are secured by
interests in real estate. However, subject to its permitted
investments, any Fund may invest in companies which invest in real
estate commodities or commodities contracts. Each of the Funds may
invest in futures contracts and options thereon to the extent
described in the Prospectuses and elsewhere in this Statement of
Additional Information.
8. A Fund may not make short sales of securities, maintain a short
position or purchase securities on margin, except that the Funds may
obtain short-term credits as necessary for the clearance of security
transactions.
9. A Fund may not act as underwriter of securities of other issuers,
except as it may be deemed an underwriter under federal securities
laws in selling a security held by the Fund.
10. A Fund may not purchase securities of other investment companies
except as permitted by the 1940 Act and the rules and regulations
thereunder. Under these rules and regulations, each of the Funds is
prohibited, subject to certain exceptions, from acquiring the
securities of other investment companies if, as a result of such
acquisition, (a) such Fund owns more than 3% of the total voting stock
of the company; (b) securities issued by any one investment company
represent more than 5% of the total assets of
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such Fund; or (c) securities (other than treasury stock) issued by all
investment companies represent more than 10% of the total assets of
such Fund, provided, that with respect to the Institutional Money
Market Fund, Florida Municipal Bond Fund and Growth Fund II, the
limitations do not apply to an investment of all of the investable
assets of such Fund in a Qualifying Portfolio. These investment
companies typically incur fees that are separate from those fees
incurred directly by a Fund. A Fund's purchase of such investment
company securities results in the layering of expenses, such that
shareholders would indirectly bear a proportionate share of the
operating expenses of such investment companies, including advisory
fees.
It is the position of the SEC's Staff that certain non-governmental
issuers of CMOs and REMICs constitute investment companies pursuant to
the 1940 Act and either (a) investments in such instruments are
subject to the limitations set forth above or (b) the issuers of such
instruments have received orders from the SEC exempting such
instruments from the definition of investment company.
11. A Fund may not issue senior securities (as defined in the 1940 Act)
except in connection with permitted borrowings as described above or
as permitted by rule, regulation or order of the SEC.
12. A Fund may not write or purchase puts, calls, or other options or
combinations thereof, except that each Fund may write covered calls
options with respect to any or all of the securities it holds, subject
to any limitations described in the Prospectuses or elsewhere in this
Statement of Additional Information and each Fund may purchase and
sell other options as described in the Prospectuses and this Statement
of Additional Information.
NON-FUNDAMENTAL POLICIES
The following policies are not fundamental and may be changed with respect
to any Fund without approval by the shareholders of that Fund:
No Fund may invest in warrants, except that the Growth Fund II may invest
in warrants in an amount not exceeding 5% of the Fund's net assets as valued at
the lower of cost or market value. Included in this amount, but not to exceed 2%
of the Fund's net assets, may be warrants not listed on the New York Exchange or
the American Stock Exchange. This limitation does not apply to warrants acquired
in units or attached to securities. Such warrants may not be listed on the New
York Stock Exchange or American Stock Exchange.
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of that Fund's net assets (10% for the Institutional Money Market
Fund and Institutional
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Treasury Money Market Fund), provided that this limitation does not apply to an
investment of all of the investable assets of the Institutional Money Market
Fund, Florida Municipal Bond Fund and Growth Fund II in a Qualifying Portfolio.
The foregoing limitation does not apply to restricted securities, including
Section 4(2) paper and Rule 144A securities, if it is determined by or under
procedures established by the Board of Trustees of Galaxy that, based on trading
markets for the specific restricted security in question, such security is not
illiquid.
No Fund may purchase or retain securities of an issuer if, to the knowledge
of Galaxy, an officer, trustee, member or director of Galaxy or any investment
adviser of Galaxy owns beneficially more than 1/2 of 1% of the shares or
securities of such issuer and all such officers, trustees, members and directors
owning more than 1/2 of 1% of such shares or securities together own more than
5% of such shares or securities.
No Fund may invest in interests in oil, gas or other mineral exploration or
development programs. No Fund may invest in oil, gas or mineral leases.
No Fund may purchase securities of any company which has (with
predecessors) a record of less than 3 years continuing operations if as a result
more than 5% of total assets (taken at fair market value) of the Fund would be
invested in such securities, except that the foregoing limitation shall not
apply to (a) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (b) Municipal Securities which are rated by at
least one Rating Agency; or (c) an investment of all of the investable assets of
the Institutional Money Market Fund, Florida Municipal Bond Fund and Growth Fund
II in a Qualifying Portfolio.
Except as stated otherwise, 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. If the value of a Fund's holdings of illiquid
securities at any time exceeds the percentage limitation applicable at the time
of acquisition due to subsequent fluctuations in value or other reasons, the
Board of Trustees will consider what actions, if any, are appropriate to
maintain adequate liquidity. With respect to borrowings, if a Fund's asset
coverage at any time falls below that required by the 1940 Act, the Fund will
reduce the amount of its borrowings in the manner required by the 1940 Act to
the extent necessary to satisfy the asset coverage requirement.
Each of the Institutional Money Market and Institutional Treasury Money
Market Funds 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, the Institutional Money Market Fund
is subject to the 5% limitation contained in Investment Limitation No. 3 above
as to all of its assets; however in accordance with such Rule, the Institutional
Money Market 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
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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. 3 above. Each of the
Institutional Money Market and Institutional Treasury Money Market Funds 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.
The Institutional Money Market Fund and Growth Fund II may purchase Rule
144A securities. 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 a Fund 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.
VALUATION OF PORTFOLIO SECURITIES
VALUATION OF THE INSTITUTIONAL MONEY MARKET AND INSTITUTIONAL TREASURY MONEY
MARKET FUNDS
Galaxy uses the amortized cost method of valuation to value shares of the
Institutional Money Market and Institutional Treasury Money Market Funds. In
order to use the amortized cost method, the Funds comply with the various
quality and maturity restrictions specified in Rule 2a-7 promulgated under the
1940 Act. Pursuant to this method, a security is valued at its initial
acquisition cost, as adjusted for amortization of premium or accretion of
discount, regardless of the impact of fluctuating interest rates on the market
value of the security. Where it is not appropriate to value a security by the
amortized cost method, the security will be valued either by market quotations
or by fair value as determined by or under the direction of Galaxy's Board of
Trustees. This method may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Fund would receive if it
sold the security. The value of securities in each of the 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 neither 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
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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.
VALUATION OF THE INTERMEDIATE TAX-EXEMPT BOND, CONNECTICUT INTERMEDIATE
MUNICIPAL BOND, MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND AND FLORIDA MUNICIPAL
BOND FUNDS
The assets of the Intermediate Tax-Exempt Bond, Connecticut Intermediate
Municipal Bond, Massachusetts Intermediate Municipal Bond and Florida Municipal
Bond Funds are valued for purposes of pricing sales and redemptions by an
independent pricing service ("Service") approved by Galaxy's Board of Trustees.
When, in the judgment of the Service, quoted bid prices for portfolio securities
are readily available and are representative of the bid side of the market,
these investments are valued at the mean between quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments are carried at fair value as determined by the Service, based
on methods which include consideration of yields or prices of bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may also employ electronic
data processing techniques and matrix systems to determine value. Short-term
securities are valued at amortized cost, which approximates market value. The
amortized cost method involves valuing a security at its cost on the date of
purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and cost.
VALUATION OF THE GROWTH FUND II
In determining market value, the assets of the Growth Fund II which are
traded on a recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded or at the last
sale price on the national securities market. Securities quoted on the NASD
National Market System are also valued at the last sale price. Other securities
traded on over-the-counter markets are valued on the basis of their closing
over-the-counter bid prices. Securities for which there were no transactions are
valued at the average of the most recent bid and asked prices. Portfolio
securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, except when an occurrence subsequent to the time a
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<PAGE>
value was so established is likely to have changed such value, then the fair
value of those securities may be determined through consideration of other
factors by or under the direction of Galaxy's Board of Trustees. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security. For
valuation purposes, quotations of foreign securities in foreign currency are
converted to U.S. dollars equivalent at the prevailing market rate on the day of
valuation. Investments in debt securities with remaining maturities of 60 days
or less are valued based upon the amortized cost method. Restricted securities,
securities for which market quotations are not readily available, and other
assets are valued at fair value by Fleet under the supervision of Galaxy's Board
of Trustees.
Certain of the securities acquired by the Growth Fund II may be traded on
foreign exchanges or over-the-counter markets on days on which the Fund's net
asset value is not calculated. In such cases, the net asset value of the Fund's
shares may be significantly affected on days when investors can neither purchase
nor redeem shares of the Fund.
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 at Four Falls Corporate Center, 6th Floor, West Conshohocken,
Pennsylvania 19428. PDI has agreed to use appropriate efforts to solicit all
purchase orders.
Trust Shares, Shares and/or BKB Shares of the Funds will initially be
issued in connection with the Reorganization. Following the Reorganization, BKB
Shares will be available for purchase only by those shareholders who received
BKB Shares in the Reorganization. BKB Shares of a Fund will convert to Retail A
Shares of the same Fund on the first anniversary of the Reorganization, provided
that prior thereto the Board of Trustees of Galaxy has determined that such
conversion is in the best interests of holders of BKB Shares.
PURCHASES OF RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
GENERAL
Investments in Retail A Shares of the Funds are subject to a front-end
sales charge. Investments in Retail B Shares of the Growth Fund II are subject
to a back-end sales charge. This back-end sales charge declines over time and is
known as a "contingent deferred sales charge." Investors should read
"Characteristics of Retail A Shares and Retail B Shares" and "Factors to
Consider When Selecting Retail A Shares or Retail B Shares" below before
deciding between the two with respect to the Growth Fund II.
There is no sales charge when shareholders acquire BKB Shares in connection
with the Reorganization, when shareholders buy additional BKB Shares or when BKB
Shares convert to Retail A Shares.
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<PAGE>
PDI has established several procedures to enable different types of
investors to purchase Retail A Shares, Retail B Shares and BKB Shares of the
Funds. Retail A Shares and Retail B Shares may be purchased by individuals or
corporations who submit a purchase application to Galaxy, purchasing directly
either for their own accounts or for the accounts of others. Retail A Shares and
Retail B Shares may also be purchased by FIS Securities, Inc., Fleet Securities,
Inc., Fleet Enterprises, Inc., FleetBoston Corporation, its affiliates, their
correspondent banks and other qualified banks, savings and loan associations and
broker/dealers on behalf of their customers. BKB Shares of the Intermediate
Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Growth Fund II are only
available for purchase by those shareholders who received BKB Shares in
connection with the Reorganization. Purchases may take place only on days on
which the New York Stock Exchange (the "Exchange") is open for business
("Business Days"). If an institution accepts a purchase order from a customer on
a non-Business Day, the order will not be executed until it is received and
accepted by PDI on a Business Day in accordance with PDI's procedures.
CUSTOMERS OF INSTITUTIONS
Retail A Shares and Retail B Shares purchased by institutions on behalf of
their customers will normally be held of record by the institution and
beneficial ownership of Retail A Shares and/or Retail B Shares will be recorded
by the institution and reflected in the account statements provided to its
customers. Galaxy's transfer agent may establish an account of record for each
customer of an institution reflecting beneficial ownership of Retail A Shares
and/or Retail B Shares. Depending on the terms of the arrangement between a
particular institution and Galaxy's transfer agent, confirmations of Retail A
Share and/or Retail B Share purchases and redemptions and pertinent account
statements will either be sent by Galaxy's transfer agent directly to a customer
with a copy to the institution, or will be furnished directly to the customer by
the institution. Other procedures for the purchase of Retail A Shares and Retail
B Shares established by institutions in connection with the requirements of
their customer accounts may apply. Customers wishing to purchase Retail A Shares
and/or Retail B Shares through their institution should contact such entity
directly for appropriate purchase instructions.
APPLICABLE SALES CHARGE - RETAIL A SHARES
The public offering price for Retail A Shares of the Funds is the sum of
the net asset value of the Retail A Shares purchased plus any applicable
front-end sales charge as described in the applicable Prospectus. A deferred
sales charge of up to 1.00% is assessed on certain redemptions of Retail A
Shares that are purchased with no initial sales charge as part of an investment
of $500,000 or more. A portion of the front-end sales charge may be reallowed to
broker-dealers as follows:
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<PAGE>
<TABLE>
<CAPTION>
REALLOWANCE TO
DEALERS
-------
AS A % OF
OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE
- --------------------- ---------
<S> <C>
Less than $50,000 3.25
$50,000 but less than $100,000 3.00
$100,000 but less than $250,000 2.50
$250,000 but less than $500,000 2.00
$500,000 and over 0.00
</TABLE>
The appropriate reallowance to dealers will be paid by PDI to broker-dealer
organizations which have entered into agreements with PDI. The reallowance to
dealers may be changed from time to time.
Certain affiliates of Fleet may, at their own expense, provide additional
compensation to broker-dealer affiliates of Fleet and to other unaffiliated
broker-dealers whose customers purchase significant amounts of Retail A Shares
of the Funds. Such compensation will not represent an additional expense to the
Funds or their shareholders, since it will be paid from the assets of Fleet's
affiliates.
In certain situations or for certain individuals, the front-end sales
charge for Retail A Shares of the Funds may be waived either because of the
nature of the investor or the reduced sales effort required to attract such
investments. In order to receive the sales charge waiver, an investor must
explain the status of his or her investment at the time of purchase. In addition
to the sales charge waivers described in the applicable Prospectus, no sales
charge is assessed on purchases of Retail A Shares of the Funds by the following
categories of investors or in the following types of transactions:
- purchases by directors, officers and employees of broker-dealers
having agreements with PDI pertaining to the sale of Retail A Shares
to the extent permitted by such organizations;
- purchases by current and retired members of Galaxy's Board of Trustees
and members of their immediate families;
- purchases by officers, directors, employees and retirees of
FleetBoston Corporation and any of its affiliates and members of their
immediate families;
- purchases by officers, directors, employees and retirees of PFPC Inc.
and members of their immediate families;
- purchases by persons who are also plan participants in any employee
benefit plan which is the record or beneficial holder of Trust Shares
of the Funds or any of the other portfolios offered by Galaxy;
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<PAGE>
- purchases by institutional investors, including but not limited to
bank trust departments and registered investment advisers;
- purchases by clients of investment advisers or financial planners who
place trades for their own accounts if such accounts are linked to the
master accounts of such investment advisers or financial planners on
the books of the broker-dealer through whom Retail A Shares are
purchased;
- purchases by institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account maintained
with Galaxy by the broker-dealer; and
- purchases prior to July 1, 1999 by former deposit customers of
financial institutions (other than registered broker-dealers) acquired
by FleetBoston Corporation in February 1998.
COMPUTATION OF OFFERING PRICE - RETAIL A SHARES
A hypothetical illustration of the computation of the offering price per
share of Retail A Shares of the Funds, using the value of each Predecessor
Fund's net assets and the number of outstanding shares of each Predecessor Fund
at the close of business on November 30, 1999 and the maximum front-end sales
charge of 3.75%, is as follows:
<TABLE>
<CAPTION>
Connecticut
Intermediate Intermediate
Tax-Exempt Municipal
Bond Fund Bond Fund
--------- ---------
<S> <C> <C>
Net Assets........................................... $__________ $__________
Outstanding Shares................................... $__________ $__________
Net Asset Value Per Share............................ $__________ $__________
Sales Charge (3.75% of
the offering price).................................. $__________ $__________
Offering Price to Public............................. $__________ $__________
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<PAGE>
<CAPTION>
Massachusetts
Intermediate Municipal Growth
Bond Fund Fund II
--------- -------
<S> <C> <C>
Net Assets........................................... $__________ $__________
Outstanding Shares................................... $__________ $__________
Net Asset Value Per Share............................ $__________ $__________
Sales Charge (3.75% of
the offering price).................................. $__________ $__________
Offering Price to Public............................. $__________ $__________
</TABLE>
QUANTITY DISCOUNTS
Investors may be entitled to reduced sales charges through Rights of
Accumulation, a Letter of Intent or a combination of investments, as described
below, even if the investor does not wish to make an investment of a size that
would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify PDI
at the time of purchase that he or she would like to take advantage of any of
the discount plans described below. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings through a check of appropriate records. For more information about
quantity discounts, please contact PDI or your financial institution.
RIGHTS OF ACCUMULATION. A reduced sales charge applies to any purchase of
Retail A Shares of any portfolio of Galaxy that is sold with a sales charge
("Eligible Fund") where an investor's then current aggregate investment in
Retail A Shares is $50,000 or more. "Aggregate investment" means the total of:
(a) the dollar amount of the then current purchase of shares of an Eligible
Fund; and (b) the value (based on current net asset value) of previously
purchased and beneficially owned shares of any Eligible Fund on which a sales
charge has been paid. If, for example, an investor beneficially owns shares of
one or more Eligible Funds with an aggregate current value of $49,000 on which a
sales charge has been paid and subsequently purchases shares of an Eligible Fund
having a current value of $1,000, the sales charge applicable to the subsequent
purchase would be reduced to 3.50% of the offering price. Similarly, with
respect to each subsequent investment, all shares of Eligible Funds that are
beneficially owned by the investor at the time of investment may be combined to
determine the applicable sales charge.
LETTER OF INTENT. By completing the Letter of Intent included as part of
the Account Application, an investor becomes eligible for the reduced sales
charge applicable to the total number of Eligible Fund Retail A Shares purchased
in a 13-month period pursuant to the terms and under the conditions set forth
below and in the Letter of Intent. To compute the applicable
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<PAGE>
sales charge, the offering price of Retail A Shares of an Eligible Fund on which
a sales charge has been paid and that are beneficially owned by an investor on
the date of submission of the Letter of Intent may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales charge will be
applied only to new purchases.
PFPC Inc. ("PFPC"), Galaxy's administrator, will hold in escrow Retail A
Shares equal to 5% of the amount indicated in the Letter of Intent for payment
of a higher sales charge if an investor does not purchase the full amount
indicated in the Letter of Intent. The escrow will be released when the investor
fulfills the terms of the Letter of Intent by purchasing the specified amount.
If purchases qualify for a further sales charge reduction, the sales charge will
be adjusted to reflect the investor's total purchases. If total purchases are
less than the amount specified, the investor will be requested to remit an
amount equal to the difference between the sales charge actually paid and the
sales charge applicable to the total purchases. If such remittance is not
received within 20 days, PFPC, as attorney-in-fact pursuant to the terms of the
Letter of Intent and at PDI's direction, will redeem an appropriate number of
Retail A Shares held in escrow to realize the difference. Signing a Letter of
Intent does not bind an investor to purchase the full amount indicated at the
sales charge in effect at the time of signing, but an investor must complete the
intended purchase in accordance with the terms of the Letter of Intent to obtain
the reduced sales charge. To apply, an investor must indicate his or her
intention to do so under a Letter of Intent at the time of purchase.
QUALIFICATION FOR DISCOUNTS. For purposes of applying the Rights of
Accumulation and Letter of Intent privileges described above, the scale of sales
charges applies to the combined purchases made by any individual and/or spouse
purchasing securities for his, her or their own account or for the account of
any minor children, or the aggregate investments of a trustee or custodian of
any qualified pension or profit-sharing plan established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
REINSTATEMENT PRIVILEGE. Investors may reinvest all or any portion of their
redemption proceeds in Retail A Shares of the Funds or in Retail A Shares of
another portfolio of Galaxy within 90 days of the redemption trade date without
paying a sales load. Retail A Shares so reinvested will be purchased at a price
equal to the net asset value next determined after Galaxy's transfer agent
receives a reinstatement request and payment in proper form.
Investors wishing to exercise this Privilege must submit a written
reinstatement request to PFPC as transfer agent stating that the investor is
eligible to use the Privilege. The reinstatement request and payment must be
received within 90 days of the trade date of the redemption. Currently, there
are no restrictions on the number of times an investor may use this Privilege.
Generally, exercising the Reinstatement Privilege will not affect the
character of any gain or loss realized on redemptions for federal income tax
purposes. However, if a redemption results in a loss, the reinstatement may
result in the loss being disallowed under the Code's "wash sale" rules.
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<PAGE>
GROUP SALES. Members of qualified groups may purchase Retail A Shares of
the Funds at the following group sales rates:
<TABLE>
<CAPTION>
REALLOWANCE
TOTAL SALES CHARGE TO DEALERS
------------------ ----------
AS A % OF AS A % OF AS A % OF
NUMBER OF QUALIFIED OFFERING PRICE NET ASSET VALUE OFFERING PRICE
GROUP MEMBERS PER SHARE PER SHARE PER SHARE
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
50,000 but less than 250,000.................... 3.00 3.09 3.00
250,000 but less than 500,000................... 2.75 2.83 2.75
500,000 but less than 750,000................... 2.50 2.56 2.50
750,000 and over................................ 2.00 2.04 2.00
</TABLE>
To be eligible for the discount, a group must meet the requirements set
forth below and be approved in advance as a qualified group by PDI. To receive
the group sales charge rate, group members must purchase Retail A Shares
directly from PDI in accordance with any of the procedures described in the
Prospectus. Group members must also ensure that their qualified group
affiliation is identified on the purchase application.
A qualified group is a group that (i) has at least 50,000 members, (ii) was
not formed for the purpose of buying Fund shares at a reduced sales charge,
(iii) within one year of the initial member purchase, has at least 1% of its
members invested in the Funds or any of the other investment portfolios offered
by Galaxy, (iv) agrees to include Galaxy sales material in publications and
mailings to members at a reduced cost or no cost, and (v) meets certain other
uniform criteria. PDI may request periodic certification of group and member
eligibility. PDI reserves the right to determine whether a group qualifies for a
quantity discount and to suspend this offer at any time.
APPLICABLE SALES CHARGE - RETAIL B SHARES
The public offering price for Retail B Shares of the Growth Fund II is the
net asset value of the Retail B Shares purchased. Although investors pay no
front-end sales charge on purchases of Retail B Shares, such Shares are subject
to a contingent deferred sales charge at the rates set forth below if they are
redeemed within six years of purchase. Securities dealers, brokers, financial
institutions and other industry professionals will receive commissions from PDI
in connection with sales of Retail B Shares. These commissions may be different
than the reallowances or placement fees paid to dealers in connection with sales
of Retail A Shares. Certain affiliates of Fleet may, at their own expense,
provide additional compensation to broker-dealer affiliates of Fleet and to
unaffiliated broker-dealers whose customers purchase significant amounts of
Retail B Shares of the Fund. See "Applicable Sales Charge -- Retail A Shares."
The contingent deferred sales charge on Retail B Shares is based on the lesser
of the net asset value of the Shares on the redemption date or the original cost
of the Shares being redeemed. As a result, no sales charge is imposed on any
increase in the principal value of an investor's Retail B Shares.
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<PAGE>
In addition, a contingent deferred sales charge will not be assessed on Retail B
Shares purchased through reinvestment of dividends or capital gains
distributions.
The proceeds from the contingent deferred sales charge that an investor may
pay upon redemption go to PDI, which may use such amounts to defray the expenses
associated with the distribution-related services involved in selling Retail B
Shares.
EXEMPTIONS FROM THE CONTINGENT DEFERRED SALES CHARGE. Certain types of
redemptions may also qualify for an exemption from the contingent deferred sales
charge. In addition to the sales charge exemptions described in the applicable
Prospectus, the contingent deferred sales charge with respect to Retail B Shares
is not assessed on: (i) redemptions in connection with required (or, in some
cases, discretionary) distributions to participants or beneficiaries of an
employee pension, profit-sharing or other trust or qualified retirement or Keogh
plan, individual retirement account or custodial account maintained pursuant to
Section 403(b)(7) of the Code; (ii) redemptions in connection with required (or,
in some cases, discretionary) distributions to participants in qualified
retirement or Keogh plans, individual retirement accounts or custodial accounts
maintained pursuant to Section 403(b)(7) of the Code due to death, disability or
the attainment of a specified age; (iii) redemptions effected pursuant to the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of Retail B Shares held in the account is less than the minimum account
size; (iv) redemptions in connection with the combination of the Fund with any
other investment company registered under the 1940 Act by merger, acquisition of
assets, or by any other transaction; (v) redemptions resulting from a tax-free
return of an excess contribution pursuant to Section 408(d)(4) or (5) of the
Code; or (vi) any redemption of Retail B Shares held by investors, provided the
investor was the beneficial owner of shares of the Fund (or any of the other
portfolios offered by Galaxy or otherwise advised by Fleet or its affiliates)
before December 1, 1995. In addition to the foregoing exemptions, no contingent
deferred sales charge will be imposed on redemptions made pursuant to the
Systematic Withdrawal Plan, subject to the limitations set forth under "Investor
Programs -- Retail A Shares and Retail B Shares -- Automatic Investment Program
and Systematic Withdrawal Plan" below.
CHARACTERISTICS OF RETAIL A SHARES AND RETAIL B SHARES
The primary difference between Retail A Shares and Retail B Shares lies in
their sales charge structures and shareholder servicing/distribution expenses.
An investor should understand that the purpose and function of the sales charge
structures and shareholder servicing/distribution arrangements for both Retail A
Shares and Retail B Shares are the same.
Retail A Shares of the Growth Fund II are sold at their net asset value
plus a front-end sales charge of up to 3.75%. This front-end sales charge may be
reduced or waived in some cases. See the applicable Prospectus and "Applicable
Sales Charges -- Retail A Shares" and "Quantity Discounts" above. Retail A
Shares of the Fund are currently subject to ongoing shareholder servicing fees
at an annual rate of up to 0.30% of the Fund's average daily net assets
attributable to its Retail A Shares.
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<PAGE>
Retail B Shares of the Growth Fund II are sold at net asset value without
an initial sales charge. Normally, however, a deferred sales charge is paid if
the Shares are redeemed within six years of investment. See the applicable
Prospectus and "Applicable Sales Charges -- Retail B Shares" above. Retail B
Shares of the Fund are currently subject to ongoing shareholder servicing and
distribution fees at an annual rate of up to 0.95% of the Fund's average daily
net assets attributable to its Retail B Shares. These ongoing fees, which are
higher than those charged on Retail A Shares, will cause Retail B Shares to have
a higher expense ratio and pay lower dividends than Retail A Shares.
Six years after purchase, Retail B Shares of the Fund will convert
automatically to Retail A Shares of the Fund. The purpose of the conversion is
to relieve a holder of Retail B Shares of the higher ongoing expenses charged to
those shares, after enough time has passed to allow PDI to recover approximately
the amount it would have received if a front-end sales charge had been charged.
The conversion from Retail B Shares to Retail A Shares takes place at net asset
value, as a result of which an investor receives dollar-for-dollar the same
value of Retail A Shares as he or she had of Retail B Shares. The conversion
occurs six years after the beginning of the calendar month in which the Shares
are purchased. Upon conversion, the converted shares will be relieved of the
distribution and shareholder servicing fees borne by Retail B Shares, although
they will be subject to the shareholder servicing fees borne by Retail A Shares.
Retail B Shares acquired through a reinvestment of dividends or
distributions (as discussed under "Applicable Sales Charge -- Retail B Shares")
are also converted at the earlier of two dates -- six years after the beginning
of the calendar month in which the reinvestment occurred or the date of
conversion of the most recently purchased Retail B Shares that were not acquired
through reinvestment of dividends or distributions. For example, if an investor
makes a one-time purchase of Retail B Shares of the Fund, and subsequently
acquires additional Retail B Shares of the Fund only through reinvestment of
dividends and/or distributions, all of such investor's Retail B Shares in the
Fund, including those acquired through reinvestment, will convert to Retail A
Shares of the Fund on the same date.
FACTORS TO CONSIDER WHEN SELECTING RETAIL A SHARES OR RETAIL B SHARES
Investors deciding whether to purchase Retail A Shares or Retail B Shares
of the Growth Fund II should consider whether, during the anticipated periods of
their investments in the Fund, the accumulated distribution and shareholder
servicing fees and potential contingent deferred sales charge on Retail B Shares
prior to conversion would be less than the initial sales charge and accumulated
shareholder servicing fees on Retail A Shares purchased at the same time, and to
what extent such differential would be offset by the higher yield of Retail A
Shares. In this regard, to the extent that the sales charge for Retail A Shares
is waived or reduced by one of the methods described above, investments in
Retail A Shares become more desirable. An investment of $250,000 or more in
Retail B Shares would not be in most shareholders' best interest. Shareholders
should consult their financial advisers and/or brokers with respect to the
advisability of purchasing Retail B Shares in amounts exceeding $250,000.
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<PAGE>
Although Retail A Shares are subject to a shareholder servicing fee, they
are not subject to the higher distribution and shareholder servicing fee
applicable to Retail B Shares. For this reason, Retail A Shares can be expected
to pay correspondingly higher dividends per Share. However, because initial
sales charges are deducted at the time of purchase, purchasers of Retail A
Shares (that do not qualify for exemptions from or reductions in the initial
sales charge) would have less of their purchase price initially invested in the
Fund than purchasers of Retail B Shares in the Fund.
As described above, purchasers of Retail B Shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Retail B Shares. Because the Fund's future returns
cannot be predicted, there can be no assurance that this will be the case.
Holders of Retail B Shares would, however, own shares that are subject to a
contingent deferred sales charge of up to 5.00% upon redemption, depending upon
the year of redemption. Investors expecting to redeem during this six-year
period should compare the cost of the contingent deferred sales charge plus the
aggregate distribution and shareholder servicing fees on Retail B Shares to the
cost of the initial sales charge and shareholder servicing fees on the Retail A
Shares. Over time, the expense of the annual distribution and shareholder
servicing fees on the Retail B Shares may equal or exceed the initial sales
charge and annual shareholder servicing fee applicable to Retail A Shares. For
example, if net asset value remains constant, the aggregate distribution and
shareholder servicing fees with respect to Retail B Shares of the Fund would
equal or exceed the initial sales charge and aggregate shareholder servicing
fees of Retail A Shares approximately six years after the purchase. In order to
reduce such fees for investors that hold Retail B Shares for more than six
years, Retail B Shares will be automatically converted to Retail A Shares as
described above at the end of such six-year period.
PURCHASES OF SHARES OF THE INSTITUTIONAL MONEY MARKET FUND
AND INSTITUTIONAL TREASURY MONEY MARKET FUND
Investments in Shares of the Institutional Money Market Fund and
Institutional Treasury Money Market Fund (referred to in the Prospectus for the
Funds as Trust Shares) are not subject to any sales charge. Shares of the
Institutional Money Market Fund and Institutional Treasury Money Market Fund may
be purchased by FIS Securities, Inc., Fleet Securities, Inc., Fleet Enterprises,
Inc., FleetBoston Corporation, its affiliates, their correspondent banks and
other qualified banks, saving and loan associations and broker/dealers on behalf
of their customers. Purchases of Shares may take place only on Business Days. If
an institution accepts a purchase order from a customer on a non-Business Day,
the order will not be executed until it is received and accepted by PDI on a
Business Day in accordance with PDI's procedures.
Shares of the Institutional Money Market Fund and Institutional Treasury
Money Market Fund purchased by institutions on behalf of their customers will
normally be held of record by the institution and beneficial ownership of
such Shares will be recorded by the institution and reflected in the account
statements provided to its customers. Depending on the terms of the
arrangement between a particular institution and Galaxy's transfer agent,
confirmations of Share purchases and redemptions and pertinent account
statements will either be sent by Galaxy's
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<PAGE>
transfer agent directly to a customer with a copy to the institution, or will
be furnished directly to the customer by the institution. Other procedures
for the purchase of Shares established by institutions in connection with the
requirements of their customer accounts may apply. Customers wishing to
purchase Shares through their institution should contact such entity directly
for appropriate purchase instructions.
PURCHASES OF TRUST SHARES AND SHARES OF THE FLORIDA MUNICIPAL BOND FUND
Trust Shares and Shares of the Florida Municipal Bond Fund (referred to in
the Prospectus for the Fund as Trust Shares) are sold to investors maintaining
qualified accounts at bank and trust institutions, including subsidiaries of
FleetBoston Corporation, and to participants in employer-sponsored defined
contribution plans (such institutions and plans referred to herein collectively
as "Institutions"). Trust Shares and Shares of the Florida Municipal Bond Fund
sold to such investors ("Customers") will be held of record by Institutions.
Purchases of Trust Shares and Shares of the Florida Municipal Bond Fund will be
effected only on days on which PDI, Galaxy's custodian and the purchasing
Institution are open for business ("Trust Business Days"). If an Institution
accepts a purchase order from its Customer on a non-Trust Business Day, the
order will not be executed until it is received and accepted by PDI on a Trust
Business Day in accordance with the foregoing procedures.
OTHER PURCHASE INFORMATION
On a Business Day or a Trust Business Day when the Exchange closes early
due to a partial holiday or otherwise, Galaxy will advance the time at which
purchase orders must be received in order to be processed on that Business Day
or Trust Business Day.
REDEMPTIONS
Redemption orders are effected at the net asset value per share next
determined after receipt of the order by PDI. On a Business Day or Trust
Business Day when the Exchange closes early due to a partial holiday or
otherwise, Galaxy will advance the time at which redemption orders must be
received in order to be processed on that Business Day or Trust Business Day.
Galaxy may require any information reasonably necessary to ensure that a
redemption has been duly authorized. Proceeds from redemptions of Retail B
Shares of the Growth Fund II will be reduced by the amount of any applicable
contingent deferred sales charge. Galaxy reserves the right to transmit
redemption proceeds within seven days after receiving the redemption order if,
in its judgment, an earlier payment could adversely affect a Fund.
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
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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.
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.
With respect to Shares of the Institutional Money Market Fund and
Institutional Treasury Money Market Fund, Galaxy requires that an institution
maintain an average balance of $2,000,000 in an account. If the balance in such
account falls below that minimum, the institution may be obliged by Galaxy to
redeem all of the shares in the account. In addition, Galaxy may redeem shares
involuntarily or make payment for redemption in securities if it appears
appropriate to do so in light of Galaxy's responsibilities under the 1940 Act.
INVESTOR PROGRAMS
The following information supplements the description in the applicable
Prospectuses as to various Investor Programs available to holders of Retail A
Shares, Retail B Shares and BKB Shares and Shares of the Institutional Money
Market and Institutional Treasury Money Market Funds.
EXCHANGE PRIVILEGE -- RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES AND SHARES
OF THE INSTITUTIONAL MONEY MARKET AND INSTITUTIONAL TREASURY MONEY MARKET FUNDS
The minimum initial investment to establish an account in another Fund or
portfolio by exchange, except for the Institutional Money Market Fund and
Institutional Treasury Money Market Fund, is $2,500, unless (i) the Retail A
Shares, Retail B Shares or BKB Shares being redeemed were purchased through a
registered representative who is a Fleet Bank employee, in which event there is
no minimum investment requirement, or (ii) at the time of the exchange the
investor elects, with respect to the Fund or portfolio into which the exchange
is being made, to participate in Galaxy's Automatic Investment Program, in which
event there is no minimum initial investment requirement, or in Galaxy's College
Investment Program, in which event the minimum initial investment is generally
$100. The minimum initial investment to establish an account by exchange in the
Institutional Money Market Fund and Institutional Treasury Money Market Fund is
$2 million.
An exchange involves a redemption of all or a portion of the Retail A
Shares, Retail B Shares, BKB Shares or Shares of a Fund and the investment of
the redemption proceeds in Retail A Shares, Retail B Shares, BKB Shares or
Shares of another Fund or, in the case of Retail A Shares and Shares of the
Institutional Money Market and Institutional Treasury Money Market Funds,
another portfolio offered by Galaxy or otherwise advised by Fleet or its
affiliates. The
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redemption will be made at the per share net asset value next determined after
the exchange request is received. The shares of a Fund or portfolio to be
acquired will be purchased at the per share net asset value next determined
after acceptance of the exchange request, plus any applicable sales charge.
Investors may find the exchange privilege useful if their investment
objectives or market outlook should change after they invest in any of the
Funds. For further information regarding Galaxy's exchange privilege, investors
should call PFPC, Galaxy's transfer agent, at 1-877-BUY-GALAXY (1-877-289-4252).
Customers of institutions should call their institution for such information.
Investors exercising the exchange privilege into other portfolios should request
and review these portfolios' prospectuses prior to making an exchange. Telephone
1-877-BUY-GALAXY (1-877-289-4252) for a prospectus or to make an exchange.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, Galaxy reserves the right to terminate the exchange privilege of
any shareholder who requests more than three exchanges a year. Galaxy will
determine whether to do so based on a consideration of both the number of
exchanges that any particular shareholder or group of shareholders has requested
and the time period over which their exchange requests have been made, together
with the level of expense to Galaxy which will result from effecting additional
exchange requests. The exchange privilege may be modified or terminated at any
time. At least 60 days' notice of any material modification or termination will
be given to shareholders except where notice is not required under the
regulations of the SEC.
For federal income tax purposes, an exchange of shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Before
making an exchange request, an investor should consult a tax or other financial
adviser to determine the tax consequences.
RETIREMENT PLANS
Retail A Shares, Retail B Shares and BKB Shares of the Growth Fund II are
available for purchase in connection with the following tax-deferred prototype
retirement plans:
INDIVIDUAL RETIREMENT ARRANGEMENTS ("IRAS") (including traditional, Roth
and Education IRAs and "roll-overs" from existing retirement plans), a
retirement-savings vehicle for qualifying individuals. The minimum initial
investment for an IRA account is $500 (including a spousal account).
SIMPLIFIED EMPLOYEE PENSION PLANS ("SEPS"), a form of retirement plan for
sole proprietors, partnerships and corporations. The minimum initial investment
for a SEP account is $500.
MULTI-EMPLOYEE RETIREMENT PLANS ("MERPS"), a retirement vehicle established
by employers for their employees which is qualified under Section 401(k) and
403(b) of the Code. The minimum initial investment for a MERP is $500.
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KEOGH PLANS, a retirement vehicle for self-employed individuals. The
minimum initial investment for a Keogh Plan is $500.
Detailed information concerning eligibility and other matters related to
these plans and the form of application is available from PDI (call
1-877-BUY-GALAXY (1-877-289-4252)) with respect to IRAs, SEPs and Keogh Plans
and from Fleet Securities, Inc. (call 1-800-221-8210) with respect to MERPs.
AUTOMATIC INVESTMENT PROGRAM AND SYSTEMATIC WITHDRAWAL PLAN -- RETAIL A SHARES,
RETAIL B SHARES AND BKB SHARES
The Automatic Investment Program permits an investor to purchase Retail A
Shares, Retail B Shares or BKB Shares of a Fund each month or each quarter.
Provided an investor's financial institution allows automatic withdrawals,
shares are purchased by transferring funds from the investor's checking, bank
money market, NOW or savings account designated by the investor. The account
designated will be debited in the specified amount, and Retail A Shares, Retail
B Shares or BKB shares will be purchased, on a monthly or quarterly basis, on
any Business Day designated by the investor. If the designated day falls on a
weekend or holiday, the purchase will be made on the Business Day closest to the
designated day. Only an account maintained at a domestic financial institution
which is an Automated Clearing House ("ACH") member may be so designated.
The Systematic Withdrawal Plan permits an investor to automatically redeem
Retail A Shares, Retail B Shares or BKB Shares on a monthly, quarterly,
semi-annual, or annual basis on any Business Day designated by an investor, if
the account has a starting value of at least $10,000. If the designated day
falls on a weekend or holiday, the redemption will be made on the Business Day
closest to the designated day. Proceeds of the redemption will be sent to the
shareholder's address of record or financial institution within three Business
Days of the redemption. If redemptions exceed purchases and dividends, the
number of shares in the account will be reduced. Investors may terminate the
Systematic Withdrawal Plan at any time upon written notice to PFPC, Galaxy's
transfer agent (but not less than five days before a payment date). There is no
charge for this service. Purchases of additional Retail A Shares concurrently
with withdrawals are ordinarily not advantageous because of the sales charge
involved in the additional purchases. No contingent deferred sales charge will
be assessed on redemptions of Retail B Shares of the Growth Fund II made through
the Systematic Withdrawal Plan that do not exceed 12% of an account's net asset
value on an annualized basis. For example, monthly, quarterly and semi-annual
Systematic Withdrawal Plan redemptions of Retail B Shares will not be subject to
the contingent deferred sales charge if they do not exceed 1%, 3% and 6%,
respectively, of an account's net asset value on the redemption date. Systematic
Withdrawal Plan redemptions of Retail B Shares in excess of this limit are still
subject to the applicable contingent deferred sales charge.
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PAYROLL DEDUCTION PROGRAM -- RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
To be eligible for the Payroll Deduction Program, the payroll department of
an investor's employer must have the capability to forward transactions directly
through the ACH, or indirectly through a third party payroll processing company
that has access to the ACH. An investor must complete and submit a Galaxy
Payroll Deduction Application to his or her employer's payroll department, which
will arrange for the specified amount to be debited from the investor's paycheck
each pay period. Retail A Shares, Retail B Shares or BKB Shares of Galaxy will
be purchased within three days after the debit occurred. If the designated day
falls on a weekend or non-Business Day, the purchase will be made on the
Business Day closest to the designated day. An investor should allow between two
to four weeks for the Payroll Deduction Program to be established after
submitting an application to the employer's payroll department.
COLLEGE INVESTMENT PROGRAM -- RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Galaxy reserves the right to redeem accounts participating in the College
Investment Program involuntarily, upon 60 days' written notice, if the account's
net asset value falls below the applicable minimum initial investment as a
result of redemptions. Investors participating in the College Investment Program
will receive consolidated monthly statements of their accounts. Detailed
information concerning College Investment Program accounts and applications may
be obtained from PDI (call 1-877-BUY-GALAXY (1-877-289-4252)).
DIRECT DEPOSIT PROGRAM -- RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Death or legal incapacity will terminate an investor's participation in the
Direct Deposit Program. An investor may elect at any time to terminate his or
her participation by notifying in writing the Social Security Administration.
Further, Galaxy may terminate an investor's participation upon 30 days' notice
to the investor.
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 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 on its taxable income 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
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ending October 31 of such calendar year. Each Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
The Funds will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or gross sale proceeds paid to
any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to withholding by the Internal Revenue Service for
failure to properly include on his or her return payments of taxable interest or
dividends, or (iii) has failed to certify to the Funds that he or she is not
subject to back up withholding when required to do so or that he or she is an
"exempt recipient."
Dividends declared in October, November or December of any year which are
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by the Funds on December
31 of such year if such dividends are actually paid during January of the
following year.
It is the policy of each of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds 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.
An investment in any one Fund is not intended to constitute a balanced
investment program. Shares of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds would not be suitable for tax-exempt institutions
and may not be suitable for retirement plans qualified under Section 401 of the
Code, H.R. 10 plans and individual retirement accounts because such plans and
accounts are generally tax-exempt and, therefore, not only would the shareholder
not gain any additional benefit from the Funds' dividends being tax-exempt, but
such dividends would be ultimately taxable to the beneficiaries when
distributed. In addition, the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds 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.
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In order for the Intermediate Tax-Exempt Bond, Connecticut Intermediate
Municipal Bond, Massachusetts Intermediate Municipal Bond and Florida Municipal
Bond Funds to pay exempt-interest dividends for any taxable year, at the close
of each taxable quarter at least 50% of the aggregate value of a Fund's
portfolio must consist of exempt-interest obligations. Within 60 days after the
close of its taxable year, each 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 a 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 Section 265 and 171(a)(2) of the Code. The
percentage of total dividends paid by a 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.
STATE AND LOCAL
Exempt-interest dividends and other distributions paid by the Intermediate
Tax-Exempt Bond, Connecticut Intermediate Municipal Bond, Massachusetts
Intermediate Municipal Bond and Florida Municipal Bond Funds may be taxable to
shareholders under state or local law as dividend income, even though all or a
portion of such distributions may be derived from interest on tax-exempt
obligations which, if realized directly, would be exempt from such income taxes.
Dividends paid by the Connecticut Intermediate Municipal Bond Fund that
qualify as exempt-interest dividends for federal income tax purposes are not
subject to the Connecticut personal income tax imposed on resident and
non-resident individuals, trusts and estates to the extent that they are derived
from Connecticut Municipal Securities (as defined above). Other Fund dividends
and distributions, whether received in cash or additional shares, are subject to
this tax, except that, in the case of shareholders who hold their shares of the
Fund as capital assets, distributions treated as capital gain dividends for
federal income tax purposes are not subject to the tax to the extent that they
are derived from obligations issued by or on behalf of the State of Connecticut,
its political subdivisions, or public instrumentalities, state or local
authorities, districts or similar public entities created under Connecticut law.
Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the federal alternative minimum tax, other than any
derived from Connecticut Municipal Securities, could cause liability for the net
Connecticut minimum tax applicable to investors subject to the Connecticut
personal income tax who are required to pay the federal alternative minimum tax.
Dividends paid by the Fund, including those that qualify as exempt-interest
dividends for federal income tax purposes, are taxable for purposes of the
Connecticut Corporation Business Tax; however, 70% (100% if the investor owns at
least 20% of the total voting power and value of the Fund's shares) of amounts
that are treated as dividends and not as exempt-interest dividends or capital
gain dividends for federal income tax purposes are deductible for purposes of
this tax, but no deduction is allowed for expenses related thereto. Shares of
the Fund are not subject to property taxation by Connecticut or its political
subdivisions.
Distributions by the Massachusetts Intermediate Municipal Bond Fund to its
shareholders are exempt from Massachusetts personal income taxation to the
extent they are derived from (and
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designated by the Fund as being derived from) (i) interest on Massachusetts
Municipal Securities (as defined above), (ii) capital gains realized by the Fund
from the sale of certain Massachusetts Municipal Securities, or (iii) interest
on U.S. Government obligations exempt from state income taxation. Distributions
from the Fund's other net investment income and short-term capital gains will be
taxable as ordinary income. Distributions from the Fund's net long-term capital
gains will be taxable as long-term capital gains regardless of how long the
shareholder has owned Fund shares. The tax treatment of distributions is the
same whether distributions are paid in cash or in additional shares of the Fund.
In 1994, the Massachusetts personal income tax statute was modified to provide
for graduated rates of tax (with some exceptions) on gains from the sale or
exchange of capital assets held for more than one year based on the length of
time the asset has been held since January 1, 1995. The Massachusetts Department
of Revenue has released proposed regulations providing that the holding period
of the mutual fund (rather than that of its shareholders) will be determinative
for purposes of applying the revised statute to shareholders that receive
capital gain distributions (other than exempt capital gain distributions, as
discussed above), so long as the mutual fund separately designates the amount of
such distributions attributable to each of six classes of gains from the sale or
exchange of capital assets held for more than one year in a notice provided to
shareholders and the Commissioner of Revenue on or before March 1 of the
calendar year after the calendar year of such distributions. In the absence of
such notice, the holding period of the assets giving rise to such gain is deemed
to be more than one but not more than two years. Shareholders should consult
their tax advisers with respect to the Massachusetts tax treatment of capital
gain distributions from the Fund.
Distributions by the Massachusetts Intermediate Municipal Bond Fund to
corporate shareholders, including exempt-interest dividends, may be subject to
Massachusetts corporate excise tax. Fund shares are not, however, subject to
property taxation by Massachusetts or its political subdivisions.
The State of Florida does not currently impose an income tax on
individuals. Thus, individual shareholders of the Florida Municipal Bond Fund
will not be subject to any Florida income tax on distributions received from the
Fund. However, Florida does currently impose an income tax on certain
corporations. Consequently, distributions may be taxable to corporate
shareholders.
The State of Florida currently imposes an "intangibles tax" at the annual
rate of 2 mills or 0.20% on certain securities and other intangible assets owned
by Florida residents. Every natural person is entitled to an exemption of the
first $20,000 of the value of taxable property against the first mill of the
annual tax. Spouses filing jointly are entitled to a $40,000 exemption. With
respect to the last half (0.5) mill, natural persons are entitled to an
exemption of the first $100,000 of otherwise taxable property (joint filers are
entitled to a $200,000 exemption). Taxpayers are limited to only one exemption
for the first mill and one exemption for the last half (0.5) mill. Notes, bonds
and other obligations issued by the State of Florida or its municipalities,
counties, and other taxing districts, or by the United States Government, its
agencies and certain U.S. territories and possessions (such as Guam, Puerto
Rico and the Virgin Islands) as well as cash are exempt from this intangibles
tax. If on December 31 of any year at least 90% of the net asset value of the
portfolio of the Florida Municipal Bond Fund
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consists solely of such exempt assets, then the Fund's shares will be exempt
from the Florida intangibles tax payable in the following year.
In order to take advantage of the exemption from the intangibles tax in any
year, it may be necessary for the Fund to sell some of its non-exempt assets
held in its portfolio during the year and reinvest the proceeds in exempt assets
including cash prior to December 31. Transaction costs involved in restructuring
the portfolio in this fashion would likely reduce the Fund's investment return
and might exceed any increased investment return the Fund achieved by investing
in non-exempt assets during the year.
Outside the State of Florida, income distributions 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 or 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.
Depending upon the extent of Galaxy's activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located, or in which it is otherwise deemed to be conducting
business, each Fund may be subject to the tax laws of such states or localities.
In addition, in those states and localities that have income tax laws, the
treatment of a Fund and its shareholders under such laws may differ from their
treatment under federal income tax laws. Under state or local law, distributions
of net investment income may be taxable to shareholders as dividend income even
though a substantial portion of such distributions may be derived from interest
on U.S. Government obligations which, if realized directly, would be exempt from
such income taxes. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes.
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
The tax principles applicable to certain financial instruments and futures
contracts and options that may be acquired by the Funds are complex and, in some
cases, uncertain. Such investments may cause a Fund to recognize taxable income
prior to the receipt of cash, thereby requiring the Fund to liquidate other
positions, or to borrow money, so as to make sufficient distributions to
shareholders to avoid corporate-level tax. Moreover, some or all of the taxable
income recognized may be ordinary income or short-term capital gain, so that the
distributions may be taxable to shareholders as ordinary income.
Generally, futures contracts and options on futures contracts held by the
Funds (as described above) (collectively, the "Instruments") at the close of
their taxable year are treated for federal income tax purposes as sold for their
fair market value on the last business day of such year, a process known as
"mark-to-market." Forty percent of any gain or loss resulting from such
constructive sales will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the period a Fund has held the Instruments ("the 40-60 rule"). The
amount of any capital gain or loss actually realized by a Fund in a subsequent
sale or other disposition of those Instruments is adjusted to reflect any
capital gain
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or loss taken into account by the Fund in a prior year as a result of the
constructive sale of the Instruments. With respect to certain Instruments,
deductions for interest and carrying charges may not be allowed.
In accordance with Treasury regulations, certain transactions that are part
of a "Section 988 hedging transaction" (as defined in the Code and Treasury
regulations) may be integrated and treated as a single transaction or otherwise
treated consistently for purposes of the Code. "Section 988 hedging
transactions" are not subject to the mark-to-market or loss deferral rules under
the Code.
MISCELLANEOUS
Shareholders will be advised annually as to the federal income tax
consequences and, with respect to shareholders of the Connecticut Intermediate
Municipal Bond, Massachusetts Municipal Bond and Florida Municipal Bond Funds,
Connecticut personal income tax, Massachusetts personal income tax and Florida
intangible personal property tax consequences, respectively, 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>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address and Age Galaxy Fund and Other Affiliations
- ------------------------ ----------- ----------------------
<S> <C> <C>
Dwight E. Vicks, Jr. Chairman & Trustee President & Director, Vicks Lithograph &
Vicks Lithograph & Printing Corporation (book manufacturing
Printing Corporation and commercial printing); Director, Utica
Commercial Drive First Insurance Company; Trustee, Savings
P.O. Box 270 Bank of Utica; Director, Monitor Life
Yorkville, NY 13495 Insurance Company; Director, Commercial
Age 66 Travelers Mutual Insurance Company;
Trustee, The Galaxy VIP Fund; Trustee,
Galaxy Fund II.
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<PAGE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address and Age Galaxy Fund and Other Affiliations
- ------------------------ ----------- ----------------------
<S> <C> <C>
John T. O'Neill(1) President, Treasurer Private Investor; Executive Vice President
28 Narragansett Bay Avenue & Trustee and CFO, Hasbro, Inc. (toy and game
Warwick, RI 02889 manufacturer until December 1999); Trustee,
Age 55 The Galaxy VIP Fund; Trustee, Galaxy Fund
II.
Louis DeThomasis Trustee President, Saint Mary's College of
Saint Mary's College Minnesota; Director, Bright Day Travel,
of Minnesota Inc.; Trustee, Religious Communities Trust;
Winona, MN 55987 Trustee, The Galaxy VIP Fund; Trustee,
Age 59 Galaxy Fund II.
Donald B. Miller Trustee Chairman, Horizon Media, Inc. (broadcast
10725 Quail Covey Road services); Director/Trustee, Lexington
Boynton Beach, FL 33436 Funds; Chairman, Executive Committee,
Age 74 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 Projects,
The Astra Ventures, Inc. Incorporated (land development); President,
One Citizens Plaza The Astra Ventures, Incorporated
Providence, RI 02903 (previously, Buffinton Box Company -
Age 58 manufacturer of cardboard boxes);
Commissioner, Rhode Island Investment
Commission; Trustee, The Galaxy VIP Fund;
Trustee, Galaxy Fund II.
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<PAGE>
<CAPTION>
Positions Principal Occupation
with The During Past 5 Years
Name and Address and Age Galaxy Fund and Other Affiliations
- ------------------------ ----------- ----------------------
<S> <C> <C>
Bradford S. Wellman(1) Trustee Private Investor; Vice President and
2468 Ohio Street Director, Acadia Management Company
Bangor, ME 04401 (investment services); Director, Essex
Age 68 County Gas Company, until January 1994;
Director, Maine Mutual Fire Insurance Co.;
Member, Maine Finance Authority; Trustee,
The Galaxy VIP Fund; Trustee, Galaxy Fund
II.
W. Bruce McConnel, III Secretary Partner of the law firm Drinker Biddle &
One Logan Square Reath LLP, Philadelphia, Pennsylvania.
18th and Cherry Streets
Philadelphia, PA 19103
Age 57
Jylanne Dunne Vice President and Vice President, PFPC Inc., 1990 to present.
PFPC Inc. Assistant Treasurer
4400 Computer Drive
Westborough, MA 01581-5108
Age 40
William Greilich Vice President Vice President, PFPC Inc., 1991-96; Vice
PFPC Inc. President and Division Manager, PFPC Inc.,
4400 Computer Drive 1996 to present.
Westborough, MA 01581-5108
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 May 28, 1999, each trustee receives an annual aggregate fee of
$45,000 for his services as a trustee of Galaxy, The Galaxy VIP Fund ("Galaxy
VIP") and Galaxy Fund II ("Galaxy II") (collectively, the "Trusts"), plus an
additional $3,500 for each in-person Galaxy Board meeting attended and $1,500
for each in-person Galaxy VIP or Galaxy II Board meeting attended not held
concurrently with an in-person Galaxy meeting, and is reimbursed for expenses
incurred in attending all meetings. Each trustee also receives $750 for each
telephone Board
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meeting in which the trustee participates, $1,000 for each in-person Board
committee meeting attended and $500 for each telephone Board committee meeting
in which the trustee participates. The Chairman of the Boards of the Trusts is
entitled to an additional annual aggregate fee in the amount of $4,000, and the
President and Treasurer of the Trusts is entitled to an additional annual
aggregate fee of $2,500 for their services in these respective capacities. The
foregoing trustees' and officers' fees are allocated among the portfolios of the
Trusts based on their relative net assets. Prior to May 28, 1999, 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 as 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 "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 PFPC receives any compensation from Galaxy for acting as an
officer. No person who is an officer, director or employee of Fleet or Oechsle,
or any of its affiliates, serves as a trustee, officer or employee of Galaxy.
The trustees and officers of Galaxy own less than 1% of its outstanding shares.
The following chart provides certain information about the fees received by
Galaxy's trustees in the most recently completed fiscal year.
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<PAGE>
<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 $39,355 None $55,750
Trustee
- -------------------------------------------------------------------------------------------------------
Dwight E. Vicks, Jr.
Chairman and Trustee $42,875 None $60,500
- -------------------------------------------------------------------------------------------------------
Donald B. Miller**
Trustee $40,042 None $56,500
- -------------------------------------------------------------------------------------------------------
Rev. Louis DeThomasis
Trustee $37,643 None $53,250
- -------------------------------------------------------------------------------------------------------
John T. O'Neill
President, Treasurer $41,813 None $59,000
and Trustee
- -------------------------------------------------------------------------------------------------------
James M. Seed**
Trustee $39,355 None $55,750
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------
* The "Fund Complex" consists of Galaxy, The Galaxy VIP Fund and Galaxy Fund
II, which comprised a total of 43 separate portfolios as of October 31,
1999.
** Deferred compensation (including interest) in the amounts of $43,939 and
$65,944 accrued during Galaxy's fiscal year ended October 31, 1999 for
Messrs. Miller and Seed, respectively.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, Galaxy's Declaration of Trust provides that shareholders
shall not be subject to any personal liability for the acts or obligations of
Galaxy, and that every note, bond, contract, order or other undertaking made by
Galaxy shall contain a provision to the effect that the shareholders are not
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.
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<PAGE>
The Declaration of Trust states further that no trustee, officer or agent
of Galaxy shall be personally liable for or on account of any contract, debt,
claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of Galaxy; nor shall any trustee be personally liable to any person for
any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim against
the trustees or Galaxy shall look solely to the trust property for payment.
With the exceptions stated, the Declaration of Trust provides that a
trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a trustee, and that the Board of Trustees
shall indemnify representatives and employees of Galaxy to the same extent to
which they themselves are entitled to indemnification.
INVESTMENT ADVISER
Fleet serves as investment adviser to the Funds. In its Advisory Agreement,
Fleet has agreed to provide investment advisory services to the Funds as
described in the Prospectuses. Fleet has also agreed to pay all expenses
incurred by it in connection with its activities under the Advisory Agreement
other than the cost of securities (including brokerage commissions) purchased
for the Funds. See "Expenses" below.
For the services provided and expenses assumed, Fleet is entitled to
receive advisory fees, computed daily and paid monthly, at the following annual
rates (i) with respect to the Money Market Funds, 0.20% of the average daily net
assets of each Fund; and (ii) with respect to the Intermediate Tax-Exempt Bond
Fund, Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund, Florida Municipal Bond Fund and Growth Fund II, 0.75% of
each Fund's average daily net assets.
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
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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.
Prior to the Reorganization, each Predecessor Fund was advised by
BankBoston N.A. ("BankBoston"). BankBoston was a wholly-owned subsidiary of
BankBoston Corporation. On _____________, 1999, BankBoston Corporation merged
into Fleet Financial Group, Inc. to form FleetBoston Corporation (the "Holding
Company Merger"). As a result of the Holding Company Merger, BankBoston is now a
subsidiary of FleetBoston Corporation and an affiliate of the Adviser.
BankBoston served as investment adviser to each Predecessor Fund pursuant
to an investment advisory agreement dated June 1, 1993 (the "Prior Agreement").
Pursuant to the terms of the Prior Agreement, BankBoston was entitled to receive
fees, accrued daily and paid monthly, at the following annual rates: (i) with
respect to the Institutional Money Market Fund and Institutional Treasury Money
Market Fund, 0.20% of the average daily net assets of each Fund; and (ii) with
respect to the Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate
Municipal Bond Fund, Massachusetts Intermediate Municipal Bond Fund, Florida
Municipal Bond Fund and Growth Fund II, 0.74% of the average daily net assets of
each Fund. In addition, BankBoston agreed to waive investment advisory fees
and/or reimburse expenses to help the Predecessor Funds maintain competitive
expense ratios.
During the last three fiscal years, each Predecessor Fund paid advisory
fees (net of fee waivers and/or expense reimbursements) to BankBoston as set
forth below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31:
1999 1998 1997
FUND (THOUSANDS) (THOUSANDS) (THOUSANDS)
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Institutional Money Market Fund $760 $46 --(1)
Institutional Treasury Money Market Fund $8,329 $6,468 $3,052
Intermediate Tax-Exempt Bond Fund $2,241 $1,877 $1,387
Connecticut Intermediate Municipal Bond Fund $1,139 $764 $573
Massachusetts Intermediate Municipal Bond Fund $1,574 $1,162 $768
Florida Municipal Bond Fund $380 $267 --(1)
Growth Fund II $1,455 $2,110 $1,050
</TABLE>
- ---------------
(1) The Predecessor Fund did not conduct operations during the period indicated.
ADMINISTRATOR
PFPC, Inc. ("PFPC") (formerly known as First Data Investor Services Group,
Inc.), located at 4400 Computer Drive, Westborough, Massachusetts 01581-5108,
serves as the Funds' administrator. PFPC is a majority-owned subsidiary of PNC
Bank Corp.
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<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:
<TABLE>
<CAPTION>
COMBINED AVERAGE DAILY NET ASSETS ANNUAL RATE
--------------------------------- -----------
<S> <C>
Up to $2.5 billion.......................... 0.090%
From $2.5 to $5 billion..................... 0.085%
From $5 to $12 billion...................... 0.075%
From $12 to $15 billion..................... 0.065%
From $15 to $18 billion..................... 0.060%
Over $18 billion............................ 0.0575%
</TABLE>
In addition, PFPC also receives a separate annual fee from each Galaxy portfolio
for certain fund accounting services. From time to time, PFPC may waive
voluntarily all or a portion of the administration fees payable to it by the
Funds.
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 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.
Prior to the Reorganization, SEI Investments Mutual Funds Services ("SEI")
served as the administrator to the Predecessor Funds. For its services, SEI
received a fee calculated daily and paid monthly, at an annual rate of 0.085% of
the first $5 billion of the Predecessor Funds' combined average daily net assets
and 0.045% of combined average daily net assets in excess of $5 billion. SEI
also agreed to waive portions of its fees from time to time.
During the last three fiscal years, SEI received administration fees, net
of fee waivers, as set forth below:
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<PAGE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31:
1999 1998 1997
FUND (THOUSANDS) (THOUSANDS) (THOUSANDS)
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Institutional Money Market Fund $_______ $_______ $_______
Institutional Treasury Money Market Fund $_______ $_______ $_______
Intermediate Tax-Exempt Bond Fund $_______ $_______ $_______
Connecticut Intermediate Municipal Bond Fund $_______ $_______ $_______
Florida Municipal Bond Fund........................................ $_______ $_______ $_______
Massachusetts Intermediate Municipal Bond Fund $_______ $_______ $_______
Growth Fund II..................................................... $_______ $_______ $_______
</TABLE>
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. Chase Manhattan may employ
sub-custodians for the Funds for the purpose of providing custodial services for
the Funds' foreign assets held outside the United States.
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. In
addition, Chase Manhattan also serves as Galaxy's "foreign custody manager" (as
that term is defined in Rule 17f-5 under the 1940 Act) and in such capacity
employs sub-custodians for the Funds for the purpose of providing custodial
services for the foreign assets of those Funds held outside the U.S. The assets
of the Funds are held under bank custodianship in compliance with the 1940 Act.
PFPC 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, Westborough, 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.
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<PAGE>
PFPC may enter into agreements with one or more entities, including
affiliates of Fleet, pursuant to which such entities agree to perform certain
sub-account and administrative functions ("Sub-Account Services") on a per
account basis with respect to Trust Shares of the Growth Fund II held by defined
contribution plans, including maintaining records reflecting separately with
respect to each plan participant's sub-account all purchases and redemptions of
Trust Shares and the dollar value of Trust Shares in each sub-account; crediting
to each participant's sub-account all dividends and distributions with respect
to that sub-account; and transmitting to each participant a periodic statement
regarding the sub-account as well as any proxy materials, reports and other
material Fund communications. Such entities are compensated by PFPC for the
Sub-Account Services and in connection therewith the transfer agency fees
payable by Trust Shares of the Growth Fund II to PFPC have been increased by an
amount equal to these fees. In substance, therefore, the holders of Trust Shares
of this Fund indirectly bears these fees.
Fleet Bank, an affiliate of Fleet, is paid a fee for Sub-Account Services
performed with respect to Trust Shares of the Growth Fund II held by defined
contribution plans. Pursuant to an agreement between Fleet Bank and PFPC, Fleet
Bank is paid $21.00 per year for each defined contribution plan participant
account. PFPC bears this expense directly, and shareholders of Trust Shares of
the Growth Fund II bear this expense indirectly through fees paid to PFPC for
transfer agency services.
EXPENSES
Fleet and PFPC bear all expenses in connection with the performance of
their services for the Funds, except that Galaxy bears the expenses incurred in
the Funds' operations including: taxes; interest; fees (including fees paid to
its trustees and officers who are not affiliated with PFPC); SEC fees; state
securities fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; advisory,
administration, shareholder servicing, Rule 12b-1 distribution (if applicable),
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
Fleet will select specific portfolio investments and effect transactions
for the Funds. Fleet seeks to obtain the best net price and the most favorable
execution of orders. Fleet may, in its discretion, effect transactions in
portfolio securities with dealers who provide research advice or other services
to the Funds or Fleet. Fleet is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for any Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if Fleet determines in good faith that such commission was
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reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or Fleet overall responsibilities to the particular Fund and to
Galaxy. Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond and government securities markets and the economy.
The fees under the investment advisory agreements between Galaxy and Fleet are
not reduced by reason of receiving such brokerage and research services. The
Board of Trustees will periodically review the commissions paid by the Funds to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits inuring to the Funds.
During the fiscal year ended May 31, 1999, the following Fund paid soft
dollar commissions as shown below:
<TABLE>
<CAPTION>
FUND COMMISSIONS
---- -----------
<S> <C>
Growth Fund II................. $_______
</TABLE>
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. There is generally no
stated commission in the case of securities traded in U.S. over-the-counter
markets, but the prices of those securities include undisclosed commissions or
mark-ups. 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. U.S.
Government securities are generally purchased from underwriters or dealers,
although certain newly issued U.S. Government securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
No brokerage commissions are typically paid on purchases and sales of U.S.
Government securities.
The following Fund paid brokerage commissions as shown in the table below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31:
FUND 1999 1998 1997
- ---- ---- ---- ----
<S> <C> <C> <C>
Growth Fund II $199,396 $227,975 $163,411
</TABLE>
The Funds may effect a portion of their portfolio transactions through
Quick & Reilly Institutional Trading ("Quick & Reilly"), a division of Fleet
Securities, Inc., which is an affiliate of Fleet.
Debt securities purchased or sold by the Institutional Money Market,
Institutional Treasury Money Market, Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds are generally traded in 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 and underwriting commission or concession,
and
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<PAGE>
the prices at which securities are purchased from and sold to dealers include a
dealers' mark-up or mark-down.
Each Fund may engage in short-term trading to achieve its investment
objective. Portfolio turnover may vary greatly from year to year as well as
within a particular year. The Institutional Money Market and Institutional
Treasury Money Market 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.
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.
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.
SHAREHOLDERS SERVICES PLANS
RETAIL A SHARES
Galaxy has adopted a Shareholder Services Plan (the "Retail A Plan")
pursuant to which it intends to enter into servicing agreements with
institutions (including Fleet Bank and its affiliates). Pursuant to these
servicing agreements, institutions render certain shareholder liaison and/or
administrative support services to customers who are the beneficial owners of
Retail A Shares. Such services are provided to customers who are the beneficial
owners of Retail A Shares and are intended to supplement the services provided
by PFPC as administrator and transfer agent to the shareholders of record of
Retail A Shares. The Retail A Plan provides that Galaxy will pay fees for such
services at the following annual rates: (i) with respect to the Intermediate
Tax-Exempt Bond, Connecticut Intermediate Municipal Bond and Massachusetts
Intermediate Municipal Bond, up to 0.30% of the average daily net asset value of
Retail A Shares owned beneficially by customers; and (ii) with respect to the
Growth Fund II, up to 0.50% of the average daily net asset value of Retail A
Shares owned beneficially by customers. Institutions may receive up to one-half
of this fee for providing one or more of the following services to such
customers: aggregating and processing purchase and redemption requests and
placing net
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purchase and redemption orders with PDI; processing dividend payments from a
Fund; providing sub-accounting with respect to Retail A Shares or the
information necessary for sub-accounting; and providing periodic mailings to
customers. Institutions may also receive up to one-half of this fee for
providing one or more of these additional services to such customers: providing
customers with information as to their positions in Retail A Shares; responding
to customer inquiries; and providing a service to invest the assets of customers
in Retail A Shares.
Although the Retail A Plan has been approved with respect to Retail A
Shares and Trust Shares of the Funds, as of the date of this Statement of
Additional Information, Galaxy intends to enter into servicing agreements under
the Retail A Plan only with respect to Retail A Shares of each Fund, and to
limit the payments under these servicing agreements for each Fund to an
aggregate fee of not more than: (i) with respect to the Intermediate Tax-Exempt
Bond, Connecticut Intermediate Municipal Bond and Massachusetts Intermediate
Municipal Bond Funds, up to 0.15% of the average daily net asset value of Retail
A Shares owned beneficially by customers of institutions; and (ii) with respect
to the Growth Fund II, up to 0.30% of the average daily net asset value of
Retail A Shares owned beneficially by customers of institutions. Galaxy
understands that institutions may charge fees to their customers who are the
beneficial owners of Retail A Shares in connection with their accounts with such
institutions. Any such fees would be in addition to any amounts which may be
received by an institution under the Retail A Plan. Under the terms of each
servicing agreement entered into with Galaxy, institutions are required to
provide to their customers a schedule of any fees that they may charge in
connection with customer investments in Retail A Shares.
Each servicing agreement between Galaxy and an institution ("Service
Organization") relating to the Retail A Plan requires that, with respect to
those Funds which declare dividends on a daily basis, the Service Organization
agrees to waive a portion of the servicing fee payable to it under the Retail A
Plan to the extent necessary to ensure that the fees required to be accrued with
respect to the Retail A Shares of such Funds on any day do not exceed the income
to be accrued to such Retail A Shares on that day.
Galaxy's servicing agreements are governed by the Retail A Plan that has
been adopted by Galaxy's Board of Trustees in connection with the offering of
Retail A Shares of each Fund. Pursuant to the Retail A Plan, the Board of
Trustees reviews, at least quarterly, a written report of the amounts paid under
the servicing agreements and the purposes for which the expenditures were made.
In addition, the arrangements with Service Organizations must be approved
annually by a majority of Galaxy's trustees, including a majority of the
trustees who are not "interested persons" of Galaxy as defined in the 1940 Act
and who have no direct or indirect financial interest in such arrangements (the
"Disinterested Trustees").
The Board of Trustees has approved Galaxy's arrangements with Service
Organizations based on information provided by Galaxy's service contractors that
there is a reasonable likelihood that the arrangements will benefit the Funds
and their shareholders by affording Galaxy greater flexibility in connection
with the efficient servicing of the accounts of the beneficial owners of Retail
A Shares of the Funds. Any material amendment to Galaxy's arrangements with
Service Organizations must be approved by a majority of Galaxy's Board of
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Trustees (including a majority of the Disinterested Trustees). So long as
Galaxy's arrangements with Service Organizations are in effect, the selection
and nomination of the members of Galaxy's Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of Galaxy will be committed to
the discretion of such Disinterested Trustees.
BKB SHARES
Galaxy has adopted a separate Shareholder Services Plan (the "BKB Plan")
pursuant to which it intends to enter into servicing agreements with
institutions (including Fleet Bank and its affiliates). Pursuant to these
servicing agreements, institutions render certain shareholder liaison and/or
administrative support services to customers who are the beneficial owners of
BKB Shares. Such services are provided to customers who are the beneficial
owners of BKB Shares and are intended to supplement the services provided by
PFPC as administrator and transfer agent to the shareholders of record of BKB
Shares. The BKB Plan provides that Galaxy will pay fees for such services at the
following annual rates: (i) with respect to the Intermediate Tax-Exempt Bond,
Connecticut Intermediate Municipal Bond and Massachusetts Intermediate Municipal
Bond Funds, up to 0.30% of the average daily net asset value of BKB Shares owned
beneficially by customers; and (ii) with respect to the Growth Fund II, up to
0.50% of the average daily net asset value of BKB Shares owned beneficially by
customers. Institutions may receive up to one-half of this fee for providing one
or more of the following services to such customers: aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with PDI; processing dividend payments from a Fund; providing sub-accounting
with respect to BKB Shares or the information necessary for sub-accounting; and
providing periodic mailings to customers. Institutions may also receive up to
one-half of this fee for providing one or more of these additional services to
such customers: providing customers with information as to their positions in
BKB Shares; responding to customer inquiries; and providing a service to invest
the assets of customers in BKB Shares.
Galaxy intends to limit the payment under any servicing agreements for each
Fund to an aggregate annual fee of not more than: (i) with respect to the
Intermediate Tax-Exempt Bond, Connecticut Intermediate Municipal Bond and
Massachusetts Intermediate Municipal Bond Funds, 0.15% of the average daily net
asset value of the BKB Shares of each Fund beneficially owned by customers of
institutions; and (ii) with respect to the Growth Fund II, 0.30% of the average
daily net asset value of the BKB Shares of the Fund beneficially owned by
customers of institutions. Galaxy understands that institutions may charge fees
to their customers who are the beneficial owners of BKB Shares in connection
with their accounts with such institutions. Any such fees would be in addition
to any amounts which may be received by an institution under the BKB Plan. Under
the terms of each servicing agreement entered into with Galaxy, institutions are
required to provide to their customers a schedule of any fees that they may
charge in connection with customer investments in BKB Shares.
Each servicing agreement between Galaxy and an institution ("Service
Organization") relating to the BKB Plan requires that, with respect to those
Funds which declare dividends on a daily basis, the Service Organization agree
to waive a portion of the servicing fee payable to it under the BKB Plan to the
extent necessary to ensure that the fees required to be accrued with
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respect to the BKB Shares of such Funds on any day do not exceed the income to
be accrued to such BKB Shares on that day.
Galaxy's servicing agreements are governed by the BKB Plan that has been
adopted by Galaxy's Board of Trustees in connection with the offering of BKB
Shares of each Fund. Pursuant to the BKB Plan, the Board of Trustees reviews, at
least quarterly, a written report of the amounts paid under the servicing
agreements and the purposes for which the expenditures were made. In addition,
the arrangements with Service Organizations must be approved annually by a
majority of Galaxy's trustees, including a majority of the Disinterested
Trustees.
The Board of Trustees has approved Galaxy's arrangements with Service
Organizations based on information provided by Galaxy's service contractors that
there is a reasonable likelihood that the arrangements will benefit the Funds
and their shareholders by affording Galaxy greater flexibility in connection
with the efficient servicing of the accounts of the beneficial owners of BKB
Shares of the Funds. Any material amendment to Galaxy's arrangements with
Service Organizations must be approved by a majority of Galaxy's Board of
Trustees (including a majority of the Disinterested Trustees). So long as
Galaxy's arrangements with Service Organizations are in effect, the selection
and nomination of the members of Galaxy's Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of Galaxy will be committed to
the discretion of such Disinterested Trustees.
DISTRIBUTION AND SERVICES PLAN
Galaxy has adopted a Distribution and Services Plan pursuant to Rule 12b-1
under the 1940 Act (the "Rule") with respect to Retail B Shares of the Growth
Fund II (the "12b-1 Plan"). Under the 12b-1 Plan, Galaxy may pay (a) PDI or
another person for expenses and activities intended to result in the sale of
Retail B Shares, including the payment of commissions to broker-dealers and
other industry professionals who sell Retail B Shares and the direct or indirect
cost of financing such payments, (b) institutions for shareholder liaison
services, which means personal services for holders of Retail B Shares and/or
the maintenance of shareholder accounts, such as responding to customer
inquiries and providing information on accounts, and (c) institutions for
administrative support services, which include but are not limited to (i)
transfer agent and sub-transfer agent services for beneficial owners of Retail B
Shares; (ii) aggregating and processing purchase and redemption orders; (iii)
providing beneficial owners with statements showing their positions in Retail B
Shares; (iv) processing dividend payments; (v) providing sub-accounting services
for Retail B Shares held beneficially; (vi) forwarding shareholder
communications, such as proxies, shareholder reports, dividend and tax notices,
and updating prospectuses to beneficial owners; and (vii) receiving, translating
and transmitting proxies executed by beneficial owners.
Under the 12b-1 Plan for Retail B Shares, payments by Galaxy (i) for
distribution expenses may not exceed the annualized rate of 0.65% of the
average daily net assets attributable to the Fund's outstanding Retail B
Shares, and (ii) to an institution for shareholder liaison services and/or
administrative support services may not exceed the annual rates of 0.25% and
0.25%, respectively, of the average daily net assets attributable to the
Fund's outstanding Retail B
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<PAGE>
Shares which are owned of record or beneficially by that institution's
customers for whom the institution is the dealer of record or shareholder of
record or with whom it has a servicing relationship. As of the date of this
Statement of Additional Information, Galaxy intends to limit the Fund's
payments for shareholder liaison and administrative support services under
the 12b-1 Plan to an aggregate fee of not more than 0.30% (on an annualized
basis) of the average daily net asset value of Retail B Shares owned of
record or beneficially by customers of institutions.
Payments for distribution expenses under the 12b-1 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 12b-1 Plan provides that a report of the
amounts expended under the 12b-1 Plan, and the purposes for which such
expenditures were incurred, will be made to the Board of Trustees for its review
at least quarterly. The 12b-1 Plan provides that it may not be amended to
increase materially the costs which Retail B Shares of a Fund may bear for
distribution pursuant to the 12b-1 Plan without shareholder approval, and that
any other type of material amendment must be approved by a majority of the Board
of Trustees, and by a majority of the trustees who are neither "interested
persons" (as defined in the 1940 Act) of Galaxy nor have any direct or indirect
financial interest in the operation of the 12b-1 Plan or in any related
agreements (the "12b-1 Trustees"), by vote cast in person at a meeting called
for the purpose of considering such amendments.
Galaxy's Board of Trustees has concluded that there is a reasonable
likelihood that the 12b-1 Plan will benefit the Fund and holders of Retail B
Shares. The 12b-1 Plan is subject to annual reapproval by a majority of the
12b-1 Trustees and is terminable at any time with respect to the Fund by a vote
of a majority of such Trustees or by vote of the holders of a majority of the
Retail B Shares of the Fund. Any agreement entered into pursuant to the 12b-1
Plan with an institution ("Service Organization") is terminable with respect to
the 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 Retail B Shares of the
Fund, by PDI or by the Service Organization. An agreement will also terminate
automatically in the event of its assignment.
As long as the 12b-1 Plan is in effect, the nomination of the trustees who
are not interested persons of Galaxy (as defined in the 1940 Act) must be
committed to the discretion of the 12b-1 Trustees.
DISTRIBUTOR
PDI serves as Galaxy's distributor. PDI is a registered broker-dealer with
principal offices located at Four Falls Corporate Center, 6th Floor, West
Conshohocken, PA 19428-2961. Jane Haegele is the sole shareholder of PDI.
Unless otherwise terminated, the Distribution Agreement between Galaxy and
PDI remains in effect until November 1, 2000, and thereafter will continue from
year to year upon
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annual approval by Galaxy's Board of Trustees, or by the vote of a majority of
the outstanding shares of Galaxy and by the vote of a majority of the Board of
Trustees of Galaxy who are not parties to the Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.
AUDITORS
[_______________], independent auditors, with offices at [________________
________________ _________________________] serve as auditors for Galaxy.
Prior to the Reorganization, [________________________], with offices at
[__________________________________], served as independent auditors for the
Predecessor Funds. The financial highlights for the Predecessor Funds for each
of the years or periods in the five-year period ended May 31, 1999 included in
the Prospectuses and the financial statements contained in the Predecessor
Funds' Annual Reports to Shareholders dated May 31, 1999 and incorporated by
reference into this Statement of Additional Information have been audited by
[_______________].
COUNSEL
Drinker Biddle & Reath LLP (of which W. Bruce McConnel, III, Secretary
of Galaxy, is a partner), One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103, are counsel to Galaxy and will pass upon
certain legal matters on its behalf. The law firm of Day, Berry & Howard,
LLP, Cityplace, Hartford, Connecticut 06103-3499 serves as special
Connecticut counsel to Galaxy and has reviewed the portion of this Statement
of Additional Information and the Prospectuses with respect to the
Connecticut Intermediate Municipal Bond Fund concerning Connecticut taxes and
the description of special considerations relating to Connecticut Municipal
Securities. The law firm of Ropes & Gray, One International Place, Boston,
Massachusetts 02110-2624 serves as special Massachusetts counsel to Galaxy
has reviewed the portion of this Statement of Additional Information and the
Prospectuses with respect to the Massachusetts Intermediate Municipal Bond
Fund concerning Massachusetts taxes and the description of special
considerations relating to Massachusetts Municipal Securities. The law firm
of _______________ serves as special Florida counsel to Galaxy and has
reviewed the portion of this Statement of Additional Information and
Prospectus with respect to the Florida Municipal Bond Fund concerning Florida
taxes and the description of special considerations relating to Florida
Municipal Securities.
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<PAGE>
PERFORMANCE AND YIELD INFORMATION
INSTITUTIONAL MONEY MARKET AND INSTITUTIONAL TREASURY MONEY MARKET FUNDS
The standardized annualized seven-day yields for the Institutional Money
Market and Institutional Treasury Money Market 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.
The current yields for the Funds may be obtained by calling PDI at
1-877-BUY-GALAXY (1-877-289-4252).
Prior to the Reorganization, the Predecessor Funds to the Institutional
Money Market Fund and Institutional Treasury Money Market Fund offered a single
class of shares. For the seven-day period ended November 30, 1999, the
annualized yield and effective yield of the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
ANNUALIZED EFFECTIVE
FUND YIELD YIELD
- ---- ----- -----
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Institutional Money Market
Fund ________% ________%
- ----------------------------------------------------------------------------------------------------------
Institutional Treasury Money Market
Fund ________% ________%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
INTERMEDIATE TAX-EXEMPT BOND FUND, CONNECTICUT INTERMEDIATE MUNICIPAL BOND FUND,
MASSACHUSETTS INTERMEDIATE MUNICIPAL BOND FUND, FLORIDA MUNICIPAL BOND FUND AND
GROWTH FUND II
Investment returns and principal values will vary with market conditions so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Past
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<PAGE>
performance is no guarantee of future results. Unless otherwise indicated, total
return figures include changes in share price, deduction of any applicable sales
charge, and reinvestment of dividends and capital gains distributions, if any.
The Funds' 30-day (or one month) standard yields are calculated separately
for each series of shares in each Fund in accordance with the method prescribed
by the SEC for mutual funds:
6
YIELD = 2[(a-b)/cd +1 ) - 1]
Where: a = dividends and interest earned by a Fund during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = maximum offering price per share on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on debt obligations held by a Fund is calculated by computing the yield
to maturity of each obligation based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest) and dividing the result
by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market value of such debt obligations. Expenses accrued
for the period (variable "b" in the formula) include all recurring fees charged
by a Fund to all shareholder accounts in proportion to the length of the base
period and the Fund's mean (or median) account size. Undeclared earned income
will be subtracted from the offering price per share (variable "d" in the
formula).
With respect to mortgage or other receivables-backed obligations that are
expected to be subject to monthly payments of principal and interest
("pay-downs"), (i) gain or loss attributable to actual monthly pay-downs are
accounted for as an increase or decrease to interest income during the period,
and (ii) each Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the
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<PAGE>
weighted average date is not available or (b) not to amortize discount or
premium on the remaining security.
Each Fund may also advertise its "effective yield" which is calculated
similarly but when annualized, the income earned by an investment in the Fund is
assumed to be reinvested.
Interest earned on tax-exempt obligations that are issued without original
issue discount and have a current market discount is calculated by using the
coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have discounts based on current market value that are
less the then-remaining portion of the original issue discount (market premium),
the yield to maturity is based on the market value.
The "tax-equivalent" yield of the Intermediate Tax-Exempt Bond, Connecticut
Intermediate Municipal Bond, Massachusetts Intermediate Municipal Bond and
Florida Municipal Bond Funds is computed by (a) dividing the portion of the
Fund's yield (calculated as above) that is exempt from both federal and state
income taxes by one minus a stated combined federal and state income tax rate;
(b) dividing the portion of the Fund's yield (calculated as above) that is
exempt from federal income tax only by one minus a stated federal income tax
rate; and (c) adding the figures resulting from (a) and (b) above to that
portion if any, of the yield that is not exempt from federal income tax.
Prior to the Reorganization, the Predecessor Funds offered one series of
shares. The following are the standard yields and tax equivalent yields for the
Predecessor Funds' shares for the 30-day period ended November 30, 1999:
<TABLE>
<CAPTION>
STANDARD TAX-EQUIVALENT
FUND YIELD YIELD
- ---- ----- -----
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Tax-Exempt
Bond Fund ______% ______%
- -----------------------------------------------------------------------------------------------------------
Connecticut Intermediate Municipal
Bond Fund ______% ______%
- -----------------------------------------------------------------------------------------------------------
Massachusetts Intermediate Municipal
Bond Fund ______% ______%
- -----------------------------------------------------------------------------------------------------------
Florida Municipal Bond Fund ______% ______%
- -----------------------------------------------------------------------------------------------------------
Growth Fund II ______% N/A
- -----------------------------------------------------------------------------------------------------------
</TABLE>
-85-
<PAGE>
Each Fund that advertises its "average annual total return" computes such
return separately for each series of shares by determining the average annual
compounded rate of return during specified periods that equates the initial
amount invested to the ending redeemable value of such investment according to
the following formula:
1/n
T = [(ERV/P) - 1]
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
l, 5 or 10 year (or other) periods at the
end of the applicable period (or a
fractional portion thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
Each Fund that advertises its "aggregate total return" computes such
returns separately for each series of shares by determining the aggregate
compounded rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [(ERV/P) - l]
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
Prior to the Reorganization, the Predecessor Funds offered one series of
shares. The following are the aggregate annual returns for shares of the
Predecessor Funds from the date of each Fund's initial public offering through
November 30, 1999:
<TABLE>
<CAPTION>
FUND
- ----
<S> <C>
Intermediate Tax-Exempt Bond Fund _____%(1)
Connecticut Intermediate Municipal Bond Fund _____%(2)
Massachusetts Intermediate Municipal Bond Fund _____%(1)
Florida Municipal Bond Fund _____%(3)
Growth Fund II _____%(4)
</TABLE>
-86-
<PAGE>
- ------------------
1. For the period from June 14, 1993 (initial public offering date) through
November 30, 1999.
2. For the period from August 1, 1994 (initial public offering date) through
November 30, 1999.
3. For the period from June 30, 1997 (initial public offering date) through
November 30, 1999.
4. For the period from March 28, 1996 (initial public offering date) through
November 30, 1999.
The average annual total returns for shares of the Predecessor Funds for the
one-year and five-year periods ended November 30, 1999 are as follows:
<TABLE>
<CAPTION>
ONE FIVE
FUND YEAR YEAR
- ---- ---- ----
<S> <C> <C>
Intermediate Tax-Exempt Bond Fund _____% _____%
Connecticut Intermediate Municipal Bond Fund _____% _____%
Massachusetts Intermediate Municipal Bond Fund _____% _____%
Florida Municipal Bond Fund _____% _____%
Growth Fund II _____% _____%
</TABLE>
TAX-EQUIVALENCY TABLES - CONNECTICUT INTERMEDIATE MUNICIPAL BOND, MASSACHUSETTS
INTERMEDIATE MUNICIPAL BOND AND FLORIDA MUNICIPAL BOND FUNDS
The Connecticut Intermediate Municipal Bond, Massachusetts Intermediate
Municipal Bond and Florida Municipal Bond Funds may use tax-equivalency
tables in advertising and sales literature. The interest earned by the
Municipal Securities in the respective portfolios generally remains free from
federal regular income tax and, in the case of the Connecticut Intermediate
Municipal Bond Fund and Massachusetts Intermediate Municipal Bond Fund,
from the regular personal income tax imposed by Connecticut and
Massachusetts. Some portion of each Fund's income may, however, be subject to
the federal alternative minimum tax and state and local regular or
alternative minimum taxes. As the tables below indicate, "tax-free"
investments may be attractive choices for investors, particularly in times of
narrow spreads between "tax-free" and taxable yields.
The charts below are for illustrative purposes only and use tax brackets
that were in effect beginning January 1, 2000. These are not indicators of past
or future performance of the Connecticut Intermediate Municipal Bond,
Massachusetts Intermediate Municipal Bond and Florida Municipal Bond Funds.
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent for each chart. Moreover, the charts
do not reflect the possible effect of all items relating to the effective
marginal tax rate, such as alternative minimum tax, personal exemptions, tax
credits, the phase-out of exemptions or credits, itemized deductions or the
possible partial disallowance of deductions.
-87-
<PAGE>
Note: The charts below do not address taxable equivalent yields applicable
to married taxpayers filing separate returns or heads of households.
Investors are urged to consult their own tax advisors as to these matters.
CONNECTICUT: 2000
Equivalency yields: Tax-Exempt
<TABLE>
<CAPTION>
Combined Connecticut Tax-Equivalent Yields**
$Taxable Income* State Federal Effective ---------------------------------------------------------------------------------------
Single Rate Rate Rate 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-26,250 3.96% 15% 18.37% 3.68% 4.29% 4.90% 5.51% 6.13% 6.74% 7.35% 7.96% 8.58% 9.19% 9.80%
26,251-63,550 4.50% 28% 31.24% 4.36% 5.09% 5.82% 6.54% 7.27% 8.00% 8.73% 9.45% 10.18% 10.91% 11.63%
63,551-132,600 4.50% 31% 34.11% 4.55% 5.31% 6.07% 6.83% 7.59% 8.35% 9.11% 9.86% 10.62% 11.38% 12.14%
132,601-288,350 4.50% 36% 38.88% 4.91% 5.73% 6.54% 7.36% 8.18% 9.00% 9.82% 10.63% 11.45% 12.27% 13.09%
Over 288,350 4.50% 39.6% 42.32% 5.20% 6.07% 6.93% 7.80% 8.67% 9.54% 10.40% 11.27% 12.14% 13.00% 13.87%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Combined Connecticut Tax-Equivalent Yields**
$Taxable Income* State Federal Effective ----------------------------------------------------------------------------------
Married Filing Jointly Rate Rate Rate 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-43,850 3.825% 15% 18.25% 3.67% 4.28% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56% 9.17% 9.79%
43,851-105,950 4.50% 28% 31.24% 4.36% 5.09% 5.82% 6.54% 7.27% 8.00% 8.73% 9.45% 10.18% 10.91% 11.63%
105,951-161,450 4.50% 31% 34.11% 4.55% 5.31% 6.07% 6.83% 7.59% 8.35% 9.11% 9.86% 10.62% 11.38% 12.14%
161,451-288,350 4.50% 36% 38.88% 4.91% 5.73% 6.54% 7.36% 8.18% 9.00% 9.82% 10.63% 11.45% 12.27% 13.09%
Over 288,350 4.50% 39.6% 42.32% 5.20% 6.07% 6.93% 7.80% 8.67% 9.54% 10.40% 11.27% 12.14% 13.00% 13.87%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This amount represents taxable income as defined in the Internal Revenue
Code. It is assumed that taxable income for Connecticut tax purposes is the
same as defined in the Internal Revenue Code. In fact, however, Connecticut
taxable income may differ due to differences in exemptions, itemized
deductions or other items.
** Each entry represents the taxable yield that is the equivalent to the
specified Federal and Connecticut tax-exempt yield for a Connecticut tax
payer in the specified income bracket.
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<PAGE>
MASSACHUSETTS: 2000
Equivalent Yields: Tax-Exempt
<TABLE>
<CAPTION>
Rate Combined Massachusetts Tax-Equivalent Yields**
$Taxable Income State Federal Effective ----------------------------------------------------------------------------------------
Single* Rate Rate Rate 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-26,250 5.85% 15.00% 19.97% 3.75% 4.37% 5.00% 5.62% 6.25% 6.87% 7.50% 8.12% 8.75% 9.37% 10.00%
26,251-63,550 5.85% 28.00% 32.21% 4.43% 5.16% 5.90% 6.64% 7.38% 8.11% 8.85% 9.59% 10.33% 11.06% 11.80%
63,551-132,600 5.85% 31.00% 35.04% 4.62% 5.39% 6.16% 6.93% 7.70% 8.47% 9.24% 10.01% 10.78% 11.55% 12.32%
132,601-288,350 5.85% 36.00% 39.74% 4.98% 5.81% 6.64% 7.47% 8.30% 9.13% 9.96% 10.79% 11.62% 12.45% 13.28%
Over 288,350 5.85% 39.60% 43.13% 5.28% 6.15% 7.03% 7.91% 8.79% 9.67% 10.55% 11.43% 12.31% 13.19% 14.07%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
$Taxable Income* Combined Massachusetts Tax-Equivalent Yields**
Married Filing State Federal Effective ----------------------------------------------------------------------------------------
Jointly Rate Rate Rate 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-43,850 5.85% 15.00% 19.97% 3.75% 4.37% 5.00% 5.62% 6.25% 6.87% 7.50% 8.12% 8.75% 9.37% 10.00%
43,851-105,950 5.85% 28.00% 32.21% 4.43% 5.16% 5.90% 6.64% 7.38% 8.11% 8.85% 9.59% 10.33% 11.06% 11.80%
105,951-161,450 5.85% 31.00% 35.04% 4.62% 5.39% 6.16% 6.93% 7.70% 8.47% 9.24% 10.01% 10.78% 11.55% 12.32%
161,451-288,350 5.85% 36.00% 39.74% 4.98% 5.81% 6.64% 7.47% 8.30% 9.13% 9.96% 10.79% 11.62% 12.45% 13.28%
Over 288,350 5.85% 39.60% 43.13% 5.28% 6.15% 7.03% 7.91% 8.79% 9.67% 10.55% 11.43% 12.31% 13.19% 14.07%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This amount represents taxable income as defined in the Internal Revenue
Code. It is assumed that taxable income for Massachusetts tax purposes is
the same as defined in the Internal Revenue Code. In fact, however,
Massachusetts taxable income may differ due to differences in exemptions,
itemized deductions or other items.
** Each entry represents the taxable yield that is the equivalent to the
specified Federal and Massachusetts tax-exempt yield for a Massachusetts
tax payer in the specified income bracket.
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<PAGE>
FLORIDA: 2000
Equivalent yields: Tax-Exempt
<TABLE>
<CAPTION>
Federal Florida Tax-Equivalent Yields**
$Taxable Income* Federal Effective -------------------------------------------------------------------------------------------
Single Rate Rate 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-26,250 15.0% 15.0% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
26,251-63,550 28.0% 28.0% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11%
63,551-132,600 31.0% 31.0% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59%
132,601-288,350 36.0% 36.0% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72% 12.50%
Over 288,350 39.6% 39.6% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
$Taxable Income* Florida Tax-Equivalent Yields**
Married Filing Federal Effective -------------------------------------------------------------------------------------------
Jointly Rate Rate 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-43,850 15.0% 15.0% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41%
43,851-105,950 28.0% 28.0% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11%
105,951-161,450 31.0% 31.0% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59%
161,451-288,350 36.0% 36.0% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72% 12.50%
Over 288,350 39.6% 39.6% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This amount represents taxable income as defined in the Internal Revenue
Code.
** Each entry represents the taxable yield that is the equivalent to the
specified Federal tax-exempt yield for a Florida taxpayer in the specified
income bracket.
-90-
<PAGE>
PERFORMANCE REPORTING
From time to time, in advertisements or in reports to shareholders, the
performance of the Funds may be quoted and compared to that of other mutual
funds with similar investment objectives and to stock or other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Funds may be compared to data prepared by Lipper Analytical
Services, Inc., a widely recognized independent service which monitors the
performance of mutual funds. The performance of the Growth Fund II may also be
compared to data prepared by the S&P 500 Index, an unmanaged index of groups of
common stocks, the Consumer Price Index, or the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial companies listed on
the New York Stock Exchange.
Performance data as reported in national financial publications including,
but not limited to, DONOGHUE'S MONEY FUND REPORT-Registered Trademark-, MONEY
MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL and THE NEW YORK TIMES, or
publications of a local or regional nature may also be used in comparing the
performance of the Funds. The performance of the Institutional Money Market and
Institutional Treasury Money Market Funds 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. Performance data will be calculated
separately for Trust Shares, Retail A Shares, Retail B Shares and/or BKB Shares
of the Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal
Bond Fund, Massachusetts Intermediate Municipal Bond Fund and Growth Fund II
and for Shares of the Institutional Money Market Fund, Institutional Treasury
Money Market Fund and Florida Municipal Bond Fund.
The performance of the Funds will fluctuate and any quotation of
performance 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 data are generally functions of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses, and
market conditions. Any additional fees charged by institutions with respect to
accounts of customers that have invested in shares of a Fund will not be
included in performance calculations.
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.
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MISCELLANEOUS
As used in this Statement of Additional Information, "assets belonging to"
a particular Fund or series of a Fund means the consideration received by Galaxy
upon the issuance of shares in that particular Fund or series of the Fund,
together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds and a
portion of any general assets of Galaxy not belonging to a particular series or
Fund. In determining the net asset value of a particular series of a Fund,
assets belonging to the particular series of the Fund are charged with the
direct liabilities in respect of that series and with a share of the general
liabilities of Galaxy, which are allocated in proportion to the relative asset
values of the respective series and Funds at the time of allocation. Subject to
the provisions of Galaxy's Declaration of Trust, determinations by the Board of
Trustees as to the direct and allocable liabilities, and the allocable portion
of any general assets with respect to a particular series or Fund, are
conclusive.
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 or a particular series of shares in a Fund means, with respect
to the approval of an investment advisory agreement, a distribution plan or a
change in an investment objective or fundamental investment policy, the
affirmative vote of the holders of the lesser of (a) more than 50% of the
outstanding shares of such Fund or such series of shares, or (b) 67% or more of
the shares of such Fund or such series of shares present at a meeting if more
than 50% of the outstanding shares of such Fund or such series of shares are
represented at the meeting in person or by proxy.
As of February 9, 2000, the name, address and share ownership of the
entities or persons that held of record more than 5% of the outstanding Trust
Shares of each of Galaxy's investment portfolios (including shares of the
Institutional Government Money Market Fund) were as follows: Money Market Fund
- -- Fleet New York, Fleet Investment Services, 159 East Main Street, NY/RO/T03C,
Rochester, NY 14638-0001 (99.71%); Tax-Exempt Money Market Fund -- Fleet New
York, Fleet Investment Services, 159 East Main Street, NY/RO/T03C, Rochester, NY
14638-0001 (99.83%); Government Money Market Fund -- Fleet New York, Fleet
Investment Services, 159 East Main Street, NY/RO/T03C, Rochester, NY 14638-0001
(98.18%); U.S. Treasury Money Market Fund -- Fleet New York, Fleet Investment
Services, 159 East Main Street, NY/RO/T03C, Rochester, NY 14638-0001 (94.67%);
Institutional Treasury Money Market Fund -- Fleet New York, Fleet Investment
Services, 159 East Main Street, NY/RO/T03C, Rochester, NY 14638-0001 (90.51%);
Luitpold Pharmaceuticals Inc., Kirk Sobecki, CFO, ATTN: Harold Noviello, One
Luitpold Drive, Shirley, NY 11967 (6.28%); Equity Value Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (78.09%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(13.16%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (7.11%); Equity
Growth Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (69.29%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (16.18%); Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (14.06%); Equity Income Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (13.69%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (32.37%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (52.62%); International Equity Fund -- Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (43.05%); Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (37.80%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (13.94%); Growth &
Income Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (76.51%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (19.76%); Asset Allocation Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (93.31%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit --NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(5.97%); Small Company Equity Fund -- Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(63.45%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (26.75%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (7.32%); Small Cap Value Fund -- Gales & Co.,
Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (31.82%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
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<PAGE>
(17.96%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (48.81%); Strategic
Equity Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (97.52%);
Intermediate Government Income Fund -- Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(25.67%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (33.94%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (38.13%); High Quality Bond Fund -- Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (60.55%); Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (26.00%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (12.74%); Short-Term
Bond Fund -- Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (46.26%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (20.25%); Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (31.27%); Tax-Exempt Bond Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (37.18%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (26.37%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (32.39%); Connecticut Municipal Bond Fund --
Gales & Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East
Main Street, Rochester, NY 14638-0001 (71.43%); Gales Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (23.98%) Massachusetts Municipal Bond Fund -- Gales & Co., Fleet
Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (44.64%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(45.38%); Bob & Co., c/o Bank of Boston, Attn: Mutual Fund Dept. 45-02-06, P.O.
Box 1809, Boston, MA 02105-1809 (8.09%); Corporate Bond Fund - Gales & Co.,
Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (42.58%); Gales & Co., Fleet Investment Services,
Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(33.79%); Gales & Co., Fleet Investment Services, Mutual Funds Unit - Mutual
Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(15.43%); New York Municipal Bond Fund -- Gales & Co., Fleet Investment
Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY
14638-0001 (7.24%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (67.05%); Gales &
Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main
Street, Rochester, NY 14638-0001 (12.44%); Bob & Co., c/o Bank of Boston, ATTN:
Mutual Fund Dept. 45-02-06, P.O. Box 1809, Boston, MA 02105-1809 (13.20%); New
Jersey Municipal Bond Fund -- Gales & Co., Fleet Investment Services, Mutual
Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(51.12%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (34.02%); Bob & Co.,
c/o Bank of Boston, ATTN: Mutual Fund Dept. 45-02-06, P.O.
Box 1805, Boston, MA 02105-1809 (14.56%).
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<PAGE>
As of February 9, 2000, the name address and share ownership of the
entities or persons that held of record more than 5% of the outstanding Retail A
Shares of each of Galaxy's investment portfolios (including shares of the
Connecticut Municipal Money Market and Massachusetts Municipal Money Market
Funds) were as follows: U.S. Treasury Money Market Fund -- U. S. Clearing, A
Division of Fleet Securities Inc., 26 Broadway, New York, NY 10004 (10.38%);
Massachusetts Municipal Money Market Fund -- Fleet New York, Fleet Investment
Services, 159 East Main Street, NY/RO/T03C, Rochester, NY 14638-0001 (59.39%);
Connecticut Municipal Money Market Fund -- Fleet New York, Fleet Investment
Services, 159 East Main Street, NY/RO/T03C, Rochester, NY 14638-0001 (50.11%);
International Equity Fund -- Charles Schwab & Co., Inc., Special Custody
Account, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA 94104-4122
(5.98%); Tax-Exempt Bond Fund -- Danny Schulman, 9 Corn Mill Ct., Upper Saddle
River, NJ 07458-1232 (8.20%); Connecticut Municipal Bond Fund -- Marle Luida
Carcangiu, Juan Rosai Ulma CT, 36 Beach Ave., Milford, CT 06460 (5.77%);
Massachusetts Municipal Bond Fund -- Al Lodice, 63 Winter St., Lexington, MA
02420-1209 (6.08%); Rhode Island Municipal Bond Fund -- Gales & Co., Fleet
Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East Main Street,
Rochester, NY 14638-0001 (35.52%); James R. McCulloch, c/o Microfibre, P.O. Box
1208, Pawtucket, RI 02862-1208 (7.51%); Bob & Co., c/o Bank of Boston, Attn:
Mutual Fund Dept. 45-02-06, P.O. Box 1809, Boston, MA 02105-1809 (20.01%); New
York Municipal Bond Fund -- Marilyn J. Brantley, 5954 Van Allen Road, Belfast,
NY 14711-8750 (10.85%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#978-61025-18, Lipco Action Electric J.V., Anthony Spina-President, 19-55
37th Street, Astoria, NY 11105-1118 (6.65%); New Jersey Municipal Bond Fund --
Serena W. Peng, 70 Chelsea, Watchung, NJ 07060-6424 (79.60%); William Minnaard,
50 Rock Road Unit A6, Hawthorne, NJ 07506-1570 (6.25%).
As of February 9, 2000, the name, address, and share ownership of the
entities or persons that held of record more than 5% of the outstanding Retail B
Shares of each of Galaxy's investment portfolios were as follows: Money Market
Fund -- Ralph V. Luciano & Claire E. Luciano JTWROS, 8651 Ethans Glen Terrace,
Jacksonville, FL 32256-9072 (5.20%); Steven R. Schwartz, 2393 Lake Elmo Ave. N,
Lake Elmo, MN 55042-8407 (5.89%); Wylie O'Brien, 69 Edgewood Ave., Haverhill, MA
01832-2909 (5.36%); Strategic Equity Fund -- Betsey Tan, 7 Donovan's Lane,
Natick, MA 01760-3615 (7.18%); Intermediate Government Income Fund -- Adriana
Vita, 345 Park Ave., New York, NY 10154 (7.71%); Short-Term Bond Fund -- Chelsea
Police Relief Assoc., John R. Phillips, Treas. & Michael McCona, Clerk, 180
Crescent Avenue, Chelsea, MA 02150-3017 (15.08%); Josua Colon Cust, Hazel Colon
UGMA CT, 400 Lasalle Street, New Britan, CT 06051-1316 (8.41%); Elizabeth Mugar,
10 Chestnut St., Apt. 1808, Springfield, MA 01103-1709 (8.04%); Tax-Exempt Bond
Fund -- David Fendler, Sylvia Fendler JTWROS, 72 Brinkerhoff Ave., Stamford, CT
06905-3203 (7.93%); Frances E. Stady, P.O. Box 433, 3176 Main St., Yorkshire, NY
14173-0433 (6.19%); U.S. Clearing Corp., FBO#978-02869-11, Carol Guy & Ali E.
Guy, 14 Thomas St., Scarsdale, NY 10583-1031 (5.20%).
As of February 9, 2000, the name, address and share ownership of the
entities or persons that held of record or beneficially more than 5% of the
outstanding Prime A Shares of each of Galaxy's investment portfolios were as
follows: Equity Growth Fund -- U.S. Clearing, A Division of Fleet Securities,
Inc., FBO#104-32732-16, Hilda Brandt, 3900 North Charles Street,
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<PAGE>
Baltimore, MD 21218-1724 (49.88%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#114-697238-17, Sara Mallow, 6415 NW 24th Street, Boca
Raton, FL 33439-4320 (26.03%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#120-97689-18, Yook Y. Doo, 46-34 Robinson St., Flushing, NY
11355-3445 (8.66%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#021-90471-15, Mabel L. Bowman, 35634 Meyers Ct., Fremont, CA 94536-2540
(6.86%); U.S. Clearing, A Division of Fleet Securities Inc., FBO#143-27206-11,
Mary V. Mastroianni & Pasqual Mastroianni JT Ten, 1811 Randolph Road,
Schenectady, NY 12308-2021 (5.33%); International Equity Fund -- U.S.
Clearing, A Division of Fleet Securities Inc., FBO#125-98055-11, Albert F.
Twanmo, 6508 81st Street, Cabin John, MD 20818-1203 (80.62%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#136-99157-13, Jon-Paul Dadaian, Roth
IRA Account, 178 Clarken Drive, West Orange, NJ 07052-3441 (14.83%); Growth
and Income Fund -- U.S. 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 (35.29%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#113-27816-16, Pamela M. Fain, 68 Oak Ridge Drive,
Bethany, CT 06524-3118 (28.59%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#175-97327-10, Margaret Ann Gillenwater, 2525 E. Prince Road #23,
Tucson, AZ 85716-1146 (23.86%); U.S. 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 33406-4299 (6.20%); Asset Allocation Fund -- U.S. Clearing, A
Division of Fleet Securities Inc., FBO#147-97697-11, Ray Wayne Prince, 11010
Stephens Road, Berlin Heights, OH 44814-9673 (22.65%); U.S. 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
(7.45%); U.S. Clearing, A Division of Fleet Securities Inc., FBO#175-97327-10,
Margaret Ann Gillenwater, 2525 E. Prince Road #23, Tucson, AZ 85716-1146
(14.58%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#114-97238-17, Sara Mallow, IRA Account, 6415 NW 24th Street, Boca Raton,
FL 33434-4320 (22.83%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#166-98586-13, Pamela Ann Radamaker, 1001 Trainway Blvd. NE, Albuquerque,
NM 87112-6280 (13.12%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#194-97099-17, James Kenneth Winter, IRA Rollover Account, 28 South Fork
Cove, Senatobia, MS 38668-6329 (5.26%); Small Cap Value Fund -- U.S. Clearing,
A Division of Fleet Securities Inc., FBO#104-32732-16, Hilda Brandt, 3900
North Charles Street, Baltimore, MD 21218-1724 (28.64%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#150-98301-11, N. Clifford Nelson Jr.,
58 Middlebury Road, Orchard Park, NY 14127-3581 (18.05%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#102-60254-19, Frederick W. Geissinger,
601 NW 2nd Street, Evansville, IN 47708-1013 (17.92%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#103-97564-14, Thomas X. McKenna, 170
Turtle Creek Drive, Tequesta, FL 33469-1547 (12.05%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#103-31296-18, Edward U. Roddy III, 109
Angler Avenue, Palm Beach, FL 33480-3101 (8.82%); U.S. Clearing, A Division of
Fleet Securities Inc., FBO#165-26664-29, Special Risk Underwriters, P.O. Box
54699, Phoenix, AZ 85078-4699 (5.66%); High Quality Bond Fund -- U.S.
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 (71.89%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#013-02964-11, Jane L. Grayhurst, 770 Boylston St., Apt. 10-G, Boston, MA
02199-7709 (15.64%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#132-90090-11, Virginia Holmes, 303 Bella Vista Drive, Ithaca, NY
14850-5774 (12.21%)
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<PAGE>
As of February 9, 2000, the name, address and share ownership of the
entities or persons that held of record or beneficially more than 5% of the
outstanding Prime B Shares of each of Galaxy's investment portfolios were as
follows: Equity Growth Fund -- U.S. 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 (19.75%); U.S. 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 (12.76%); U.S.
Clearing, A Division of Fleet Securities Inc., FBO#183-97247-11, W.P. Fleming,
66500 E. 253rd, Grove, OK 74344-6163 (5.87%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#024-90318-16, Lynn C. Sherrie, IRA Rollover, P.O. Box 316,
Wilson, NY 14172-0316 (12.39%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#221-00085-18, Walter M. Swiecicki & Cathleen Swiecicki JTWROS, 119 Old
Beekman Road, Monmouth Junction, NJ 08852-3114 (10.69%); International Equity
Fund -- U.S. 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, 165 West
31st St., New York, NY 10001-3405 (80.25%); Growth and Income Fund -- U.S.
Clearing, A Division of Fleet Securities Inc., FBO#147-97497-13, Martin Allen
Sante, 8858 Moanalua Way, Diamondhead, MS 39525-3760 (28.95%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#103-31744-16, Irwin Luftig & Elaine
Luftig, 6119 Bear Creek Ct., Lake Worth, FL 33467-6812 (19.09%); U.S. Clearing,
A Division of Fleet Securities Inc., FBO#147-29019-15, Walter W. Quan, 2617
Skyline Drive, Lorain, OH 44053-2243 (15.84%); U.S. Clearing, A Division of
Fleet Securities Inc., FBO#014-90365-19, Peter Burr Bickford, 65 A. Lazell
Street, Hingham, MA 02043-4403 (7.92%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#108-000116-10, Michael Kennedy & Carleen Kennedy JTWROS, 12
Walton Avenue, Locust Valley, NY 11560-1227 (5.83%); U.S. Clearing Corp.,
FBO#148-28677-18, Linda M. Berke & Michael E. Berke JTTEN, 30941 Westwood Rd.,
Farmington Hills, MI 48331-1466 (16.24%); Asset Allocation Fund -- U.S.
Clearing, A Division of Fleet Securities Inc., FBO#138-97818-14, Carol Y.
Foster, 524 Marie Avenue, Blountstown, FL 32424-1218 (9.84%); U.S. Clearing, A
Division of Fleet Securities Inc., FBO#102-92974-11, Ann E. Herzog, 74 Tacoma
Street, Staten Island, NY 10304-4222 (9.39%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#166-98559-16, Ann P. Sargent, 422 Los Encinos Avenue, San
Jose, CA 95134-1336 (6.26%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#166-97970-19, Alicia E. Schober, 10139 Ridgeway Drive, Cupertino, CA
95014-2658 (6.07%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#194-14889-16, Paul R. Thornton & Karin Z. Thornton, JTTEN, 1207 Oak Glen
Lane, Sugarland, TX 77479-6175 (5.58%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#147-29049-19, Randall Prince, Rt. 1, Box 865, Turtletown,
TN 37391-9700 (5.93%); Small Cap Value Fund -- U.S. Clearing, A Division of
Fleet Securities Inc., FBO#147-97574-19, Ray William Mominey, 1340 San Cristobal
Villa, Punta Gorda, FL 33983-6618 (16.77%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#111-98315-17, Thomas J. Bernfield, 185 West End Avenue,
Apt. 21D, New York, NY 10023-5548 (10.68%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#107-30623-15, Andrejs Zvejnieks, 2337 Christopher Walk,
Atlanta, GA 30327-1110 (7.24%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#180-98472-11, Rufus O. Eddins, Jr., IRA Rollover, 360 Dominion Circle,
Knoxville, TN 37922-2750 (5.63%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#221-97250-13, Michael A. Veschi, 106 Exmoor Court, Leesburg, VA
20176-2049 (5.41%); High Quality Bond Fund -- U.S. Clearing, A Division of Fleet
Securities Inc., FBO#200-70099-19, Neil C. Feldman, 41
-96-
<PAGE>
Windham Way, Englishtown, NJ 07726-8216 (27.85%); U.S. Clearing, A Division of
Fleet Securities Inc., FBO#119-97697-10, Ira Zornberg, 4219 Nautilus Avenue,
Brooklyn, NY 11224-1019 (11.23%); U.S. Clearing, A Division of Fleet
Securities Inc., FBO#013-03576-19, Louise Brown & Sandra Fontaine JTTEN, 172
High Street, Woonsocket, RI 02895-4311 (5.00%); U.S. Clearing, A Division of
Fleet Securities Inc., FBO# 147-24459-13, Jay Robert Klein, 26800 Amhearst
Circle #209, Cleveland, OH 44122-7572 (11.06%); U.S. Clearing, A Division of
Fleet Securities Inc., FBO#102-93287-11, Marjorie Dion, 301 Raimond Street,
Yephank, NY 11980-9725 (8.02%); U.S. Clearing, A Division of Fleet Securities
Inc., FBO#102-68909-11, Marjorie Dion, 301 Raimond Street, Yephank, NY
11980-9725 (10.57%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#157-98031-13, Patricia Fusco, 112 E. Chapel Avenue, Cherry Hill, NJ
08034-1204 (7.17%); U.S. Clearing, A Division of Fleet Securities Inc.,
FBO#238-97175-19, Marie Gottfried, Rollover IRA Account, 10208 Andover Coach
Circle H-2, Lake Worth, FL 33467-8158 (5.31%).
As of February 9, 2000, the name, address and share 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
Street, Rochester, NY 14638 (12.36%); Silverstream Software Inc., c/o Norstar
Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (5.13%); U.S.
Treasury Money Market Fund -- Loring Walcott Client Sweep Account, c/o Norstar
Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (21.63%);
Equity Value Fund -- Fleet Savings Plus- Equity Value, c/o Norstar Trust
Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (25.00%); Equity
Growth Fund -- Fleet Savings - Equity Growth, c/o Norstar Trust Co./Gales & Co.,
159 East Main Street, Rochester, NY 14638 (23.00%); Nusco Retiree Health VEBA
Trust, c/o Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY
14638 (6.91%); International Equity Fund -- FFG International Equity Fund, c/o
Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638
(12.24%); Fleet Savings Plus - Intl. Equity, c/o Norstar Trust Co./Gales & Co.,
159 East Main Street, Rochester, NY 14638 (10.45%); Intermediate Government
Income Fund -- Nusco Retiree Health VEBA Trust, c/o Norstar Trust Co./Gales &
Co., 159 East Main Street, Rochester, NY 14638 (6.45%); Strategic Equity Fund --
FFG Retirement & Pension VDG, c/o Fleet Financial Group, 159 East Main Street,
Rochester, NY 14638 (93.85%); High Quality Bond Fund -- Fleet Savings Plus Plan
- - HQ Bond, c/o Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester,
NY 14638 (18.49%); Short-Term Bond Fund -- Witicox & Gibbs Retirement Plan, c/o
Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638
(5.14%); Asset Allocation Fund -- Fleet Savings Plus - Asset Allocation, c/o
Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638
(26.66%); Small Company Equity Fund -- Fleet Savings Plus - Small Company, c/o
Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638
(32.64%); Tax-Exempt Bond Fund -- Nusco Retiree Health VEBA Trust, c/o Norstar
Trust Co./ Gales & Co., 159 East Main Street, Rochester, NY 14638 (35.99%);
Corporate Bond Fund -- Cole Hersee Pension Plan, c/o Norstar Trust Co./Gales &
Co., 159 East Main Street, Rochester, NY 14638 (7.92%); Growth and Income Fund
- -- Fleet Savings Plus - Growth Income, c/o Norstar Trust Co./Gales & Co., 159
East Main Street, Rochester, NY 14638 (43.28%); Crompton & Knowles IARP, c/o
Norstar Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638
(9.55%); Small Cap Value Fund -- FFG Emp. Ret. Misc. Assets SNC, c/o Norstar
Trust Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (25.80%);
Institutional
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<PAGE>
Government Fund -- Duncanson & Holt Inc., c/o Norstar Trust Co./Gales & Co.,
159 East Main Street, Rochester, NY 14638 (5.42%); New Jersey Municipal Bond
Fund -- Perillo Tours, c/o Norstar Trust Co./Gales & Co., 159 East Main
Street, Rochester, NY 14638 (22.20%); Royal Chambord IMA, c/o Norstar Trust
Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (11.10%); McKee
Wendell A. Martial Trust, c/o Norstar Trust Co./Gales & Co., 159 East Main
Street, Rochester, NY 14638 (11.02%); Varco Inc. IMA, c/o Norstar Trust
Co./Gales & Co., 159 East Main Street, Rochester, NY 14638 (5.55%); Terry,
Julia Lee Inv. Adv., c/o Norstar Trust Co./Gales & Co., 159 East Main Street,
Rochester, NY 14638 (5.22%); Tieman Diane V IA, c/o Norstar Trust Co./Gales &
Co., 159 East Main Street, Rochester, NY 14638 (5.04%).
As of February 9, 2000, the name, address and share ownership of the
entities or persons that held of record or beneficially more than 5% of the
outstanding shares of Galaxy's Prime Reserves, Government Reserves, Tax-Exempt
Reserves, Large Company Index, U.S. Treasury Index and Municipal Index Funds
were as follows: Prime Reserves -- U.S. Clearing, 26 Broadway, New York, NY
10004 (100%); Government Reserves -- U.S. Clearing, 26 Broadway, New York, NY
10004 (100%); Tax-Exempt Reserves -- U.S. Clearing, 26 Broadway, New York, NY
(100%); Large Company Index -- Gales & Co., Fleet Investment Services, Mutual
Funds Unit - NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001
(37.42%); Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (5.17%); U.S.
Treasury Index -- Gales & Co., Fleet Investment Services, Mutual Funds Unit -
NY/RO/T04A, 159 East Main Street, Rochester, NY 14638-0001 (8.29%); Gales & Co.,
Fleet Investment Services, Rochester, NY 14638-0001 (15.35%); Municipal Index --
Gales & Co., Fleet Investment Services, Mutual Funds Unit - NY/RO/T04A, 159 East
Main Street, Rochester, NY 14638-0001 (8.96%); Bob & Co., c/o Bank of Boston,
Attn: Mutual Funds Dept. 45-02-06, P.O. Box 1809, Boston, MA 02105-1809
(18.08%); U.S. Clearing Corp., FBO#979-11223-11, Steven Starker, 7 Flagler
Drive, Rye, NY 10580-1951 (5.18%).
As of February 9, 2000, the following Galaxy investment portfolios had
no person or entity hold of record or beneficially more than 5% of the following
portfolios' outstanding Trust Shares: Equity Income Fund, New York Municipal
Bond Fund, Connecticut Municipal Bond Fund, Massachusetts Municipal Bond Fund,
Rhode Island Municipal Bond Fund, Massachusetts Municipal Money Market Fund,
Connecticut Municipal Money Market Fund, Government Money Fund and the
Tax-Exempt Money Market Fund.
FINANCIAL STATEMENTS
The Semi-Annual Reports to Shareholders with respect to the Predecessor
Funds for the period ended November 30, 1999 have been filed with the SEC. The
financial statements in such Semi-Annual Reports are [__________________
________________] this Statement of Additional Information. No
other parts of the Semi-Annual Reports to Shareholders are [___________
__________________]. The financial statements and financial highlights included
in such Semi-Annual Reports are unaudited.
The Annual Reports to Shareholders with respect to the Predecessor Funds
for the fiscal year ended May 31, 1999 have been filed with the SEC. The
financial statements contained in such Annual Reports are [_________________
__________________] this Statement of Additional Information. No
other parts of the Annual Reports to Shareholders are [__________________
___________]. The financial statements and financial highlights for the
Predecessor Funds included in such Annual Reports to Shareholders have been
audited by the Predecessor Funds' independent accountants, [_________________
_________________], whose reports thereon also appear in such Annual
Reports and are also [______________________________]. The financial statements
in such Annual Reports have been [______________________________] in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
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APPENDIX A
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current opinion of
credit worthiness of an obligor with respect to financial obligations having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be
A-1
<PAGE>
evidenced by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.
A-2
<PAGE>
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the 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
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of
A-3
<PAGE>
principal and interest is strong, the relative degree of safety is not as high
as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
A-4
<PAGE>
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower
A-5
<PAGE>
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," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" indicates poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa." The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater economic
stress.
A-6
<PAGE>
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
A-7
<PAGE>
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC," "CC", and "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
A-8
<PAGE>
"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by
Thomson Financial BankWatch to non-investment grade long-term debt. Such issues
are regarded as having speculative characteristics regarding the likelihood of
timely repayment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's note rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
A-9
<PAGE>
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-10
<PAGE>
APPENDIX B
As stated above, the Funds may enter into futures transactions for hedging
purposes. The following is a description of such transactions.
I. INTEREST RATE FUTURES CONTRACTS
USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are established in both
the cash market and the futures market. In the cash market, bonds are purchased
and sold with payment for the full purchase price of the bond being made in
cash, generally within five business days after the trade. In the futures
market, only a contract is made to purchase or sell a bond in the future for a
set price on a certain date. Historically, the prices for bonds established in
the futures markets have tended to move generally in the aggregate in concert
with the cash market prices and have maintained fairly predictable
relationships. Accordingly, the Funds may use interest rate futures contracts as
a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures contract
sales to protect against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which they
hope to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate futures
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The specific
securities delivered or taken, respectively, at settlement date, would not be
determined until at or near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by a Fund's entering
into a futures contract purchase for the same aggregate amount of the specific
type of financial instrument and the same delivery date. If the price of the
sale exceeds the price of the offsetting purchase, the Fund immediately is paid
the difference and thus realizes a gain. If the offsetting purchase price
exceeds the sale price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by a Fund
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase
B-1
<PAGE>
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges -- principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate futures contracts for
which there exists a public market, including, without limitation, the foregoing
instruments.
EXAMPLE OF FUTURES CONTRACT SALE. The Funds would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by a particular
Fund tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury bonds"). Fleet wishes to fix the current market
value of this portfolio security until some point in the future. Assume the
portfolio security has a market value of 100, and Fleet believes that, because
of an anticipated rise in interest rates, the value will decline to 95. The Fund
might enter into futures contract sales of Treasury bonds for an equivalent of
98. If the market value of the portfolio security does indeed decline from 100
to 95, the equivalent futures market price for the Treasury bonds might also
decline from 98 to 93.
In that case, the five point loss in the market value of the portfolio
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
Fleet could be wrong in its forecast of interest rates, and the equivalent
futures market price could rise above 98. In this case, the market value of the
portfolio securities, including the portfolio security being protected, would
increase. The benefit of this increase would be reduced by the loss realized on
closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE. A Fund would engage in an interest
rate futures contract purchase when it is not fully invested in long-term bonds
but wishes to defer for a time
B-2
<PAGE>
the purchase of long-term bonds in light of the availability of advantageous
interim investments, e.g., shorter term securities whose yields are greater than
those available on long-term bonds. A Fund's basic motivation would be to
maintain for a time the income advantage from investing in the short-term
securities; the Fund would be endeavoring at the same time to eliminate the
effect of all or part of an expected increase in market price of the long-term
bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the Fund
may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. Fleet wishes to fix the current market price
(and thus 10% yield) of the long-term bond until the time (four months away in
this example) when it may purchase the bond. Assume the long-term bond has a
market price of 100, and Fleet believes that, because of an anticipated fall in
interest rates, the price will have risen to 105 (and the yield will have
dropped to about 9 1/2%) in four months. The Fund might enter into futures
contracts purchases of Treasury bonds for an equivalent price of 98. At the same
time, the Fund would assign a pool of investments in short-term securities that
are either maturing in four months or earmarked for sale in four months, for
purchase of the long-term bond at an assumed market price of 100. Assume these
short-term securities are yielding 15%. If the market price of the long-term
bond does indeed rise from 100 to 105, the equivalent futures market price for
Treasury bonds might also rise from 98 to 103. In that case, the 5 point
increase in the price that the Fund pays for the long-term bond would be offset
by the 5 point gain realized by closing out the futures contract purchase.
Fleet could be wrong in its forecast of interest rates; long-term interest
rates might rise to above 10%; and the equivalent futures market price could
fall below 98. If short-term rates at the same time fall to 10% or below, it is
possible that the Fund would continue with its purchase program for long-term
bonds. The market price of available long-term bonds would have decreased. The
benefit of this price decrease, and thus yield increase, will be reduced by the
loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued incremental
income will be reduced by the loss realized on closing out the futures contract
purchase. In each transaction, expenses would also be incurred.
II. MUNICIPAL BOND INDEX FUTURES CONTRACTS
A municipal bond index assigns relative values to the bonds included in the
index and the index fluctuates with changes in the market values of the bonds so
included. The Chicago Board of Trade has designed a futures contract based on
the Bond Buyer Municipal Bond Index. This Index is composed of 40 term revenue
and general obligation bonds, and its composition is updated regularly as new
bonds meeting the criteria of the Index are issued and existing bonds mature.
The Index is intended to provide an accurate indicator of trends and changes in
the
B-3
<PAGE>
municipal bond market. Each bond in the Index is independently priced by six
dealer-to-dealer municipal bond brokers daily. The 40 prices then are averaged
and multiplied by a coefficient. The coefficient is used to maintain the
continuity of the Index when its composition changes. The Chicago Board of
Trade, on which futures contracts based on this Index are traded, as well as
other U.S. commodities exchanges, are regulated by the Commodity Futures Trading
Commission. Transactions on such exchange are cleared through a clearing
corporation, which guarantees the performance of the parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. The Fund may do so either to hedge the value of its portfolio as
a whole, or to protect against declines occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, the Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, but a long futures
position may be terminated without a corresponding purchase of securities.
Closing out a futures contract sale prior to the settlement date may be
effected by the Fund's entering into a futures contract purchase for the same
aggregate amount of the index involved and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by a Fund's entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
EXAMPLE OF A MUNICIPAL BOND INDEX FUTURES CONTRACT
Consider a portfolio manager holding $1 million par value of each of the
following municipal bonds on February 2 in a particular year.
<TABLE>
<CAPTION>
Current Price
(points and
Maturity thirty-seconds
Issue Coupon Issue Date Date of a point)
- ------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Ohio HFA 9 3/8 5/05/83 5/1/13 94-2
NYS Power 9 3/4 5/24/83 1/1/17 102-0
San Diego, CA IDR 10 6/07/83 6/1/18 100-14
Muscatine, IA Elec 10 5/8 8/24/83 1/1/08 103-16
Mass Health & Ed 10 9/23/83 7/1/16 100-12
</TABLE>
The current value of the portfolio is $5,003,750.
To hedge against a decline in the value of the portfolio, resulting from a
rise in interest rates, the portfolio manager can use the municipal bond index
futures contract. The current value
B-4
<PAGE>
of the Municipal Bond Index is 86-09. Suppose the portfolio manager takes a
position in the futures market opposite to his or her cash market position by
selling 50 municipal bond index futures contracts (each contract represents
$100,000 in principal value) at this price.
On March 23, the bonds in the portfolio have the following values:
<TABLE>
<S> <C>
Ohio HFA 81-28
NYS Power 98-26
San Diego, CA IDB 98-11
Muscatine, IA Elec 99-24
Mass Health & Ed 97-18
</TABLE>
The bond prices have fallen, and the portfolio has sustained a loss of
$130,312. This would have been the loss incurred without hedging. However, the
Municipal Bond Index also has fallen, and its value stands at 83-27. Suppose now
the portfolio manager closes out his or her futures position by buying back 50
municipal bond index futures contracts at this price.
The following table provides a summary of transactions and the results of
the hedge.
<TABLE>
<CAPTION>
CASH MARKET FUTURES MARKET
----------- --------------
<S> <C> <C>
February 2 $5,003,750 long posi- Sell 50 Municipal Bond
tion in municipal futures contracts at
bonds 86-09
March 23 $4,873,438 long posi- Buy 50 Municipal Bond
tion in municipal futures contracts at
bonds 83-27
--------------------- -----------------------
$130,312 Loss $121,875 Gain
</TABLE>
While the gain in the futures market did not entirely offset the loss in
the cash market, the $8,437 loss is significantly lower than the loss which
would have been incurred without hedging.
The numbers reflected in this appendix do not take into account the effect
of brokerage fees or taxes.
III. MARGIN PAYMENTS
Unlike purchases or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with Galaxy's custodian an amount of cash or cash equivalents, known as initial
margin, based on the value of the contract. The nature of initial margin in
futures transactions is different from that of margin in security transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the
B-5
<PAGE>
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. Subsequent payments, called variation margin, to and from the
broker, will be made on a daily basis as the price of the underlying instruments
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as marking-to-the-market. For example, when a
particular Fund has purchased a futures contract and the price of the contract
has risen in response to a rise in the underlying instruments, that position
will have increased in value and the Fund will be entitled to receive from the
broker a variation margin payment equal to that increase in value. Conversely,
where the Fund has purchased a futures contract and the price of the futures
contract has declined in response to a decrease in the underlying instruments,
the position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, Fleet may elect to close the position by taking an opposite
position, subject to the availability of a secondary market, which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or gain.
IV. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by the Funds
as hedging devices. One risk arises because of the imperfect correlation between
movements in the price of the futures and movements in the price of the
instruments that are the subject of the hedge. The price of the futures may move
more than or less than the price of the instruments being hedged. If the price
of the futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, a Fund would
be in a better position than if it had not hedged at all. If the price of the
instruments being hedged has moved in a favorable direction, this advantage will
be partially offset by the loss on the futures. If the price of the futures
moves more than the price of the hedged instruments, the Funds involved will
experience either a loss or gain on the futures, which will not be completely
offset by movements in the price of the instruments which are the subject of the
hedge. To compensate for the imperfect correlation of movements in the price of
instruments being hedged and movements in the price of futures contracts, a Fund
may buy or sell futures contracts in a greater dollar amount than the dollar
amount of instruments being hedged if the volatility over a particular time
period of the prices of such instruments has been greater than the volatility
over such time period of the futures, or if otherwise deemed to be appropriate
by the investment adviser. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
instruments being hedged is less than the volatility over such time period of
the futures contract being used, or if otherwise deemed to be appropriate by
Fleet. It is also possible that, where a Fund had sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of instruments held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value in its
portfolio securities.
B-6
<PAGE>
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by a reduction in
the price of the instruments that were to be purchased.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with Galaxy's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions that could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the adviser may still not result in
a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, a Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single
B-7
<PAGE>
trading day. Once the daily limit has been reached in the contract, no trades
may be entered into at a price beyond the limit, thus preventing the liquidation
of open futures positions. The trading of futures contracts is also subject to
the risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
house or other disruptions of normal activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Successful use of futures by the Funds is also subject to Fleet's ability
to predict correctly movements in the direction of the market. For example, if a
particular Fund has hedged against the possibility of a decline in the market
adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Funds may have to sell
securities at a time when it may be disadvantageous to do so.
B-8
<PAGE>
THE GALAXY FUND
FORM N-1A
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) (1) Declaration of Trust dated March 31, 1986.(4)
(2) Amendment No. 1 to the Declaration of Trust dated as of
April 26, 1988.(4)
(3) Certificate pertaining to Classification of Shares
pertaining to Class A and Class B shares.(4)
(4) Certificate of Classification of Shares pertaining to
Class C, Class D and Class E shares.(4)
(5) Certificate of Classification of Shares pertaining to
Class C - Special Series 1 and Class D - Special Series
1 shares.(4)
(6) Certificate of Classification of Shares pertaining to
Class F shares; Class G - Series 1 shares; Class G -
Series 2 shares; Class H - Series 1 shares; Class H -
Series 2 shares; Class I - Series 1 shares; Class I -
Series 2 shares; Class J - Series 1 shares; and Class J
- Series 2 shares.(4)
(7) Certificate of Classification of Shares pertaining to
Class K - Series 1 shares; Class K - Series 2 shares;
Class L - Series 1 shares; Class L - Series 2 shares;
Class M Series 1 shares; Class M - Series 2 shares;
Class N - Series 1 shares; Class N Series 2 shares;
Class O - Series 1 shares; and Class O - Series 2
shares.(4)
(8) Certificate of Classification of Shares pertaining to
Class P - Series 1 shares; Class P - Series 2 shares;
Class Q - Series 1 shares; Class Q - Series 2 shares;
Class R Series 1 shares; Class R - Series 2 shares; and
Class S shares.(4)
(9) Certificate of Classification of Shares pertaining to
Class T - Series 1 shares and Class T - Series 2
shares.(4)
(10) Certificate of Classification of Shares pertaining to
Class U - Series 1 shares and Class U - Series 2 shares;
Class V shares; Class
<PAGE>
W shares; and Class X - Series 1 shares and Class X -
Series 2 shares.(8)
(11) Certificate of Classification of Shares pertaining to
Class C - Special Series 2 shares; Class H - Series 3
shares; Class J - Series 3 shares; Class K - Series 3
shares; Class L - Series 3 shares; Class M - Series 3
shares; Class N - Series 3 shares; and Class U - Series
3 shares.(8)
(l2) Certificate of Classification of Shares pertaining to
Class A - Special Series 2 shares.(8)
(13) Certificate of Classification of Shares pertaining to
Class Y - Series 1 shares and Class Y - Series 2 shares;
Class Z - Series 1 shares, Class Z - Series 2 shares and
Class Z - Series 3 shares; and Class AA - Series 1
shares, Class AA - Series 2 shares and Class AA - Series
3 shares.(8)
(14) Certificate of Classification of Shares pertaining to
Class BB, Class CC and Class DD shares.(8)
(15) Certificate of Classification of Shares pertaining to
Class D - Special Series 2 shares; Class G - Series 3
shares; Class I - Series 3 shares; and Class X - Series
3 shares.(8)
(16) Certificate of Classification of Shares pertaining to
Class C - Special Series 3 shares; Class C - Special
Series 4 shares; Class D - Special Series 3 shares;
Class D - Special Series 4 shares; Class G - Series 4
shares; Class G Series 5 shares; Class H - Series 4
shares; Class H - Series 5 shares; Class I - Series 4
shares; Class I - Series 5 shares; Class J - Series 4
shares; Class J - Series 5 shares; Class K - Series 4
shares; Class K - Series 5 shares; Class L - Series 4
shares; Class L - Series 5 shares; Class M - Series 4
shares; Class M - Series 5 shares; Class N - Series 4
shares; Class N - Series 5 shares; Class U - Series 4
shares; Class U - Series 5 shares; Class X - Series 4
shares; Class X - Series 5 shares; Class AA - Series 4
shares; and Class AA - Series 5 shares.(8)
(17) Certificate of Classification of Shares pertaining to
Class EE - Series shares and Class EE - Series 2 shares;
Class V - Special Series 1 shares; and Class W - Special
Series 1 shares.(11)
-2-
<PAGE>
(18) Certificate of Classification of Shares pertaining to
Class A - Special Series 3 shares; Class F - Special
Series 2 shares; Class E - Special Series 2 shares;
Class L - Series 6 shares; Class D - Special Series 5
shares; Class J - Series 6 shares; Class R - Series 3
shares; Class N - Series 6 shares; Class U - Series 6
shares; Class H - Series 6 shares; and Class G - Series
6 shares.(12)
(19) Certificate of Classification of Shares pertaining to
Class FF shares; Class GG shares; Class HH - Series 1
shares and Class HH - Series 2 shares; Class II shares;
Class JJ - Series 1 shares, Class JJ - Series 2 shares
and Class JJ - Series 3 shares; Class KK - Series 1
shares, Class KK - Series 2 shares and Class KK - Series
3 shares; Class LL - Series 1 shares, Class LL - Series
2 shares and Class LL - Series 3 shares; and Class MM -
Series 1 shares, Class MM - Series 2 shares and Class MM
- Series 3 shares.(14)
(20) Form of Certificate of Classification of Shares
pertaining to Class MM - Series 4 shares.(14)
(b) Code of Regulations.(4)
(c) Article V, Section 5.1, and Article VIII, Section 8.1,
of Registrant's Declaration of Trust incorporated herein
by reference as Exhibit (a)(1), and Amendment No. 1 to
Registrant's Declaration of Trust incorporated herein by
reference as Exhibit (a)(2).
(d) (1) Advisory Agreement between the Registrant and Fleet
Investment Advisors Inc. with respect to the Money
Market, Government, U.S. Treasury, Tax-Exempt,
Institutional Government Money Market (formerly
Institutional Treasury Money Market), Short-Term Bond,
Intermediate Government Income (formerly Intermediate
Bond), Corporate Bond, High Quality Bond, Tax-Exempt
Bond, New York Municipal Bond, Connecticut Municipal
Bond, Massachusetts Municipal Bond, Rhode Island
Municipal Bond, Equity Value, Equity Growth, Equity
Income, International Equity, Small Company Equity and
Asset Allocation Funds dated as of May 19, 1994.(2)
(2) Addendum No. 1 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with
respect to the Connecticut Municipal Money Market,
Massachusetts Municipal Money
-3-
<PAGE>
Market, Growth and Income and Small Cap Value Funds
dated as of December 1, 1995.(1)
(3) Addendum No. 2 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with
respect to the New Jersey Municipal Bond Fund, MidCap
Equity Fund and Strategic Equity Fund dated as of
March 3, 1998.(5)
(4) Addendum No. 3 to Advisory Agreement dated September 18,
1998 between the Registrant and Fleet Investment
Advisors Inc. with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves.(8)
(5) Form of Addendum No. 4 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with
respect to the New York Municipal Money Market Fund.(11)
(6) Form of Addendum No. 5 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with
respect to the Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida
Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II.(14)
(7) Sub-Advisory Agreement between Fleet Investment Advisors
Inc. and Oechsle International Advisors, LLC with
respect to the International Equity Fund dated as of
October 8, 1998.(8)
(e) (1) Distribution Agreement between the Registrant and
Provident Distributors, Inc. dated as of December 1,
1999.(12)
(2) Form of Amendment No. 1 to Distribution Agreement
between the Registrant and Provident Distributors, Inc.
with respect to the New York Municipal Money Market
Fund.(11)
(3) Form of Amendment No. 2 to Distribution Agreement
between the Registrant and Provident Distributors, Inc.
with respect to the Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida
Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut
-4-
<PAGE>
Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II.(14)
(f) The Galaxy Fund/The Galaxy VIP Fund/Galaxy Fund II
Deferred Compensation Plan and Related Agreement
effective as of January 1, 1997.(2)
(g) (1) Global Custody Agreement between the Registrant and
The Chase Manhattan Bank dated as of
November 1, 1991.(4)
(2) Form of Amendment to Global Custody Agreement between
the Registrant and The Chase Manhattan Bank with respect
to the New Jersey Municipal Bond, MidCap Equity and
Strategic Equity Funds.(3)
(3) Form of Amendment to Global Custody Agreement between
the Registrant and The Chase Manhattan Bank with respect
to the Prime Reserves, Government Reserves and
Tax-Exempt Reserves.(5)
(4) Form of Amendment to Global Custody Agreement between
the Registrant and The Chase Manhattan Bank with respect
to the New York Municipal Money Market Fund.(11)
(5) Form of Amendment to Global Custody Agreement between
the Registrant and The Chase Manhattan Bank with respect
to the Institutional Money Market Fund, Institutional
Treasury Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II.(14)
(6) Amendment dated December 2, 1998 to Global Custody
Agreement between the Registrant and The Chase Manhattan
Bank.(9)
(7) Consent to Assignment of Global Custody Agreement
between the Registrant, The Chase Manhattan Bank, N.A.
and 440 Financial Group of Worcester, Inc. to The
Shareholder Services Group, Inc. d/b/a 440 Financial
dated March 31, 1995.(11)
(h) (1) Administration Agreement between the Registrant and
PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.) dated as of June 1, 1997.(3)
-5-
<PAGE>
(2) Amendment No. 1 dated March 3, 1998 to Administration
Agreement between the Registrant and PFPC Inc. (formerly
known as First Data Investor Services Group, Inc.) with
respect to the New Jersey Municipal Bond Fund, MidCap
Equity Fund and Strategic Equity Fund.(5)
(3) Amendment No. 2 dated as of March 5, 1998 to
Administration Agreement between the Registrant and PFPC
Inc. (formerly known as First Data Investor Services
Group, Inc.).(6)
(4) Amendment No. 3 dated as of September 18, 1998 to
Administration Agreement between the Registrant and PFPC
Inc. (formerly known as First Data Investor Services
Group, Inc.) with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves Fund.(8)
(5) Amendment No. 4 dated as of September 10, 1998 to
Administration Agreement between the Registrant and PFPC
Inc. (formerly known as First Data Investor Services
Group, Inc.).(9)
(6) Amendment No. 5 dated as of December 1, 1999 to
Administration Agreement between Registrant and PFPC
Inc. (formerly known as First Data Investor Services
Group, Inc.).(12)
(7) Form of Amendment No. 6 to Administration Agreement
between Registrant and PFPC Inc. (formerly known as
First Data Investor Services Group, Inc.) with respect
to the New York Municipal Money Market Fund.(11)
(8) Form of Amendment No. 7 to Administration Agreement
between Registrant and PFPC Inc. (formerly known as
First Data Investor Services Group, Inc.) with respect
to the Institutional Money Market Fund, Institutional
Treasury Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II.(14)
(9) Transfer Agency and Services Agreement between the
Registrant and PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) dated as of June 1,
1997.(3)
-6-
<PAGE>
(10) Amendment No. 1 dated March 3, 1998 to Transfer Agency
and Services Agreement between the Registrant and PFPC
Inc. (formerly known as First Data Investor Services
Group, Inc.) with respect to the New Jersey Municipal
Bond Fund, MidCap Equity Fund and Strategic Equity
Fund.(5)
(11) Amendment No. 2 dated as of March 5, 1998 to Transfer
Agency and Services Agreement between the Registrant and
PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.).(6)
(12) Amendment No. 3 dated as of September 18, 1998 to
Transfer Agency and Services Agreement between the
Registrant and PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) with respect to the Prime
Reserves, Government Reserves and Tax-Exempt Reserves
Fund.(8)
(13) Amendment No. 4 dated as of September 10, 1998 to
Transfer Agency and Services Agreement between
Registrant and PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.).(9)
(14) Amendment No. 5 dated as of September 9, 1999 to
Transfer Agency and Services Agreement between
Registrant and PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.).(12)
(15) Amendment No. 6 dated as of December 2, 1999 to Transfer
Agency and Services Agreement between Registrant and
PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.).(12)
(16) Form of Amendment No. 7 to Transfer Agency and Services
Agreement between Registrant and PFPC Inc. (formerly
known as First Data Investor Services Group, Inc.) with
respect to the New York Municipal Money Market Fund.(11)
(17) Form of Amendment No. 8 to Transfer Agency and Services
Agreement between Registrant and PFPC Inc. (formerly
-7-
<PAGE>
known as First Data Investor Services Group, Inc). with
respect to the Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida
Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II.(14)
(18) Shareholder Services Plan for Trust Shares and Retail A
Shares and Related Forms of Servicing Agreements.(14)
(19) Shareholder Services Plan for BKB Shares and Related
Forms of Servicing Agreements.(14)
(20) Credit Agreement dated as of December 29, 1999 among the
Registrant, The Galaxy VIP Fund, Galaxy Fund II, Various
Banks, Deutsche Bank Securities Inc. and Deutsche Bank
AG, New York Branch.(14)
(21) Form of Agreement and Plan of Reorganization between The
Galaxy Fund and Boston 1784 Funds.(13)
(i) (1) Opinion and consent of counsel dated
September 28, 1999.(10)
(2) Opinion and consent of counsel dated
December 3, 1999.(11)
(3) Opinion and Consent of counsel with respect to shares of
the Institutional Money Market Fund, Institutional
Treasury Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II to
be filed by amendment.
(j) (1) Consent of Drinker Biddle & Reath LLP.(14)
(2) Consent of Ropes & Gray.(14)
(3) Consent of Day, Berry and Howard LLP.(14)
(4) Consent of Independent Auditors to be filed by
amendment.
(k) None.
-8-
<PAGE>
(l) (1) Purchase Agreement between the Registrant and Shearson
Lehman Brothers Inc. dated July 24, 1986.(4)
(2) Purchase Agreement between the Registrant and Shearson
Lehman Brothers Inc. dated October 11, 1990 with respect
to the Treasury, Equity Growth, Equity Income,
International Equity and High Quality Bond Funds.(4)
(3) Purchase Agreement between the Registrant and SMA
Equities, Inc. dated December 30, 1991 with respect to
the Small Company Equity Fund, Short-Term Bond Fund,
Tax-Exempt Bond Fund, Asset Allocation Fund, and New
York Municipal Bond Fund.(4)
(4) Purchase Agreement between the Registrant and Allmerica
Investments, Inc. dated February 22, 1993 with respect
to the Connecticut Municipal Bond, Massachusetts
Municipal Bond, Rhode Island Municipal Bond and
Institutional Government Money Market (formerly
Institutional Treasury Money Market) Funds.(4)
(5) Purchase Agreement between the Registrant and 440
Financial Distributors, Inc. dated May 19, 1994 with
respect to the Corporate Bond Fund.(4)
(6) Purchase Agreement between the Registrant and First Data
Distributors, Inc. dated February 28, 1996 with respect
to the Connecticut Municipal Money Market, Massachusetts
Municipal Money Market Money, Growth and Income and
Small Cap Value Funds.(4)
(7) Purchase Agreement between the Registrant and First Data
Distributors, Inc. with respect to the New Jersey
Municipal Bond Fund.(5)
(8) Form of Purchase Agreement between the Registrant and
First Data Distributors, Inc. with respect to the MidCap
Equity Fund.(3)
(9) Purchase Agreement between the Registrant and First Data
Distributors, Inc. with respect to the Strategic Equity
Fund.(5)
(10) Purchase Agreement between the Registrant and First Data
Distributors, Inc. dated September 18, 1998 with respect
to the Prime Reserves, Government Reserves and
Tax-Exempt Reserves.(9)
-9-
<PAGE>
(11) Form of Purchase Agreement between the Registrant and
Provident Distributors, Inc. with respect to the New
York Municipal Money Market Fund.(14)
(12) Form of Purchase Agreement between the Registrant and
Provident Distributors, Inc. with respect to the
Institutional Money Market Fund, Institutional Treasury
Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II.(14)
(m) (1) Distribution and Services Plan for Retail B Shares and
Related Form of Servicing Agreement.(14)
(2) Distribution and Services Plan and Related Form of
Servicing Agreement with respect to the Prime Reserves,
Government Reserves and Tax-Exempt Reserves.(5)
(3) Distribution Plan for A Prime Shares.(6)
(4) Distribution and Services Plan for B Prime Shares and
Related Form of Servicing Agreement.(6)
(5) Distribution and Services Plan and Related Form of
Servicing Agreement with respect to Prime Shares of the
New York Municipal Money Market Fund, Connecticut
Municipal Money Market Fund and Massachusetts Municipal
Money Market Fund.(11)
(n) None.
(o) Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Class System.(14)
- -------------------
(1) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 27 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-4806 and 811-4636) as filed with the Commission
on March 4, 1996.
-10-
<PAGE>
(2) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 29 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 30, 1996.
(3) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 31 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 15, 1997.
(4) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 32 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on February 27, 1998.
(5) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 33 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on June 30, 1998.
(6) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 34 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on September 11, 1998.
(7) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 35 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on October 6, 1998.
(8) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 36 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 30, 1998.
(9) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 37 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on February 26, 1999.
(10) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 38 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on September 28, 1999.
(11) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 40 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 3, 1999.
(12) Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 41 to the Registrant's Registration Statement
on Form N-1A as filed with the Commission on December 29, 1999.
-11-
<PAGE>
(13) Filed electronically as Appendix II to the Combined Prospectus/Proxy
Statement and incorporated herein by reference to the Registrant's
Registration Statement on Form N-14 as filed with the Commission on
February 7, 2000.
(14) Filed herewith.
-12-
<PAGE>
Item 24. Persons Controlled By or Under Common Control with Registrant
Registrant is controlled by its Board of Trustees.
Item 25. Indemnification
Indemnification of the Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in Section
1.19 of the Distribution Agreement incorporated herein by reference as Exhibit
(e)(1), in Section 12 of the Global Custody Agreement incorporated herein by
reference as Exhibit (g)(1) and in Article 10 of the Transfer Agency and
Services Agreement incorporated herein by reference as Exhibit (h)(9). The
Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In
addition, Section 9.3 of the Registrant's Declaration of Trust dated March 31,
1986, incorporated herein by reference as Exhibit (a)(1), provides as follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all
liabilities and expenses (including amounts paid in satisfaction
of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the
defense or disposition of any action, suit or other proceeding,
whether civil or criminal, in which he may be involved or with
which he may be threatened, while as a Trustee or thereafter, by
reason of his being or having been such a Trustee EXCEPT with
respect to any matter as to which he shall have been adjudicated
to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, PROVIDED that as
to any matter disposed of by a compromise payment by such
person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received
a written opinion from independent legal counsel approved by the
Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty, or
the matter of bad faith had been adjudicated, it would in the
opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully
entitled, PROVIDED that no person may satisfy any right of
indemnity or reimbursement hereunder except out of the property
of the Trust. The Trustees may make advance payments in
connection with the indemnification under this Section 9.3,
PROVIDED that the indemnified person shall have given a written
undertaking to reimburse the Trust in the event it is
subsequently determined that he is not entitled to such
indemnification.
-13-
<PAGE>
The Trustees shall indemnify representatives and employees of
the Trust to the same extent that Trustees are entitled to
indemnification pursuant to this Section 9.3.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. (a) Business and Other Connections of Investment Adviser
Fleet Investment Advisors Inc. ("Fleet") is an investment
adviser registered under the Investment Advisers Act of 1940
(the "Advisers Act").
The list required by this Item 26 of officers and directors of
Fleet, together with information as to any business profession,
vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is
incorporated herein by reference to Schedules A and D of Form
ADV filed by Fleet pursuant to the Advisers Act (SEC File No.
801-20312).
(b) Business and Other Connections of Sub-Adviser
Oechsle International Advisors, LLC. ("Oechsle") is an
investment adviser registered under the Investment Advisers Act
of 1940 (the "Advisers Act").
The list required by this Item 26 of the officers of Oechsle,
together with information as to any business profession,
vocation or employment of a substantial nature engaged in by
such officers during the past two years, is incorporated herein
by reference to Schedules A and D of Form ADV filed by Oechsle
pursuant to the Advisers Act (SEC File No. 801-28111).
-14-
<PAGE>
Item 27. Principal Underwriter
(a) In addition to The Galaxy Fund, Provident Distributors, Inc.
(the "Distributor") currently acts as distributor for The Galaxy
VIP Fund, Galaxy Fund II, International Dollar Reserve Fund I,
Ltd., Provident Institutional Funds Trust, Columbia Common Stock
Fund, Inc., Columbia Growth Fund, Inc., Columbia International
Stock Fund, Inc., Columbia Special Fund, Inc., Columbia Small
Cap Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia
Balanced Fund, Inc., Columbia Daily Income Company, Columbia
U.S. Government Securities Fund, Inc., Columbia Fixed Income
Securities Fund, Inc., Columbia Municipal Bond Fund, Inc.,
Columbia High Yield Fund, Inc., Columbia National Municipal Bond
Fund, Inc., GAMNA Series Funds, Inc., WT Investment Trust,
Kalmar Pooled Investment Trust, The RBB Fund, Inc., Robertson
Stephens Investment Trust, HT Insight Funds Trust,
Hilliard-Lyons Government Fund, Inc., Hilliard-Lyons Growth
Fund, Inc., Hilliard-Lyons Research Trust, The BlackRock Funds,
Inc. (distributed by BlackRock Distributors, Inc., a
wholly-owned subsidiary of Provident Distributors, Inc.),
Northern Funds Trust (distributed by Northern Funds
Distributors, LLC, a wholly-owned subsidiary of Provident
Distributors, Inc.), The OffitBank Investment Fund, Inc.
(distributed by Offit Funds Distributor, Inc., a wholly-owned
subsidiary of Provident Distributors, Inc.), The OffitBank
Variable Insurance Fund, Inc. (distributed by Offit Funds
Distributor, Inc., a wholly-owned subsidiary of Provident
Distributors, Inc.).
(b) The information required by this Item 27 (b) with respect to
each director, officer, or partner of the Distributor is
incorporated by reference to Schedule A of Form BD filed by the
Distributor with the Securities and Exchange Commission pursuant
to the Securities Act of 1934, as amended (File No. 8-46564).
(c) The Distributor receives no compensation from the Registrant for
distribution of its shares other than payments for distribution
assistance pursuant to Registrant's Distribution and Services
Plan for Retail B Shares, Distribution and Services Plan for the
Prime Reserves, Government Reserves and Tax-Exempt Reserves,
Distribution Plan for A Prime Shares and Distribution and
Services Plan for B Prime Shares.
Item 28. Location of Accounts and Records
(1) Fleet Investment Advisors Inc., 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions
as investment adviser to all of the Registrant's Funds).
(2) Oechsle International Advisors, LLC, One International
Place, Boston, Massachusetts 02210 (records relating to
its functions as sub-investment adviser to the
International Equity Fund).
-15-
<PAGE>
(3) Provident Distributors Inc., Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania
19428-2961 (records relating to its functions as
distributor).
(4) PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.), 53 State Street, Mail Stop BOS
425, Boston, MA 02109 (records relating to its functions
as administrator).
(5) PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.), 4400 Computer Drive, Westborough,
MA 01581-5108 (records relating to its functions as
transfer agent).
(6) Drinker Biddle & Reath LLP, One Logan Square, 18th and
Cherry Streets, Philadelphia, Pennsylvania 19103
(Registrant's Declaration of Trust, Code of Regulations
and Minute Books).
(7) The Chase Manhattan Bank, 1211 Avenue of the Americas,
New York, New York 10036 (records relating to its
functions as custodian).
Item 29. Management Services
Inapplicable.
Item 30. Undertakings
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
available Annual Reports to Shareholders which includes
Management's Discussion of the Registrant's performance, upon
request and without charge.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Post-Effective Amendment No. 43 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in Bonita Springs,
Florida, on the 23rd day of February, 2000.
THE GALAXY FUND
Registrant
/s/ John T. O'Neill
-------------------
President
John T. O'Neill
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 43 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John T. O'Neill Trustee, President February 23, 2000
- -------------------- and Treasurer
John T. O'Neill and Treasurer
*/s/ Dwight E. Vicks, Jr. Chairman of the Board February 23, 2000
- ------------------------- of Trustees
Dwight E. Vicks, Jr.
*/s/ Donald B. Miller Trustee February 23, 2000
- -------------------------
Donald B. Miller
*/s/ Louis DeThomasis Trustee February 23, 2000
- -------------------------
Louis DeThomasis
*/s/ Bradford S. Wellman Trustee February 23, 2000
- -------------------------
Bradford S. Wellman
*/s/ James M. Seed Trustee February 23, 2000
- -------------------------
James M. Seed
</TABLE>
*By: /s/ John T. O'Neill
-------------------
John T. O'Neill
Attorney-In-Fact
-17-
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 4, 1996 /s/Dwight E. Vicks, Jr.
--------------------------
Dwight E. Vicks, Jr.
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Donald B. Miller
---------------------
Donald B. Miller
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Brother Louis DeThomasis
---------------------------
Brother Louis DeThomasis
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/Bradford S. Wellman
----------------------
Bradford S. Wellman
<PAGE>
THE GALAXY FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
John T. O'Neill and W. Bruce McConnel, III, and either of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity as
trustee or officer, or both, of The Galaxy Fund (the "Trust"), to execute any
and all amendments to the Trust's Registration Statement on Form N-1A pursuant
to the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "Acts"), and all instruments necessary or incidental in
connection therewith pursuant to said Acts and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, and
to file the same with the Securities and Exchange Commission, and either of said
attorneys shall have full power and authority, to do and perform in the name and
on behalf of the undersigned in any and all capacities, every act whatsoever
requisite or necessary to be done, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys, or either of them, may lawfully do or cause to be done by virtue
hereof.
Dated: December 5, 1996 /s/James M. Seed
--------------------
James M. Seed
<PAGE>
EXHIBIT INDEX
<TABLE>
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Exhibit No. Description
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(a)(19) Certificate of Classification of Shares pertaining to Class FF
shares; Class GG shares; Class HH - Series 1 shares and Class
HH - Series 2 shares; Class II shares; Class JJ - Series 1
shares, Class JJ - Series 2 shares and Class JJ - Series 3
shares; Class KK - Series 1 shares, Class KK - Series 2 shares
and Class KK - Series 3 shares; Class LL - Series 1 shares,
Class LL - Series 2 shares and Class LL - Series 3 shares; and
Class MM - Series 1 shares, Class MM - Series 2 shares and
Class MM - Series 3 shares.
(a)(20) Form of Certificate of Classification of Shares pertaining to
Class MM - Series 4 shares.
(d)(6) Form of Addendum No. 5 to Advisory Agreement between the
Registrant and Fleet Investment Advisors Inc. with respect to
the Institutional Money Market Fund, Institutional Treasury
Money Market Fund, Florida Municipal Bond Fund, Intermediate
Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond
Fund, Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II.
(e)(3) Form of Amendment No. 2 to Distribution Agreement between the
Registrant and Provident Distributors, Inc. with respect to
the Institutional Money Market Fund, Institutional Treasury
Money Market Fund, Florida Municipal Bond Fund, Intermediate
Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond
Fund, Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II.
(g)(5) Form of Amendment to Global Custody Agreement between the
Registrant and The Chase Manhattan Bank with respect to the
Institutional Money Market Fund, Institutional Treasury Money
Market Fund, Florida Municipal Bond Fund, Intermediate
Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond
Fund, Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II.
(h)(8) Form of Amendment No. 7 to Administration Agreement between
Registrant and PFPC Inc.
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(formerly known as First Data Investor Services Group, Inc.)
with respect to the Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida Municipal
Bond Fund, Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund and Growth Fund II.
(h)(17) Form of Amendment No. 8 to Transfer Agency and Services
Agreement between Registrant and PFPC Inc. (formerly known as
First Data Investor Services Group, Inc). with respect to the
Institutional Money Market Fund, Institutional Treasury Money
Market Fund, Florida Municipal Bond Fund, Intermediate
Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond
Fund, Massachusetts Intermediate Municipal Bond Fund and
Growth Fund II..
(h)(18) Shareholder Services Plan for Trust Shares and Retail A Shares
and Related Forms of Servicing Agreements.
(h)(19) Shareholder Services Plan for BKB Shares and Related Forms of
Servicing Agreements.
(h)(20) Credit Agreement dated as of December 29, 1999 among the
Registrant, The Galaxy VIP Fund, Galaxy Fund II, Various
Banks, Deutsche Bank Securities Inc. and Deutsche Bank AG, New
York Branch.
(j)(1) Consent of Drinker Biddle & Reath LLP.
(j)(2) Consent of Ropes & Gray.
(j)(3) Consent of Day, Berry & Howard LLP.
(l)(11) Form of Purchase Agreement between the Registrant and
Provident Distributors, Inc. with respect to the New York
Municipal Money Market Fund.
(l)(12) Form of Purchase Agreement between the Registrant and
Provident Distributors, Inc. with respect to the Institutional
Money Market Fund, Institutional Treasury Money Market Fund,
Florida Municipal Bond Fund, Intermediate Tax-Exempt Bond
Fund, Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Growth Fund
II.
(m)(1) Distribution and Service6 Plan for Retail B Shares and related
form of Servicing Agreement.
(o) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation
of a Multi-Class System.
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Exhibit (a)(19)
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby certify as follows:
(1) That I am the duly elected Secretary of The Galaxy
Fund ("Galaxy");
(2) That in such capacity I have examined the records of
actions taken by the Board of Trustees of the Trust (i) at the regular meeting
of the Board held on December 2, 1999 and (ii) by unanimous written consent of
the Board dated as of February 1, 2000;
(3) That the following resolutions were duly adopted at
the meeting by the Board of Trustees of the Trust:
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified and designated as Class FF shares;
FURTHER RESOLVED, that each Class FF share created pursuant
to the foregoing resolution shall have all of the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption that are set forth in Galaxy's
Declaration of Trust with respect to any class of shares of
Galaxy; and
FURTHER RESOLVED, that Class FF shares shall represent
interests in the Institutional Money Market Fund.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified and designated as Class GG shares;
FURTHER RESOLVED, that each Class GG share created pursuant
to the foregoing resolution shall have all of the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms
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and conditions of redemption that are set forth in Galaxy's
Declaration of Trust with respect to any class of shares of
Galaxy; and
FURTHER RESOLVED, that Class GG shares shall represent
interests in the Institutional Treasury Money Market Fund.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified into a new class of shares denominated as Class HH
shares, consisting of two separate series of shares of beneficial
interest designated as Class HH-Series 1 shares and Class
HH-Series 2 shares, both series representing interests in the
California Municipal Bond Fund;
FURTHER RESOLVED, that all consideration received by Galaxy
for the issue or sale of Class HH-Series 1 shares shall be
invested and reinvested with the consideration received by Galaxy
for the issue and sale of Class HH-Series 2 shares and any other
shares of beneficial interest in Galaxy hereafter designated as
Class HH shares (irrespective of whether said shares have been
designated as part of a series of said class and, if so
designated, irrespective of the particular series designation),
together with all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof, any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be,
and any general assets of Galaxy allocated to Class HH shares
(irrespective of series designation) by the Board of Trustees in
accordance with Galaxy's Declaration of Trust, and each Class
HH-Series 1 share and Class HH-Series 2 share shall share in
proportion to their respective net asset values with each such
other share in such consideration and other assets, income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such proceeds in whatever
form;
FURTHER RESOLVED, that each Class HH-Series 1 share and
Class HH-Series 2 share newly classified hereby shall have all of
the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption accorded shares of beneficial
interest in Galaxy now or hereinafter designated as Class HH
shares (irrespective of series designation); and
FURTHER RESOLVED, that each Class HH-Series 1 share and
each Class HH-Series 2 share shall be charged in proportion to
their respective net asset values with each other share of
beneficial interest in Galaxy now or hereafter designated as a
Class HH share (irrespective of whether said share has been
designated as part of a series of said class and, if so
designated, irrespective of the particular series designation)
with the expenses and liabilities of Galaxy in respect
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of Class HH shares (irrespective of series designation) and in
respect of any general expenses and liabilities of Galaxy
allocated to Class HH shares by the Board of Trustees in
accordance with Galaxy's Declaration of Trust; PROVIDED, HOWEVER,
that to the extent permitted by rule or order of the Securities
and Exchange Commission and as the Board of Trustees may from time
to time determine:
(a) only Class HH-Series 1 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class HH-Series 1, as well as any other expenses and
liabilities directly attributable to Class HH-Series 1
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(b) only Class HH-Series 2 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class HH-Series 2, as well as any other expenses and
liabilities directly attributable to Class HH-Series 2
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(c) Class HH-Series 1 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class HH shares other than shares of its
Series 1, as well as any other expenses and liabilities
directly attributable to shares of Class HH other than
Class HH-Series 1 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(d) Class HH-Series 2 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class HH shares other than shares of its
Series 2, as well as any other expenses and liabilities
directly attributable to shares of Class HH other than
Class HH-Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(e) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class HH-Series 1 shares shall
be entitled to vote, except
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that: (i) if said matter affects shares of beneficial
interest in Galaxy other than Class HH-Series 1 shares,
such other affected shares in Galaxy shall also be entitled
to vote and, in such case, Class HH-Series 1 shares shall
be voted in the aggregate together with such other affected
shares and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees of
Galaxy; and (ii) if said matter does not affect Class
HH-Series 1 shares, said shares shall not be entitled to
vote (except where otherwise required by law or permitted
by the Board of Trustees) even though the matter is
submitted to a vote of the holders of shares of beneficial
interest in Galaxy other than Class HH-Series 1 shares; and
(f) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class HH-Series 2 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class HH-Series 2 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class HH-Series 2 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class HH-Series 2 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class HH-Series 2 shares; and
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, Class HH-Series 1 shares shall not
be entitled to vote, except where otherwise required by law
or permitted by the Board of Trustees of Galaxy, and except
that if said matter affects Class HH-Series 1 shares, such
shares shall be entitled to vote, and in such case, Class
HH-Series 1 shares shall be voted in the aggregate together
with all other shares of beneficial interest in Galaxy
voting on the matter and not by class or series, except
where otherwise required by law or permitted by the Board
of Trustees; and
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, Class HH-Series 2 shares shall not
be entitled to vote, except
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where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class HH-Series 2 shares, such shares shall be
entitled to vote, and in such case, Class HH-Series 2
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified and designated as Class II shares;
FURTHER RESOLVED, that each Class II share created pursuant
to the foregoing resolution shall have all of the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption that are set forth in Galaxy's
Declaration of Trust with respect to any class of shares of
Galaxy; and
FURTHER RESOLVED, that Class II shares shall represent
interests in the Florida Municipal Bond Fund.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified into a new class of shares denominated as Class JJ
shares, consisting of three separate series of shares of
beneficial interest designated as Class JJ-Series 1 shares, Class
JJ-Series 2 shares and Class JJ-Series 3 shares, each series
representing interests in the Intermediate Tax-Exempt Bond Fund;
FURTHER RESOLVED, that all consideration received by Galaxy
for the issue or sale of Class JJ-Series 1 shares shall be
invested and reinvested with the consideration received by Galaxy
for the issue and sale of Class JJ-Series 2 shares and Class
JJ-Series 3 shares and any other shares of beneficial interest in
Galaxy hereafter designated as Class JJ shares (irrespective of
whether said shares have been designated as part of a series of
said class and, if so designated, irrespective of the particular
series designation), together with all income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and any general assets of Galaxy allocated to
Class JJ shares (irrespective of series designation) by the Board
of Trustees in accordance with Galaxy's Declaration of Trust, and
each Class JJ-Series 1 share, Class JJ-Series 2 share and Class
JJ-Series 3 share shall share in
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proportion to their respective net asset values with each such
other share in such consideration and other assets, income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such proceeds in whatever
form;
FURTHER RESOLVED, that each Class JJ-Series 1 share, Class
JJ-Series 2 share and Class JJ-Series 3 share newly classified
hereby shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded
shares of beneficial interest in Galaxy now or hereinafter
designated as Class JJ shares (irrespective of series
designation); and
FURTHER RESOLVED, that each Class JJ-Series 1 share, each
Class JJ-Series 2 share and each Class JJ-Series 3 share shall be
charged in proportion to their respective net asset values with
each other share of beneficial interest in Galaxy now or hereafter
designated as a Class JJ share (irrespective of whether said share
has been designated as part of a series of said class and, if so
designated, irrespective of the particular series designation)
with the expenses and liabilities of Galaxy in respect of Class JJ
shares (irrespective of series designation) and in respect of any
general expenses and liabilities of Galaxy allocated to Class JJ
shares by the Board of Trustees in accordance with Galaxy's
Declaration of Trust; PROVIDED, HOWEVER, that to the extent
permitted by rule or order of the Securities and Exchange
Commission and as the Board of Trustees may from time to time
determine:
(a) only Class JJ-Series 1 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class JJ-Series 1, as well as any other expenses and
liabilities directly attributable to Class JJ-Series 1
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(b) only Class JJ-Series 2 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class JJ-Series 2, as well as any other expenses and
liabilities directly attributable to Class JJ-Series 2
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(c) only Class JJ-Series 3 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class JJ-Series 3, as well as any other expenses and
liabilities directly attributable to Class JJ-Series 3
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shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(d) Class JJ-Series 1 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class JJ shares other than shares of its
Series 1, as well as any other expenses and liabilities
directly attributable to shares of Class JJ other than
Class JJ-Series 1 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(e) Class JJ-Series 2 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class JJ shares other than shares of its
Series 2, as well as any other expenses and liabilities
directly attributable to shares of Class JJ other than
Class JJ-Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(f) Class JJ-Series 3 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class JJ shares other than shares of its
Series 3, as well as any other expenses and liabilities
directly attributable to shares of Class JJ other than
Class JJ-Series 3 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class JJ-Series 1 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class JJ-Series 1 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class JJ-Series 1 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class JJ-Series 1 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class JJ-Series 1 shares;
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements,
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<PAGE>
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, only Class
JJ-Series 2 shares shall be entitled to vote, except that:
(i) if said matter affects shares of beneficial interest in
Galaxy other than Class JJ-Series 2 shares, such other
affected shares in Galaxy shall also be entitled to vote
and, in such case, Class JJ-Series 2 shares shall be voted
in the aggregate together with such other affected shares
and not by class or series, except where otherwise required
by law or permitted by the Board of Trustees of Galaxy; and
(ii) if said matter does not affect Class JJ-Series 2
shares, said shares shall not be entitled to vote (except
where otherwise required by law or permitted by the Board
of Trustees) even though the matter is submitted to a vote
of the holders of shares of beneficial interest in Galaxy
other than Class JJ-Series 2 shares;
(i) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(c) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class JJ-Series 3 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class JJ-Series 3 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class JJ-Series 3 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class JJ-Series 3 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class JJ-Series 3 shares;
(j) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
JJ-Series 1 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class JJ-Series 1 shares, such shares shall be
entitled to vote, and in such case, Class JJ-Series 1
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(k) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of
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<PAGE>
shareholders of Galaxy, Class JJ-Series 2 shares shall not
be entitled to vote, except where otherwise required by law
or permitted by the Board of Trustees of Galaxy, and except
that if said matter affects Class JJ-Series 2 shares, such
shares shall be entitled to vote, and in such case, Class
JJ-Series 2 shares shall be voted in the aggregate together
with all other shares of beneficial interest in Galaxy
voting on the matter and not by class or series, except
where otherwise required by law or permitted by the Board
of Trustees;
(l) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
JJ-Series 3 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class JJ-Series 3 shares, such shares shall be
entitled to vote and, in such case, Class JJ-Series 3
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees; and
(m) Class JJ-Series 3 shares shall be convertible into
Class JJ-Series 2 shares on the basis of the relative net
asset value of the shares converted, and otherwise after
such time or times, and upon such conditions and pursuant
to such procedures, as shall be determined by the Trustees
from time to time in connection with the issuance and sale
of such shares.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified into a new class of shares denominated as Class KK
shares, consisting of three separate series of shares of
beneficial interest designated as Class KK-Series 1 shares, Class
KK-Series 2 shares and Class KK-Series 3 shares, each series
representing interests in the Connecticut Intermediate Municipal
Bond Fund;
FURTHER RESOLVED, that all consideration received by Galaxy
for the issue or sale of Class KK-Series 1 shares shall be
invested and reinvested with the consideration received by Galaxy
for the issue and sale of Class KK-Series 2 shares and Class
KK-Series 3 shares and any other shares of beneficial interest in
Galaxy hereafter designated as Class KK shares (irrespective of
whether said shares have been designated as part of a series of
said class and, if so designated, irrespective of the particular
series designation), together with all income, earnings, profits
and proceeds thereof, including any proceeds derived from the
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sale, exchange or liquidation thereof, any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and any general assets of Galaxy allocated to
Class KK shares (irrespective of series designation) by the Board
of Trustees in accordance with Galaxy's Declaration of Trust, and
each Class KK-Series 1 share, Class KK-Series 2 share and Class
KK-Series 3 share shall share in proportion to their respective
net asset values with each such other share in such consideration
and other assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment
of such proceeds in whatever form;
FURTHER RESOLVED, that each Class KK-Series 1 share, Class
KK-Series 2 share and Class KK-Series 3 share newly classified
hereby shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded
shares of beneficial interest in Galaxy now or hereinafter
designated as Class KK shares (irrespective of series
designation); and
FURTHER RESOLVED, that each Class KK-Series 1 share, each
Class KK-Series 2 share and each Class KK-Series 3 share shall be
charged in proportion to their respective net asset values with
each other share of beneficial interest in Galaxy now or hereafter
designated as a Class KK share (irrespective of whether said share
has been designated as part of a series of said class and, if so
designated, irrespective of the particular series designation)
with the expenses and liabilities of Galaxy in respect of Class KK
shares (irrespective of series designation) and in respect of any
general expenses and liabilities of Galaxy allocated to Class KK
shares by the Board of Trustees in accordance with Galaxy's
Declaration of Trust; PROVIDED, HOWEVER, that to the extent
permitted by rule or order of the Securities and Exchange
Commission and as the Board of Trustees may from time to time
determine:
(a) only Class KK-Series 1 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class KK-Series 1, as well as any other expenses and
liabilities directly attributable to Class KK-Series 1
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(b) only Class KK-Series 2 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class KK-Series 2, as well as any other expenses and
liabilities directly attributable to Class KK-Series 2
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
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(c) only Class KK-Series 3 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class KK-Series 3, as well as any other expenses and
liabilities directly attributable to Class KK-Series 3
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(d) Class KK-Series 1 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class KK shares other than shares of its
Series 1, as well as any other expenses and liabilities
directly attributable to shares of Class KK other than
Class KK-Series 1 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(e) Class KK-Series 2 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class KK shares other than shares of its
Series 2, as well as any other expenses and liabilities
directly attributable to shares of Class KK other than
Class KK-Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(f) Class KK-Series 3 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class KK shares other than shares of its
Series 3, as well as any other expenses and liabilities
directly attributable to shares of Class KK other than
Class KK-Series 3 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class KK-Series 1 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class KK-Series 1 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class KK-Series 1 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class
-11-
<PAGE>
KK-Series 1 shares, said shares shall not be entitled to
vote (except where otherwise required by law or permitted
by the Board of Trustees) even though the matter is
submitted to a vote of the holders of shares of beneficial
interest in Galaxy other than Class KK-Series 1 shares;
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class KK-Series 2 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class KK-Series 2 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class KK-Series 2 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class KK-Series 2 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class KK-Series 2 shares;
(i) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(c) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class KK-Series 3 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class KK-Series 3 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class KK-Series 3 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class KK-Series 3 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class KK-Series 3 shares;
(j) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
KK-Series 1 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class KK-Series 1 shares, such shares shall be
entitled to vote, and in such case, Class KK-Series 1
shares shall be voted in the aggregate together with all
other
-12-
<PAGE>
shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(k) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
KK-Series 2 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class KK-Series 2 shares, such shares shall be
entitled to vote, and in such case, Class KK-Series 2
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(l) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
KK-Series 3 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class KK-Series 3 shares, such shares shall be
entitled to vote and, in such case, Class KK-Series 3
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees; and
(m) Class KK-Series 3 shares shall be convertible into
Class KK-Series 2 shares on the basis of the relative net
asset value of the shares converted, and otherwise after
such time or times, and upon such conditions and pursuant
to such procedures, as shall be determined by the Trustees
from time to time in connection with the issuance and sale
of such shares.
* * *
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified into a new class of shares denominated as Class LL
shares, consisting of three separate series of shares of
beneficial interest designated as Class LL-Series 1 shares, Class
LL-Series 2 shares and Class LL-Series 3 shares, each representing
interests in the Massachusetts Intermediate Municipal Bond Fund;
-13-
<PAGE>
FURTHER RESOLVED, that all consideration received by Galaxy
for the issue or sale of Class LL-Series 1 shares shall be
invested and reinvested with the consideration received by Galaxy
for the issue and sale of Class LL-Series 2 shares and Class
LL-Series 3 shares and any other shares of beneficial interest in
Galaxy hereafter designated as Class LL shares (irrespective of
whether said shares have been designated as part of a series of
said class and, if so designated, irrespective of the particular
series designation), together with all income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and any general assets of Galaxy allocated to
Class LL shares (irrespective of series designation) by the Board
of Trustees in accordance with Galaxy's Declaration of Trust, and
each Class LL-Series 1 share, Class LL-Series 2 share and Class
LL-Series 3 share shall share in proportion to their respective
net asset values with each such other share in such consideration
and other assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment
of such proceeds in whatever form;
FURTHER RESOLVED, that each Class LL-Series 1 share, Class
LL-Series 2 share and Class LL-Series 3 share newly classified
hereby shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded
shares of beneficial interest in Galaxy now or hereinafter
designated as Class LL shares (irrespective of series
designation); and
FURTHER RESOLVED, that each Class LL-Series 1 share, each
Class LL-Series 2 share and each Class LL-Series 3 share shall be
charged in proportion to their respective net asset values with
each other share of beneficial interest in Galaxy now or hereafter
designated as a Class LL share (irrespective of whether said share
has been designated as part of a series of said class and, if so
designated, irrespective of the particular series designation)
with the expenses and liabilities of Galaxy in respect of Class LL
shares (irrespective of series designation) and in respect of any
general expenses and liabilities of Galaxy allocated to Class LL
shares by the Board of Trustees in accordance with Galaxy's
Declaration of Trust; PROVIDED, HOWEVER, that to the extent
permitted by rule or order of the Securities and Exchange
Commission and as the Board of Trustees may from time to time
determine:
(a) only Class LL-Series 1 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class LL-Series 1, as well as any other expenses and
liabilities directly attributable to Class LL-Series 1
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
-14-
<PAGE>
(b) only Class LL-Series 2 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class LL-Series 2, as well as any other expenses and
liabilities directly attributable to Class LL-Series 2
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(c) only Class LL-Series 3 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class LL-Series 3, as well as any other expenses and
liabilities directly attributable to Class LL-Series 3
shares which the Board of Trustees determines should be
borne solely by shares of such series;
(d) Class LL-Series 1 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class LL shares other than shares of its
Series 1, as well as any other expenses and liabilities
directly attributable to shares of Class LL other than
Class LL-Series 1 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(e) Class LL-Series 2 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class LL shares other than shares of its
Series 2, as well as any other expenses and liabilities
directly attributable to shares of Class LL other than
Class LL-Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(f) Class LL-Series 3 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class LL shares other than shares of its
Series 3, as well as any other expenses and liabilities
directly attributable to shares of Class LL other than
Class LL-Series 3 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class LL-Series 1 shares shall
be entitled to vote, except
-15-
<PAGE>
that: (i) if said matter affects shares of beneficial
interest in Galaxy other than Class LL-Series 1 shares,
such other affected shares in Galaxy shall also be entitled
to vote and, in such case, Class LL-Series 1 shares shall
be voted in the aggregate together with such other affected
shares and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees of
Galaxy; and (ii) if said matter does not affect Class
LL-Series 1 shares, said shares shall not be entitled to
vote (except where otherwise required by law or permitted
by the Board of Trustees) even though the matter is
submitted to a vote of the holders of shares of beneficial
interest in Galaxy other than Class LL-Series 1 shares;
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class LL-Series 2 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class LL-Series 2 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class LL-Series 2 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class LL-Series 2 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class LL-Series 2 shares; and
(i) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(c) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class LL-Series 3 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class LL-Series 3 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class LL-Series 3 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class LL-Series 3 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class LL-Series 3 shares;
(j) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) or clause (c) above (or to any
-16-
<PAGE>
plan or other document adopted by Galaxy relating to said
agreements, arrangements, expenses or liabilities) and that
is submitted to a vote of shareholders of Galaxy, Class
LL-Series 1 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class LL-Series 1 shares, such shares shall be
entitled to vote, and in such case, Class LL-Series 1
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees; and
(k) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
LL-Series 2 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class LL-Series 2 shares, such shares shall be
entitled to vote, and in such case, Class LL-Series 2
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(l) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
LL-Series 3 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class LL-Series 3 shares, such shares shall be
entitled to vote and, in such case, Class LL-Series 3
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees; and
(m) Class LL-Series 3 shares shall be convertible into
Class LL-Series 2 shares on the basis of the relative net
asset value of the shares converted, and otherwise after
such time or times, and upon such conditions and pursuant
to such procedures, as shall be determined by the Trustees
from time to time in connection with the issuance and sale
of such shares.
(4) That the following resolutions were duly
adopted by the unanimous written consent of the Board of Trustees of the Trust:
-17-
<PAGE>
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized and
unissued shares of beneficial interest in Galaxy be, and hereby
are, classified into a new class of shares denominated as Class MM
shares, consisting of three separate series of shares of
beneficial interest designated as Class MM-Series 1 shares, Class
MM-Series 2 shares and Class MM-Series 3 shares, each representing
interests in the Growth Fund II;
FURTHER RESOLVED, that all consideration received by Galaxy
for the issue or sale of Class MM-Series 1 shares shall be
invested and reinvested with the consideration received by Galaxy
for the issue and sale of Class MM-Series 2 shares and Class
MM-Series 3 shares and any other shares of beneficial interest in
Galaxy hereafter designated as Class MM shares (irrespective of
whether said shares have been designated as part of a series of
said class and, if so designated, irrespective of the particular
series designation), together with all income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and any general assets of Galaxy allocated to
Class MM shares (irrespective of series designation) by the Board
of Trustees in accordance with Galaxy's Declaration of Trust, and
each Class MM-Series 1 share, Class MM-Series 2 share and Class
MM-Series 3 share shall share in proportion to their respective
net asset values with each such other share in such consideration
and other assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment
of such proceeds in whatever form;
FURTHER RESOLVED, that each Class MM-Series 1 share, Class
MM-Series 2 share and Class MM-Series 3 share newly classified
hereby shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption accorded
shares of beneficial interest in Galaxy now or hereinafter
designated as Class MM shares (irrespective of series
designation); and
FURTHER RESOLVED, that each Class MM-Series 1 share, each
Class MM-Series 2 share and each Class MM-Series 3 share shall be
charged in proportion to their respective net asset values with
each other share of beneficial interest in Galaxy now or hereafter
designated as a Class MM share (irrespective of whether said share
has been designated as part of a series of said class and, if so
designated, irrespective of the particular series designation)
with the expenses and liabilities of Galaxy in respect of Class MM
shares (irrespective of series designation) and in respect of any
general expenses and liabilities of Galaxy allocated to Class MM
shares by the Board of Trustees in accordance with Galaxy's
Declaration of Trust; PROVIDED, HOWEVER, that to the extent
permitted by rule or order of the Securities and Exchange
Commission and as the Board of Trustees may from time to time
determine:
-18-
<PAGE>
(a) only Class MM-Series 1 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class MM-Series 1, as well as any other expenses and
liabilities directly attributable to Class MM-Series 1
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(b) only Class MM-Series 2 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class MM-Series 2, as well as any other expenses and
liabilities directly attributable to Class MM-Series 2
shares which the Board of Trustees determines should be
borne solely by shares of such Series;
(c) only Class MM-Series 3 shares shall bear the
expenses and liabilities relating to any agreements or
arrangements entered into by or on behalf of Galaxy
pursuant to which an organization or other person agrees to
provide services exclusively with respect to shares of
Class MM-Series 3, as well as any other expenses and
liabilities directly attributable to Class MM-Series 3
shares which the Board of Trustees determines should be
borne solely by shares of such series;
(d) Class MM-Series 1 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class MM shares other than shares of its
Series 1, as well as any other expenses and liabilities
directly attributable to shares of Class MM other than
Class MM-Series 1 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(e) Class MM-Series 2 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide services
with respect to Class MM shares other than shares of its
Series 2, as well as any other expenses and liabilities
directly attributable to shares of Class MM other than
Class MM-Series 2 shares which the Board of Trustees
determines should be borne exclusively by such other
shares;
(f) Class MM-Series 3 shares shall not bear the expenses
and liabilities relating to any agreements or arrangements
entered into by or on behalf of Galaxy pursuant to which an
organization or other person agrees to provide
-19-
<PAGE>
services with respect to Class MM shares other than shares
of its Series 3, as well as any other expenses and
liabilities directly attributable to shares of Class MM
other than Class MM-Series 3 shares which the Board of
Trustees determines should be borne exclusively by such
other shares;
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class MM-Series 1 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class MM-Series 1 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class MM-Series 1 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class MM-Series 1 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class MM-Series 1 shares;
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class MM-Series 2 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class MM-Series 2 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class MM-Series 2 shares shall be voted in the aggregate
together with such other affected shares and not by class
or series, except where otherwise required by law or
permitted by the Board of Trustees of Galaxy; and (ii) if
said matter does not affect Class MM-Series 2 shares, said
shares shall not be entitled to vote (except where
otherwise required by law or permitted by the Board of
Trustees) even though the matter is submitted to a vote of
the holders of shares of beneficial interest in Galaxy
other than Class MM-Series 2 shares;
(i) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(c) above (or to any plan or other document adopted by
Galaxy relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Galaxy, only Class MM-Series 3 shares shall
be entitled to vote, except that: (i) if said matter
affects shares of beneficial interest in Galaxy other than
Class MM-Series 3 shares, such other affected shares in
Galaxy shall also be entitled to vote and, in such case,
Class MM-Series 3 shares shall be voted
-20-
<PAGE>
in the aggregate together with such other affected shares
and not by class or series, except where otherwise required
by law or permitted by the Board of Trustees of Galaxy; and
(ii) if said matter does not affect Class MM-Series 3
shares, said shares shall not be entitled to vote (except
where otherwise required by law or permitted by the Board
of Trustees) even though the matter is submitted to a vote
of the holders of shares of beneficial interest in Galaxy
other than Class MM-Series 3 shares;
(j) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(b) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
MM-Series 1 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class MM-Series 1 shares, such shares shall be
entitled to vote, and in such case, Class MM-Series 1
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(k) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (c) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
MM-Series 2 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class MM-Series 2 shares, such shares shall be
entitled to vote, and in such case, Class MM-Series 2
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees;
(l) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause
(a) or clause (b) above (or to any plan or other document
adopted by Galaxy relating to said agreements,
arrangements, expenses or liabilities) and that is
submitted to a vote of shareholders of Galaxy, Class
MM-Series 3 shares shall not be entitled to vote, except
where otherwise required by law or permitted by the Board
of Trustees of Galaxy, and except that if said matter
affects Class MM-Series 3 shares, such shares shall be
entitled to vote and, in such case, Class MM-Series 3
shares shall be voted in the aggregate together with all
other shares of beneficial interest in Galaxy voting on the
matter and not by class or series, except where otherwise
required by law or permitted by the Board of Trustees; and
-21-
<PAGE>
(m) Class MM-Series 3 shares shall be convertible into
Class MM-Series 2 shares on the basis of the relative net
asset value of the shares converted, and otherwise after
such time or times, and upon such conditions and pursuant
to such procedures, as shall be determined by the Trustees
from time to time in connection with the issuance and sale
of such shares.
(5) That the foregoing resolutions remain in full
force and effect on the date hereof.
/s/ W. Bruce McConnel, III
___________________________
W. Bruce McConnel, III
Secretary
Dated: February 23, 2000
Subscribed and sworn to before
me this 23rd day of February, 2000
/s/ Dorothea A. Natale
___________________________
Dorothea A. Natale
Notary Public
-22-
<PAGE>
Exhibit (a)(20)
THE GALAXY FUND
(A Massachusetts Business Trust)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby certify as follows:
(1) That I am the duly elected Secretary of The
Galaxy Fund ("Galaxy");
(2) That in such capacity I have examined the
records of actions taken by the Board of Trustees of Galaxy at the regular
meeting of the Board held on March 2, 2000;
(3) That the following resolutions were duly adopted
at the meeting by the Board of Trustees of Galaxy:
CLASSIFICATION OF SHARES
RESOLVED, that pursuant to Section 5.1 of Galaxy's
Declaration of Trust, an unlimited number of authorized,
unissued and unclassified shares of beneficial interest of
Galaxy be, and hereby are, classified into an additional
separate series of shares which shall be designated Class
MM-Series 4;
FURTHER RESOLVED, that Class MM - Series 4 shares of
beneficial interest shall represent interests in the Growth Fund
II;
FURTHER RESOLVED, that each share of Class MM - Series 4
newly classified hereby shall have all of the following
preferences, conversion and other rights, voting powers,
restrictions, limitations, qualifications and terms and
conditions of redemption:
(1) ASSETS BELONG TO A CLASS. All consideration received by
Galaxy for the issue or sale of shares of Class MM - Series 4
shall be invested and reinvested with the consideration received
by Galaxy for the issue and sale of all other shares now or
hereafter classified as shares of Class MM (irrespective of
whether said shares have been classified as part of a series of
said Class and if so classified as part of a series,
irrespective of the particular series classification), together
with all income, earnings, profits, and proceeds derived from
the investment thereof, including any proceeds derived from the
sale, exchange, or liquidation of such investment, any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, and any general assets of Galaxy
allocated to Class MM (including the Class MM shares formerly
classified, The
<PAGE>
Class MM- Series 4 shares herein classified or such other shares
with respect to such Class MM) by the Board of Trustees in
accordance with Galaxy's Declaration of Trust. All income,
earnings, profits, and proceeds, including any profits derived
from the sale, exchange or liquidation of such shares of Class
MM and any assets derived from any reinvestment of such proceeds
in whatever form shall be allocated to the Class MM - Series 4
shares in the proportion that the net asset value of such Series
4 shares of such Class bears to the total net asset value of all
shares of such Class MM (irrespective of whether said shares
have been classified as part of a series of said Class and, if
so classified as part of a series, irrespective of the
particular series classification).
(2) LIABILITIES BELONGING TO A CLASS. All the liabilities
(including expenses) of Galaxy in respect of Class MM shall be
allocated to the Class MM - Series 4 shares hereby classified of
such Class MM in the proportion that the net asset value of such
Series 4 shares of such Class bears to the total net asset value
of all shares of such Class MM (irrespective of whether said
shares have been classified as a part of a series of said Class
and, if so classified as a part of a series, irrespective of the
particular series classification), except that to the extent
that may be from time to time determined by the Board of
Trustees to allocate the following expenses to such Class MM -
Series 4 shares (or any other series of shares of such Class):
(a) only the Series 4 shares of Class MM
shall bear: (i) the expenses and liabilities of payments
to institutions under any agreements entered into by or
on behalf of Galaxy which provide for services by the
institutions exclusively for their customers who own of
record or beneficially such Series 4 shares; and (ii)
such other expenses and liabilities as the Board of
Trustees may from time to time determine are directly
attributable to such shares and which therefore should
be borne solely by the Series 4 shares of Class MM; and
(b) no Series 4 shares of Class MM shall
bear (i) the expenses and liabilities of payments to
institutions under any agreements entered into by or on
behalf of Galaxy which provide for services by the
institutions exclusively for their customers who own of
record or beneficially shares of Class MM other than
Series 4 shares of such Class MM other than Series 4
shares of such Class; and (ii) such other expenses and
liabilities as the Board of Trustees may from time to
time determine are directly attributable to shares of
Class MM other than the Series 4 shares of such Class MM
and which therefore should be borne solely by such other
shares of Class MM and not the Series 4 shares of such
Class MM.
(3) PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS, QUALIFICATIONS, AND TERMS AND
CONDITIONS OF REDEMPTION. Except as provided hereby, each Series
4 share of Class MM shall have the same
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<PAGE>
preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and
conditions of redemption applicable to all other shares as set
forth in Galaxy's Declaration of Trust and shall also have the
same preferences, conversion, and other rights, voting powers,
restrictions, limitations, qualifications, and terms and
conditions of redemption as each other share formerly, now or
hereafter classified as a share of Class MM (irrespective of
whether said share has been classified as a part of a series of
said Class and, if so classified as a part of a series,
irrespective of the particular series classification) except
that:
(a) On any matter that pertains to the agreements or
expenses and liabilities described under Section (2),
clause (a) above (or to any plan or other document
adopted by Galaxy relating to said agreements, expenses,
or liabilities) and is submitted to a vote of
shareholders of Galaxy, only the Series 4 shares of
Class MM (excluding the other shares classified as a
series of such Class other than Series 4) shall be
entitled to vote, except that:
(i) if said matter affects shares in Galaxy
other than the Series 4 shares of Class MM, such
other affected shares in Galaxy shall also be
entitled to vote, and in such case, such Series
4 shares of such Class MM shall be voted in the
aggregate together with such other affected
shares and not by class or series except where
otherwise required by law or permitted by the
Board of Trustees of Galaxy; and
(ii) if said matter does not affect the
Series 4 shares of Class MM, such shares shall
not be entitled to vote (except where required
by law or permitted by the Board of Trustees)
even though the matter is submitted to a vote of
the holders of shares in Galaxy other than said
Series 4 shares of Class MM.
(b) With respect to such series of shares, the first
sentence of Section 5.1B(9) of Galaxy's Declaration of
Trust shall not apply, and the following shall apply
instead:
To the extent of the assets of the Trust legally
available for such redemptions, a Shareholder of
the Trust shall have the right to require the
Trust to redeem his full and fractional Shares
of any class out of assets belonging to the
classes with the same alphabetical designation
as such class at a redemption price equal to the
net asset value per Share for such Shares being
redeemed next determined after receipt of a
request to redeem in proper form as determined
by the Trustees, less such deferred sales
charge, redemption fee or other charge, if any,
as may be fixed by the Trustees, subject to the
right of the Trustees to suspend the right of
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<PAGE>
redemption of Shares or postpone the date of
payment of such redemption price in accordance
with the provisions of applicable law.
(c) Class MM - Series 4 shares shall be convertible
into Class MM Series 2 shares on the basis of the
relative net asset value of the shares converted, and
otherwise after such time or times, and upon such
conditions and pursuant to such procedures, as shall be
determined by the Trustees from time to time in
connection with the sale and issuance of such shares.
(4) That the foregoing resolutions remain in full force and
effect on the date hereof.
----------------------
W. Bruce McConnel, III
Secretary
Dated: ___________, 2000
Subscribed and sworn to before
me this ___ day of __________, 2000
- -----------------------
Dorothea A. Natale
Notary Public
-4-
<PAGE>
Exhibit (d)(6)
ADDENDUM NO. 5 TO ADVISORY AGREEMENT
This Addendum No. 5, dated as of the ____ day of _________,
2000, is entered into between THE GALAXY FUND, a Massachusetts business trust,
located in Westborough, Massachusetts ("Galaxy"), and FLEET INVESTMENT ADVISORS
INC., a New York corporation, located in Boston, Massachusetts (the "Adviser").
WHEREAS, Galaxy and the Adviser have entered into an Advisory
Agreement dated as of May 19, 1994, which was extended to additional investment
portfolios of Galaxy by Addendum No. 1 dated as of December 1, 1995, Addendum
No. 2 dated as of March 3, 1998, Addendum No. 3 dated as of September 18, 1998
and Addendum No. 4 dated as of _________, 2000 (the "Advisory Agreement"),
pursuant to which Galaxy appointed the Adviser to act as investment adviser to
Galaxy for its Money Market Fund, Government Fund, Tax-Exempt Fund, U.S.
Treasury Fund, Institutional Government Money Market Fund, Short-Term Bond Fund,
Intermediate Government Income Fund, High Quality Bond Fund, Corporate Bond
Fund, Tax-Exempt Bond Fund, New York Municipal Bond Fund, Connecticut Municipal
Bond Fund, Massachusetts Municipal Bond Fund, Rhode Island Municipal Bond Fund,
Equity Value Fund, Equity Growth Fund, Equity Income Fund, International Equity
Fund, Small Company Equity Fund, Asset Allocation Fund, Growth and Income Fund,
Connecticut Municipal Money Market Fund, Massachusetts Municipal Money Market
Fund, Small Cap Value Fund, New Jersey Municipal Bond Fund, MidCap Equity Fund,
Strategic Equity Fund, Prime Reserves, Government Reserves, Tax-Exempt Reserves
and New York Municipal Money Market Fund (each a "Fund");
WHEREAS, Galaxy has notified the Adviser that it has established
seven new portfolios, namely the Institutional Money Market Fund, Institutional
Treasury Money Market Fund, Florida Municipal Bond Fund, Intermediate Tax-Exempt
Bond Fund, Connecticut Intermediate Municipal Bond Fund, Massachusetts
Intermediate Municipal Bond Fund and Growth Fund II (the "New Funds"), and that
it desires to retain the Adviser to act as the investment adviser therefor, and
the Adviser has notified Galaxy that it is willing to serve as investment
adviser for the New Funds;
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. Galaxy hereby appoints the Adviser to act
as investment adviser to Galaxy for the New Funds for the period and on the
terms set forth in the Advisory Agreement. The Adviser hereby accepts such
appointment and agrees to render the services set forth in the Advisory
Agreement for the compensation herein provided.
2. COMPENSATION. For the services provided and the expenses
assumed pursuant to the Advisory Agreement with respect to the New Funds, Galaxy
will pay the Adviser and the Adviser will accept as full compensation therefor
fees, computed daily and paid monthly, based on the net assets of the New Funds,
considered separately on a per-Fund basis, at the following annual rates: .20%
of the net assets of each of the Institutional Money Market Fund
<PAGE>
and Institutional Treasury Money Market Fund; and .75% of the net assets of each
of the Florida Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund and Growth Fund II.
3. CAPITALIZED TERMS. From and after the date hereof, the
term "Fund" as used in the Advisory Agreement shall be deemed to include the New
Funds. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby,
the Advisory Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum
as of the date and year first above written.
THE GALAXY FUND
By: ____________________________
Name: John T. O'Neill
Title: President
FLEET INVESTMENT ADVISORS INC.
By: ____________________________
Name: Thomas M. O'Neill
Title: President
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<PAGE>
Exhibit (e)(3)
THE GALAXY FUND
DISTRIBUTION AGREEMENT
Amendment No. 2
____________, 2000
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund
(the "Trust"), a Massachusetts business trust, has agreed that the Distribution
Agreement between the Trust and Provident Distributors, Inc. ("PDI") dated as of
December 1, 1999 (the "Agreement") is herewith amended to provide that PDI shall
be the distributor for the Trust's Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Growth Fund II on the terms
and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will
you so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By: ________________________
Name: John T. O'Neill
Title: President
Accepted:
PROVIDENT DISTRIBUTORS, INC.
By: _________________________
Name:
Title:
<PAGE>
Exhibit (g)(5)
THE GALAXY FUND
Amendment to
GLOBAL CUSTODY AGREEMENT
____________, 2000
The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, NY 11245
Attn: Global Custody Division
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Global Custody
Agreement ("Agreement") between the Trust and The Chase Manhattan Bank (formerly
The Chase Manhattan Bank, N.A.) ("Chase") dated as of November 1, 1991 is
herewith amended to provide that Chase shall be the custodian for the Trust's
Institutional Money Market Fund, Institutional Treasury Money Market Fund,
Florida Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund, Massachusetts Intermediate Municipal Bond Fund
and Growth Fund II on the terms and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.
Very truly yours,
THE GALAXY FUND
By: ____________________________
Name: John T. O'Neill
Title: President
Accepted:
THE CHASE MANHATTAN BANK
By: ________________________
Name:
Title:
<PAGE>
Exhibit (h)(8)
THE GALAXY FUND
ADMINISTRATION AGREEMENT
Amendment No. 7
As of ____________, 2000
PFPC Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy
Fund (the "Trust"), a Massachusetts business trust, has agreed that the
Administration Agreement between the Trust and PFPC, Inc. ("PFPC") (formerly
known as First Data Investor Services Group, Inc.) dated as of June 1, 1997 (the
"Agreement") is herewith amended to provide that PFPC shall be the administrator
for the Trust's Institutional Money Market Fund, Institutional Treasury Money
Market Fund, Florida Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund and Growth Fund II.
If the foregoing is in accordance with your understanding,
will you so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE GALAXY FUND
By:_____________________
Name: John T. O'Neill
Title: President
Accepted:
PFPC, INC.
By:________________________
Name:
Title:
<PAGE>
Exhibit (h)(17)
THE GALAXY FUND
TRANSFER AGENCY AND SERVICES AGREEMENT
Amendment No. 8
____________, 2000
PFPC, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
Dear Sirs:
This letter is to confirm that the undersigned, The Galaxy Fund (the
"Trust"), a Massachusetts business trust, has agreed that the Transfer Agency
and Services Agreement ("Agreement") between the Trust and PFPC, Inc. ("PFPC")
(formerly known as First Data Investor Services Group, Inc.) dated as of June 1,
1997 is herewith amended to provide that PFPC shall be the transfer agent and
dividend disbursing agent for the Trust's Institutional Money Market Fund,
Institutional Treasury Money Market Fund, Florida Municipal Bond Fund,
Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond Fund,
Massachusetts Intermediate Municipal Bond Fund and Growth Fund II on the terms
and conditions contained in the Agreement.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy thereof.
Very truly yours,
THE GALAXY FUND
By: ______________________
Name: John T. O'Neill
Title: President
Accepted:
PFPC, INC.
By: _________________________
Name:
Title:
<PAGE>
Exhibit (h)(18)
THE GALAXY FUND
SHAREHOLDER SERVICES PLAN
SECTION 1. Upon the recommendation of PFPC Inc. ("PFPC"), the
administrator of The Galaxy Fund (the "Trust"), any officer of the Trust is
authorized to execute and deliver, in the name and on behalf of the Trust,
written agreements in substantially the form attached hereto or in any other
form duly approved by the Board of Trustees ("Servicing Agreements") with
securities dealers, financial institutions and other industry professionals that
are shareholders or dealers of record or which have a servicing relationship
("Service Organizations") with the beneficial owners of the Retail A Shares
and/or Trust Shares of the Money Market Fund, Government Fund, Tax-Exempt Fund,
U.S. Treasury Fund, Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund, New York Municipal Money Market Fund, Small Company
Equity Fund, MidCap Equity Fund, Equity Value Fund, Equity Growth Fund, Growth
Fund II, Equity Income Fund, Small Cap Value Fund, Growth and Income Fund,
Strategic Equity Fund, International Equity Fund, Asset Allocation 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 and Rhode
Island Municipal Bond Fund of the Trust (the "Funds"). Pursuant to said
Agreements, Service Organizations shall provide administrative support services
as set forth therein to their customers who beneficially own Retail A Shares
and/or Trust Shares (as described in the Trust's prospectuses) of the Funds in
consideration of fees, computed and paid in the manner set forth in the
Servicing Agreements, at the annual rate of up to .50% in the aggregate of the
net asset value of the Retail A Shares or Trust Shares beneficially owned by
such customers. Any bank, trust company, thrift institution or broker-dealer is
eligible to become a Service Organization and to receive fees under this Plan,
including FleetBoston Financial Corporation and its affiliates. All expenses
incurred by the Trust with respect to Retail A Shares and/or Trust Shares of a
particular Fund in connection with Servicing Agreements and the implementation
of this Plan shall be borne entirely by the holders of the applicable series of
Shares of the Fund. Each Servicing Agreement will provide for a fee waiver by a
Service Organization to the extent that the net investment income of a series of
Shares of a particular Fund earned in the applicable period is less than the fee
due from such series for such period.
SECTION 2. PFPC shall monitor the arrangements pertaining to the Trust's
Servicing Agreements with Service Organizations in accordance with the terms of
the Administration Agreement between PFPC and the Trust. PFPC shall not,
however, be obliged by this Plan to recommend, and the Trust shall not be
obliged to execute, any Servicing Agreement with any qualifying Service
Organization.
SECTION 3. So long as this Plan is in effect, PFPC shall provide to the
Trust's Board of Trustees, and the trustees shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan and the purposes
for which such expenditures were made.
<PAGE>
SECTION 4. Unless sooner terminated, this Plan shall continue until May
31, 2000 and thereafter shall continue automatically for successive annual
periods provided such continuance is approved at least annually by a majority of
the Board of Trustees, including a majority of the trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of this Plan or in any Agreement related to this Plan
(the "Disinterested Trustees").
SECTION 5. This Plan may be amended at any time with respect to any Fund
by the Board of Trustees, provided that any material amendments of the terms of
this Plan shall become effective only upon the approvals set forth in Section 4.
SECTION 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Trustees.
SECTION 7. While this Plan is in effect, the selection and nomination of
the trustees of the Trust who are not "interested persons (as defined in the
Act) of the Trust shall be committed to the discretion of the Trust's
Disinterested Trustees.
SECTION 8. This Plan has been adopted by the Trust as of October 11,
1989 and amended and restated as of September 6, 1990, September 12, 1991,
December 5, 1991, February 22, 1993, May 19, 1994, February 23, 1995, June 12,
1995, May 23, 1996, May 29, 1997, December 4, 1997, May 27, 1999, December 2,
1999 and March 2, 2000.
-2-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Money Market Fund, Government Fund, Tax-Exempt Fund, Connecticut Municipal
Money Market Fund, Massachusetts Municipal Money Market Fund, New York Municipal
Money Market Fund and U.S. Treasury Fund - Retail A Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you
concerning the provision of administrative support services to your customers
("Customers") who may from time to time beneficially own shares of the Money
Market Fund, Government Fund, Tax-Exempt Fund, Connecticut Municipal Money
Market Fund, Massachusetts Municipal Money Market Fund, New York Municipal Money
Market Fund and U.S. Treasury Fund designated as such Funds' Class A shares,
Class B shares, Class E shares, Class V shares, Class W shares, Class EE shares
and Class F shares, respectively, offered by The Galaxy Fund (the "Trust") to
investors maintaining with us certain qualified accounts as described in the
applicable prospectuses pertaining to such shares (such shares, which constitute
a separate series of shares of the Money Market Fund, Government Fund,
Tax-Exempt Fund, Connecticut Municipal Money Market Fund, Massachusetts
Municipal Money Market Fund, New York Municipal Money Market Fund and U.S.
Treasury Fund (collectively, the "Funds"), are hereinafter referred to as
"Retail Shares").
The terms and conditions of this Servicing Agreement are as
follows:
SECTION 1. You agree to offer to provide one or more of the
following administrative support services to Customers who may from time to time
beneficially own Retail Shares: (i) processing dividend payments from us on
behalf of Customers; (ii) providing information periodically to Customers
showing their positions in Retail Shares; (iii) arranging for bank wires; (iv)
responding to Customer inquiries relating to the services performed by you; (v)
providing subaccounting with respect to Retail Shares beneficially owned by
Customers or the information to us necessary for subaccounting; (vi) if required
by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (vii) forwarding to Customers proxy
statements and proxies containing any proposals regarding this Agreement or the
Shareholder Services Plan related hereto; (viii) aggregating and processing
purchase, exchange and redemption requests from Customers and placing net
purchase, exchange and redemption orders with our distributor or transfer agent;
(ix) providing Customers with a service that invests the assets of their
accounts in Retail Shares; and (x) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under applicable
statutes, rules and regulations. It is understood that not all Customers may
require or wish to avail themselves of any or all such services.
<PAGE>
SECTION 2. We recognize that you may be subject to the
provisions of certain laws governing, among other things, the conduct of
activities by federally-chartered and supervised banks and other banking
organizations. As such, you may be restricted in the activities you may
undertake and for which you may be paid and, therefore, you will perform only
those activities which are consistent with your statutory and regulatory
obligations. You will act solely as an agent for, upon the order of, and for the
account of, your Customers.
SECTION 3. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services to Customers.
SECTION 4. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning the Shares offered
by the Trust except those contained in the Trust's then current prospectuses and
statements of additional information pertaining to Retail Shares, copies of
which will be supplied to you, or in such supplemental literature or advertising
as may be authorized by the Trust in writing.
SECTION 5. For all purposes of this Agreement you will be deemed
to be an independent contractor, and will have no authority to act as agent for
the Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of Retail Shares by or on behalf of
Customers. You and your employees will, upon request, be available during normal
business hours to consult with the Trust or its designees concerning the
performance of your responsibilities under this Agreement.
SECTION 6. In consideration of the services and facilities
provided by you, the Trust will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of .25% of the average daily net asset value
of the Retail Shares of the Funds beneficially owned as of the end of each month
by your Customers for whom you are the dealer of record or holder of record or
with whom you have a servicing relationship, which fee will be computed at that
time. Fees for the Funds will be payable monthly. For purposes of determining
the fees payable under this Section 6, the average daily net asset value of your
Customers' Retail Shares will be computed in the manner specified in the Trust's
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Retail Shares for
purposes of purchases and redemptions. The fee rates stated above may be
prospectively increased or decreased by the Trust, in its sole discretion, at
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of Retail Shares including the sale
of such Retail Shares to you for the account of any Customer or Customers. All
fees payable by the Trust under this Agreement with respect to the Retail Shares
of a particular Fund shall be payable entirely out of the net investment income
allocable to such Retail Shares, and no shares of the Fund involved, other than
the Retail Shares, and no other class of shares of the Trust (or a separate
series of shares of any such class) shall be responsible for such fees. In
addition, by your written acceptance of this Agreement, you agree to and do
-2-
<PAGE>
waive such portion of the fee payable under this Section 6 as is necessary to
assure that the amount of such fee which is required to be accrued on any day
with respect to your Customers' Retail Shares does not exceed the income to be
accrued to your Customers' Retail Shares on that day.
SECTION 7. Any person authorized to direct the disposition of
the monies paid or payable by the Trust pursuant to this Agreement will provide
to the Board of Trustees of the Trust, and the Board will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish the Trust or
its designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
SECTION 8. The Trust may enter into other similar Servicing
Agreements with any other person or persons without your consent.
SECTION 9. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) in no event will any of the services
provided by you hereunder be primarily intended to result in the sale of any
Retail Shares; (ii) the compensation payable to you hereunder, together with any
other compensation payable to you by Customers in connection with the investment
of their assets in Retail Shares of the Funds, will be disclosed by you to your
Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in Retail
Shares or establish or maintain Customer accounts for the primary purpose of
investing in Retail Shares; (iv) in the event an issue pertaining to this
Agreement or our Shareholder Services Plan related hereto is submitted for
shareholder approval, you will vote any Retail Shares held for your own account
in the same proportion as the vote of the Retail Shares held for your Customers'
accounts; and (v) you will not engage in activities pursuant to this Agreement
which constitute acting as a broker or dealer under state law unless you have
obtained the licenses required by such law.
SECTION 10. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 31, 2000 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 13 hereof. This Agreement is terminable with respect
to Retail Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 13 hereof) or by you upon notice to the Trust.
SECTION 11. All notices and other communications between the
parties to this Agreement will be duly given if mailed, telegraphed, telexed or
transmitted by similar
-3-
<PAGE>
telecommunications device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
SECTION 12. This Agreement will be construed in accordance with
the laws of the Commonwealth of Massachusetts and is nonassignable by the
parties hereto.
SECTION 13. This Agreement has been approved by vote of a
majority of (i) the Board of Trustees of the Trust and (ii) those trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Trust and who have no direct or indirect financial interest in the
operation of the Shareholder Services Plan adopted by the Trust regarding the
provision of support services to the beneficial owners of Retail A Shares and/or
Trust Shares or in any agreement related thereto ("Disinterested Trustees"),
cast in person at a meeting called for the purpose of voting on such approval.
SECTION 14. The names "The Galaxy Fund" and "Trustees of The
Galaxy Fund" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated March 31, 1986 which is hereby referred to and a copy
of which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "The
Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust property belonging to such class for the enforcement of any claims
against the Trust.
If you agree to be legally bound by the provisions of this
Agreement, pleas sign a copy of this letter where indicated below and promptly
return it to the Trust, c/o Jylanne Dunne, PFPC, Inc., 4400 Computer Drive,
Westboro, MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:__________________________
Date:___________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:__________________ By:__________________________
(Authorized Officer)
-4-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Small Company Equity Fund, MidCap Equity Fund, Equity Value Fund, Equity Growth
Fund, Growth Fund II, Equity Income Fund, International 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 and Rhode Island Municipal Bond Fund - Retail A Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers ("Customers") who
may from time to time beneficially own shares of the Small Company Equity Fund,
MidCap Equity Fund, Equity Value Fund, Equity Growth Fund, Growth Fund II,
Equity Income Fund, International 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 and Rhode Island Municipal
Bond Fund, designated as such Funds' Class K - Series 2 shares, Class Z - Series
2 shares, Class C - Special Series 1 shares, Class H Series 2 shares, Class MM -
Series 2 shares, Class I - Series 2 shares, Class G - Series 2 shares, Class N
Series 2 shares, Class X - Series 2 shares, Class U - Series 2 shares, Class AA
- - Series 2 shares, Class L Series 2 shares, Class D - Special Series 1 shares,
Class J - Series 2 shares, Class T - Series 2 shares, Class M - Series 2 shares,
Class JJ - Series 2 shares, Class HH - Series 2 shares, Class Y - Series 2
shares, Class O Series 2 shares, Class P - Series 2 shares, Class KK- Series 2
shares, Class Q - Series 2 shares, Class LL Series 2 shares and Class R - Series
2 shares, respectively, offered by The Galaxy Fund (the "Trust") to investors
maintaining with us certain qualified accounts as described in the applicable
prospectuses pertaining to such shares (such shares, which constitute a separate
series of shares of the Small Company Equity Fund, MidCap Equity Fund, Equity
Value Fund, Equity Growth Fund, Growth Fund II, Equity Income Fund,
International 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 and Rhode Island Municipal Bond
Fund (collectively, the "Funds"), are hereinafter referred to as "Retail
Shares").
<PAGE>
The terms and conditions of this Servicing Agreement are as follows:
SECTION 1. You agree to offer to provide one or more of the following
administrative support services to Customers who may from time to time
beneficially own Retail Shares: (i) processing dividend payments from us on
behalf of Customers; (ii) arranging for bank wires; (iii) providing
subaccounting with respect to Retail Shares beneficially owned by Customers or
the information to us necessary for subaccounting; (iv) if required by law,
forwarding shareholder communications from us (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; (v) aggregating and processing purchase, exchange
and redemption requests from Customers and placing net purchase, exchange and
redemption orders with our distributor or transfer agent; and (vi) providing
such other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations. It is
understood that not all Customers may require or wish to avail themselves of any
or all such services.
SECTION 2. You agree to offer to provide one or more of the following
services to Customers who may from time to time beneficially own Retail Shares:
(i) providing information periodically to Customers showing their positions in
Retail Shares; (ii) responding to Customer inquiries relating to the services
performed by you; (iii) providing Customers with a service that invests the
assets of their accounts in Retail Shares; and (iv) providing such other similar
services as we may reasonably request to the extent you are permitted to do so
under applicable statutes, rules and regulations. It is understood that not all
Customers may require or wish to avail themselves of any or all such services.
SECTION 3. We recognize that you may be subject to the provisions of
certain laws governing, among other things, the conduct of activities by
federally-chartered and supervised banks and other banking organizations. As
such, you may be restricted in the activities you may undertake and for which
you may be paid and, therefore, you will perform only those activities which are
consistent with your statutory and regulatory obligations. You will act solely
as an agent for, upon the order of, and for the account of, your Customers.
SECTION 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
SECTION 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning Shares offered by the Trust
except those contained in the Trust's then current prospectuses and statements
of additional information pertaining to Retail Shares, copies of which will be
supplied to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
SECTION 6. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
-2-
<PAGE>
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of Retail Shares by or on behalf of
Customers. You and your employees will, upon request, be available during normal
business hours to consult with the Trust or its designees concerning the
performance of your responsibilities under this Agreement.
SECTION 7. In consideration of the services and facilities provided by
you pursuant to Section 1 hereof, the Trust will pay to you, and you will accept
as full payment therefor, a fee at the annual rate of (a) .25% of the average
daily net asset value of the Retail Shares of the Small Company Equity Fund,
MidCap Equity Fund, Equity Value Fund, Equity Growth Fund, Growth Fund II,
Equity Income Fund, International Equity Fund, Asset Allocation Fund, Small Cap
Value Fund, Growth and Income Fund and Strategic Equity Fund (collectively,
"Equity Funds") beneficially owned as of the end of each fiscal quarter by your
Customers for whom you are the dealer of record or holder of record or with whom
you have a servicing relationship, which fee will be computed at that time; and
(b) .15% of the average daily net asset value of the Retail Shares of the
Short-Term Bond Fund, Intermediate 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 and Rhode
Island Municipal Bond Fund (collectively, "Bond Funds") beneficially owned as of
the end of each month by your Customers for whom you are the dealer of record or
holder of record or with whom you have a servicing relationship, which fee will
be computed at that time. In consideration of the additional services provided
by you pursuant to Section 2 hereof, the Trust will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of (a) .25% of the
average daily net asset value of the Retail Shares of the Equity Funds; and (b)
.15% of the average daily net asset value of the Retail Shares of the Bond
Funds. Fees for the Equity Funds will be payable quarterly and for the Bond
Funds, monthly. For purposes of determining the fees payable under this Section
7, the average daily net asset value of your Customers' Retail Shares will be
computed in the manner specified in the Trust's Registration Statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Retail Shares for purposes of purchases and redemptions. The
fee rates stated above may be prospectively increased or decreased by the Trust,
in its sole discretion, at any time upon notice to you. Further, the Trust may,
in its discretion and without notice, suspend or withdraw the sale of Retail
Shares including the sale of such Retail Shares to you for the account of any
Customer or Customers. All fees payable by the Trust under this Agreement with
respect to the Retail Shares of a particular Fund shall be payable entirely out
of the net investment income allocable to such Retail Shares, and no shares of
the Fund involved, other than the Retail Shares, and no other class of shares of
the Trust (or a separate series of shares of any such class) shall be
responsible for such fees. In addition, by your written acceptance of this
Agreement, you agree to and do waive such portion of the fee payable under this
Section 7 as is necessary to assure that the amount of such fee which is
required to be accrued on any day with respect to your Customers' Retail Shares
does not exceed the income to be accrued to your Customers' Retail Shares on
that day.
-3-
<PAGE>
SECTION 8. Any person authorized to direct the disposition of the monies
paid or payable by the Trust pursuant to this Agreement will provide to the
Board of Trustees of the Trust, and the Board will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish the Trust or its designees
with such information as may be reasonably requested (including, without
limitation, periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with the Trust and its
designees (including, without limitation, any auditors designated by the Trust),
in connection with the preparation of reports to the Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust pursuant
hereto, as well as any other reports or filings that may be required by law.
SECTION 9. The Trust may enter into other similar Servicing Agreements
with any other person or persons without your consent.
SECTION 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Retail Shares; (ii)
the compensation payable to you hereunder, together with any other compensation
payable to you by Customers in connection with the investment of their assets in
Retail Shares of the Funds, will be disclosed by you to your Customers, will be
authorized by your Customers and will not result in an excessive or unreasonable
fee to you; (iii) you will not advertise or otherwise promote your Customer
accounts primarily as a means of investing in Retail Shares or establish or
maintain Customer accounts for the primary purpose of investing in Retail
Shares; (iv) in the event an issue pertaining to this Agreement or our
Shareholder Services Plan related hereto is submitted for shareholder approval,
you will vote any Retail Shares held for your own account in the same proportion
as the vote of the Retail Shares held for your Customers' accounts; and (v) you
will not engage in activities pursuant to this Agreement which constitute acting
as a broker or dealer under state law unless you have obtained the licenses
required by such law.
SECTION 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee. Unless
sooner terminated, this Agreement will continue until May 31, 2000 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 14 hereof. This Agreement is terminable with respect
to Retail Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 14 hereof) or by you upon notice to the Trust.
SECTION 12. All notices and other communications between the parties to
this Agreement will be duly given if mailed, telegraphed, telexed or transmitted
by similar telecommunications device to the appropriate address stated herein,
or to such other address as either party shall so provide the other.
SECTION 13. This Agreement will be construed in accordance with the laws
of the Commonwealth of Massachusetts and is nonassignable by the parties hereto.
-4-
<PAGE>
SECTION 14. This Agreement has been approved by vote of a majority of
(i) the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons (as defined in the Investment Company Act of 1940) of the
Trust and who have no direct or indirect financial interest in the operation of
the Shareholder Services Plan adopted by the Trust regarding the provision of
support services to the beneficial owners of Retail A Shares and/or Trust Shares
or in any agreement related thereto (the "Disinterested Trustees"), cast in
person at a meeting called for the purpose of voting on such approval.
SECTION 15. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders, or representatives of
the Trust personally but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to the Trust, c/o Jylanne Dunne, PFPC, Inc., 4400 Computer Drive, Westborough,
MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:________________________________
Date: ________________ (Authorized Officer)
Accepted and Agreed to:
[Name of Service Organization]
By:________________________________
Date: _________________ (Authorized Officer)
-5-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Money Market Fund, Government Fund, Tax-Exempt Fund and U.S. Treasury Fund -
Trust Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you
concerning the provision of administrative support services to your customers
("Customers") who may from time to time beneficially own shares of the Money
Market Fund, Government Fund, Tax-Exempt Fund and U.S. Treasury Fund, designated
as such Funds' Class A - Special Series 1 shares, Class B - Special Series 1
shares, Class E - Special Series 1 shares and Class F - Special Series 1 shares,
respectively, offered by The Galaxy Fund (the "Trust") to investors maintaining
with us certain qualified accounts as described in the applicable prospectuses
pertaining to such shares (such shares, which constitute a separate series of
shares of the Money Market Fund, Government Fund, Tax-Exempt Fund and U.S.
Treasury Fund (collectively, the "Funds"), are hereinafter referred to as "Trust
Shares").
The terms and conditions of this Servicing Agreement are as
follows:
SECTION 1. You agree to offer to provide one or more of the
following administrative support services to Customers who may from time to time
beneficially own Trust Shares: (i) processing dividend payments from us on
behalf of Customers; (ii) providing information periodically to Customers
showing their positions in Trust Shares; (iii) arranging for bank wires; (iv)
responding to Customer inquiries relating to the services performed by you; (v)
providing subaccounting with respect to Trust Shares beneficially owned by
Customers or the information to us necessary for subaccounting; (vi) if required
by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (vii) forwarding to Customers proxy
statements and proxies containing any proposals regarding this Agreement or the
Shareholder Services Plan related hereto; (viii) aggregating and processing
purchase, exchange and redemption requests from Customers and placing net
purchase, exchange and redemption orders with our distributor or transfer agent;
(ix) providing Customers with a service that invests the assets of their
accounts in Trust Shares; and (x) providing such other similar services as we
may reasonably request to the extent you are permitted to do so under applicable
statutes, rules and regulations. It is understood that not all Customers may
require or wish to avail themselves of any or all such services.
SECTION 2. We recognize that you may be subject to the
provisions of certain laws governing, among other things, the conduct of
activities by federally-chartered and supervised banks and other banking
organizations. As such, you may be restricted in the activities you may
undertake and for which you may be paid and, therefore, you will perform only
those activities
<PAGE>
which are consistent with your statutory and regulatory obligations. You will
act solely as an agent for, upon the order of, and for the account of, your
Customers.
SECTION 3. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services to Customers.
SECTION 4. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning the Trust or Trust
Shares except those contained in the Trust's then current prospectuses and
statements of additional information pertaining to Trust Shares, copies of which
will be supplied to you, or in such supplemental literature or advertising as
may be authorized by the Trust in writing.
SECTION 5. For all purposes of this Agreement you will be deemed
to be an independent contractor, and will have no authority to act as agent for
the Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of Trust Shares by or on behalf of
Customers. You and your employees will, upon request, be available during normal
business hours to consult with the Trust or its designees concerning the
performance of your responsibilities under this Agreement.
SECTION 6. In consideration of the services and facilities
provided by you hereunder, the Trust will pay to you, and you will accept as
full payment therefor, a fee at the annual rate of .25% of the average daily net
asset value of the Trust Shares of the Funds beneficially owned as of the end of
each month by your Customers for whom you are the dealer of record or holder of
record or with whom you have a servicing relationship, which fee will be
computed at that time. Fees for the Funds will be payable monthly. For purposes
of determining the fees payable under this Section 6, the average daily net
asset value of your Customers' Trust Shares will be computed in the manner
specified in the Trust's Registration Statement (as the same is in effect from
time to time) in connection with the computation of the net asset value of Trust
Shares for purposes of purchases and redemptions. The fee rates stated above may
be prospectively increased or decreased by the Trust, in its sole discretion, at
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of Trust Shares including the sale
of such Trust Shares to you for the account of any Customer or Customers. All
fees payable by the Trust under this Agreement with respect to the Trust Shares
of a particular Fund shall be payable entirely out of the net investment income
allocable to such Trust Shares, and no shares of the Fund involved, other than
the Trust Shares, and no other class of shares of the Trust (or a separate
series of shares of any such class) shall be responsible for such fees. In
addition, by your written acceptance of this Agreement, you agree to and do
waive such portion of the fee payable under this Section 6 as is necessary to
assure that the amount of such fee which is required to be accrued on any day
with respect to your Customers' Trust Shares does not exceed the income to be
accrued to your Customers' Trust Shares on that day.
-2-
<PAGE>
SECTION 7. Any person authorized to direct the disposition of
the monies paid or payable by the Trust pursuant to this Agreement will provide
to the Board of Trustees of the Trust, and the Board will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish the Trust or
its designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
SECTION 8. The Trust may enter into other similar Servicing
Agreements with any other person or persons without your consent.
SECTION 9. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) in no event will any of the services
provided by you hereunder be primarily intended to result in the sale of any
Trust Shares; (ii) the compensation payable to you hereunder, together with any
other compensation payable to you by Customers in connection with the investment
of their assets in Trust Shares of the Funds, will be disclosed by you to your
Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in Trust Shares
or establish or maintain Customer accounts for the primary purpose of investing
in Trust Shares; (iv) in the event an issue pertaining to this Agreement or our
Shareholder Services Plan related hereto is submitted for shareholder approval,
you will vote any Trust Shares held for your own account in the same proportion
as the vote of the Trust Shares held for your Customers' accounts; and (v) you
will not engage in activities pursuant to this Agreement which constitute acting
as a broker or dealer under state law unless you have obtained the licenses
required by such law.
SECTION 10. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 31, 2000 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 13 hereof. This Agreement is terminable with respect
to Trust Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 13 hereof) or by you upon notice to the Trust.
SECTION 11. All notices and other communications between the
parties to this Agreement will be duly given if mailed, telegraphed, telexed or
transmitted by similar telecommunications device to the appropriate address
stated herein, or to such other address as either party shall so provide the
other.
SECTION 12. This Agreement will be construed in accordance with
the laws of the Commonwealth of Massachusetts and is nonassignable by the
parties hereto.
-3-
<PAGE>
SECTION 13. This Agreement has been approved by vote of a
majority of (i) the Board of Trustees of the Trust and (ii) those trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Trust and who have no direct or indirect financial interest in the
operation of the Shareholder Services Plan adopted by the Trust regarding the
provision of support services to the beneficial owners of Retail A Shares and/or
Trust Shares or in any agreement related thereto ("Disinterested Trustees"),
cast in person at a meeting called for the purpose of voting on such approval.
SECTION 14. The names "The Galaxy Fund" and "Trustees of The
Galaxy Fund" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated March 31, 1986 which is hereby referred to and a copy
of which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "The
Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust property belonging to such class for the enforcement of any claims
against the Trust.
If you agree to be legally bound by the provisions of this
Agreement, pleas sign a copy of this letter where indicated below and promptly
return it to the Trust, c/o Jylanne Dunne, PFPC, Inc., 4400 Computer Drive,
Westboro, MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:___________________________
Date:___________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:__________________ By:____________________________
(Authorized Officer)
-4-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Small Company Equity Fund, MidCap Equity Fund, Equity Value Fund, Equity Growth
Fund, Growth Fund II, Equity Income Fund, International 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 and Rhode Island Municipal Bond Fund - Trust Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you
concerning the provision of administrative support services to your customers
("Customers") who may from time to time beneficially own shares of the Small
Company Equity Fund, MidCap Equity Fund, Equity Value Fund, Equity Growth Fund,
Growth Fund II, Equity Income Fund, International 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 and Rhode
Island Municipal Bond Fund, designated as such Funds' Class K - Series 1 shares,
Class Z - Series 1 shares, Class C shares, Class H Series 1 shares, Class MM -
Series 1 shares, Class I -Series 1 shares, Class G - Series 1 shares, Class N
Series 1 shares, Class X - Series 1 shares, Class U - Series 1 shares, Class AA
- - Series 1 shares, Class L Series 1 shares, Class D shares, Class J - Series 1
shares, Class T - Series 1 shares, Class M - Series 1 shares, Class JJ - Series
1 shares, Class HH - Series 1 shares, Class Y - Series 1 shares, Class O -
Series 1 shares, Class P - Series 1 shares, Class KK - Series 1 shares, Class Q
- - Series 1 shares, Class LL - Series 1 shares and Class R - Series 1 shares,
respectively, offered by The Galaxy Fund (the "Trust") to investors maintaining
with us certain qualified accounts as described in the applicable prospectuses
pertaining to such shares (such shares, which constitute a separate series of
shares of the Small Company Equity Fund, MidCap Equity Fund, Equity Value Fund,
Equity Growth Fund, Growth Fund II, Equity Income Fund, International 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 and Rhode Island Municipal Bond Fund
(collectively, the "Funds"), are
<PAGE>
hereinafter referred to as "Trust Shares").
The terms and conditions of this Servicing Agreement are as
follows:
SECTION 1. You agree to offer to provide one or more of the
following administrative support services to Customers who may from time to time
beneficially own Trust Shares: (i) processing dividend payments from us on
behalf of Customers; (ii) arranging for bank wires; (iii) providing
subaccounting with respect to Trust Shares beneficially owned by Customers or
the information to us necessary for subaccounting; (iv) if required by law,
forwarding shareholder communications from us (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Customers; (v) aggregating and processing purchase, exchange
and redemption requests from Customers and placing net purchase, exchange and
redemption orders with our distributor or transfer agent; and (vi) providing
such other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations. It is
understood that not all Customers may require or wish to avail themselves of any
or all such services.
SECTION 2. You agree to offer to provide one or more of the
following services to Customers who may from time to time beneficially own Trust
Shares: (i) providing information periodically to Customers showing their
positions in Trust Shares; (ii) responding to Customer inquiries relating to the
services performed by you; (iii) providing Customers with a service that invests
the assets of their accounts in Trust Shares; and (iv) providing such other
similar services as we may reasonably request to the extent you are permitted to
do so under applicable statutes, rules and regulations. It is understood that
not all Customers may require or wish to avail themselves of any or all such
services.
SECTION 3. We recognize that you may be subject to the
provisions of certain laws governing, among other things, the conduct of
activities by federally-chartered and supervised banks and other banking
organizations. As such, you may be restricted in the activities you may
undertake and for which you may be paid and, therefore, you will perform only
those activities which are consistent with your statutory and regulatory
obligations. You will act solely as an agent for, upon the order of, and for the
account of, your Customers.
SECTION 4. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services to Customers.
SECTION 5. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning the Trust or Trust
Shares except those contained in the Trust's then current prospectuses and
statements of additional information pertaining to Trust Shares, copies of which
will be supplied to you, or in such supplemental literature or advertising as
may be authorized by the Trust in writing.
-2-
<PAGE>
SECTION 6. For all purposes of this Agreement you will be deemed
to be an independent contractor, and will have no authority to act as agent for
the Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of Trust Shares by or on behalf of
Customers. You and your employees will, upon request, be available during normal
business hours to consult with the Trust or its designees concerning the
performance of your responsibilities under this Agreement.
SECTION 7. In consideration of the services and facilities
provided by you pursuant to Section 1 hereof, the Trust will pay to you, and you
will accept as full payment therefor, a fee at the annual rate of (a) .25% of
the average daily net asset value of the Trust Shares of the Small Company
Equity Fund, MidCap Equity Fund, Equity Value Fund, Equity Growth Fund, Growth
Fund II, Equity Income Fund, International Equity Fund, Asset Allocation Fund,
Small Cap Value Fund, Growth and Income Fund and Strategic Equity Fund
(collectively, "Equity Funds") beneficially owned as of the end of each fiscal
quarter by your Customers for whom you are the dealer of record or holder of
record or with whom you have a servicing relationship, which fee will be
computed at that time; and (b) .15% of the average daily net asset value of the
Trust Shares of the Short-Term Bond Fund, Intermediate 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 and Rhode Island Municipal Bond Fund (collectively, "Bond Funds")
beneficially owned as of the end of each month by your Customers for whom you
are the dealer of record or holder of record or with whom you have a servicing
relationship, which fee will be computed at that time. In consideration of the
additional services provided by you pursuant to Section 2 hereof, the Trust will
pay to you, and you will accept as full payment therefor, a fee at the annual
rate of (a) .25% of the average daily net asset value of the Trust Shares of the
Equity Funds; and (b) .15% of the average daily net asset value of the Trust
Shares of the Bond Funds. Fees for the Equity Funds will be payable quarterly
and for the Bond Funds, monthly. For purposes of determining the fees payable
under this Section 7, the average daily net asset value of your Customers' Trust
Shares will be computed in the manner specified in the Trust's Registration
Statement (as the same is in effect from time to time) in connection with the
computation of the net asset value of Trust Shares for purposes of purchases and
redemptions. The fee rates stated above may be prospectively increased or
decreased by the Trust, in its sole discretion, at any time upon notice to you.
Further, the Trust may, in its discretion and without notice, suspend or
withdraw the sale of Trust Shares including the sale of such Trust Shares to you
for the account of any Customer or Customers. All fees payable by the Trust
under this Agreement with respect to the Trust Shares of a particular Fund shall
be payable entirely out of the net investment income allocable to such Trust
Shares, and no shares of the Fund involved, other than the Trust Shares, and no
other class of shares of the Trust (or a separate series of shares of any such
class) shall be responsible for such fees. In addition, by your written
acceptance of this Agreement, you agree to and do waive
-3-
<PAGE>
such portion of the fee payable under this Section 7 as is necessary to assure
that the amount of such fee which is required to be accrued on any day with
respect to your Customers' Trust Shares does not exceed the income to be accrued
to your Customers' Trust Shares on that day.
SECTION 8. Any person authorized to direct the disposition of
the monies paid or payable by the Trust pursuant to this Agreement will provide
to the Board of Trustees of the Trust, and the Board will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish the Trust or
its designees with such information as may be reasonably requested (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Board of Trustees concerning this Agreement and the monies paid or payable by
the Trust pursuant hereto, as well as any other reports or filings that may be
required by law.
SECTION 9. The Trust may enter into other similar Servicing
Agreements with any other person or persons without your consent.
SECTION 10. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) in no event will any of the services
provided by you hereunder be primarily intended to result in the sale of any
Trust Shares; (ii) the compensation payable to you hereunder, together with any
other compensation payable to you by Customers in connection with the investment
of their assets in Trust Shares of the Funds, will be disclosed by you to your
Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in Trust Shares
or establish or maintain Customer accounts for the primary purpose of investing
in Trust Shares; (iv) in the event an issue pertaining to this Agreement or our
Shareholder Services Plan related hereto is submitted for shareholder approval,
you will vote any Trust Shares held for your own account in the same proportion
as the vote of the Trust Shares held for your Customers' accounts; and (v) you
will not engage in activities pursuant to this Agreement which constitute acting
as a broker or dealer under state law unless you have obtained the licenses
required by such law.
SECTION 11. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 31, 2000 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 14 hereof. This Agreement is terminable with respect
to Trust Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 14 hereof) or by you upon notice to the Trust.
SECTION 12. All notices and other communications between the
parties to this Agreement will be duly given if mailed, telegraphed, telexed or
transmitted by similar
-4-
<PAGE>
telecommunications device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
SECTION 13. This Agreement will be construed in accordance with
the laws of the Commonwealth of Massachusetts and is nonassignable by the
parties hereto.
SECTION 14. This Agreement has been approved by vote of a
majority of (i) the Board of Trustees of the Trust and (ii) those trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Trust and who have no direct or indirect financial interest in the
operation of the Shareholder Services Plan adopted by the Trust regarding the
provision of support services to the beneficial owners of Retail A Shares and/or
Trust Shares or in any agreement related thereto ("Disinterested Trustees"),
cast in person at a meeting called for the purpose of voting on such approval.
SECTION 15. The names "The Galaxy Fund" and "Trustees of The
Galaxy Fund" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated March 31, 1986 which is hereby referred to and a copy
of which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "The
Galaxy Fund" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust property belonging to such class for the enforcement of any claims
against the Trust.
-5-
<PAGE>
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to the Trust, c/o Jylanne Dunne, PFPC, Inc., 4400 Computer Drive,
Westborough, MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:____________________________
Date:___________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:__________________ By:____________________________
(Authorized Officer)
-6-
<PAGE>
THE GALAXY FUND
SHAREHOLDER SERVICES PLAN
FOR
BKB SHARES
SECTION 1. Upon the recommendation of PFPC Inc. ("PFPC"), the
administrator of The Galaxy Fund (the "Trust"), any officer of the Trust is
authorized to execute and deliver, in the name and on behalf of the Trust,
written agreements in substantially the form attached hereto or in any other
form duly approved by the Board of Trustees ("Servicing Agreements") with
securities dealers, financial institutions and other industry professionals that
are shareholders or dealers of record or which have a servicing relationship
("Service Organizations") with the beneficial owners of BKB Shares of the Money
Market Fund, U.S. Treasury Fund, Tax-Exempt Fund, Short-Term Bond Fund,
Intermediate Government Income Fund, High Quality Bond Fund, Rhode Island
Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate
Municipal Bond Fund, Massachusetts Intermediate Municipal Bond Fund, Asset
Allocation Fund, Growth and Income Fund, Growth Fund II and International Equity
Fund of the Trust (the "Funds"). Pursuant to said Agreements, Service
Organizations shall provide shareholder liaison and/or administrative support
services as set forth therein to their customers who beneficially own BKB Shares
(as described in the Trust's prospectuses) of the Funds in consideration of
fees, computed and paid in the manner set forth in the Servicing Agreements, at
the annual rate of up to .50% in the aggregate of the net asset value of the BKB
Shares beneficially owned by such customers. Any bank, trust company, thrift
institution or broker-dealer is eligible to become a Service Organization and to
receive fees under this Plan, including FleetBoston Financial Corporation and
its affiliates. All expenses incurred by the Trust with respect to BKB Shares of
a particular Fund in connection with Servicing Agreements and the implementation
of this Plan shall be borne entirely by the holders of BKB Shares of the Fund.
Each Servicing Agreement will provide for a fee waiver by a Service Organization
to the extent that the net investment income of BKB Shares of a particular Fund
earned in the applicable period is less than the fee due from BKB Shares of the
Fund for such period.
SECTION 2. PFPC shall monitor the arrangements pertaining to the Trust's
Servicing Agreements with Service Organizations in accordance with the terms of
the Administration Agreement between PFPC and the Trust. PFPC shall not,
however, be obliged by this Plan to recommend, and the Trust shall not be
obliged to execute, any Servicing Agreement with any qualifying Service
Organization.
SECTION 3. So long as this Plan is in effect, PFPC shall provide to the
Trust's Board of Trustees, and the trustees shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan and the purposes
for which such expenditures were made.
SECTION 4. Unless sooner terminated, this Plan shall continue until May
31, 2001 and thereafter shall continue automatically for successive annual
periods provided such continuance is approved at least annually by a majority of
the Board of Trustees, including a majority of the trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940, as
<PAGE>
amended (the "Act")) of the Trust and who have no direct or indirect financial
interest in the operation of this Plan or in any Servicing Agreement related to
this Plan (the "Disinterested Trustees").
SECTION 5. This Plan may be amended at any time with respect to any Fund
by the Board of Trustees, provided that any material amendments of the terms of
this Plan shall become effective only upon the approvals set forth in Section 4.
SECTION 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Trustees.
SECTION 7. While this Plan is in effect, the selection and nomination of
the trustees of the Trust who are not "interested persons" (as defined in the
Act) of the Trust shall be committed to the discretion of the Trust's
Disinterested Trustees.
SECTION 8. This Plan has been adopted by the Trust as of January 25,
2000.
-2-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Money Market Fund, U.S. Treasury Fund and Tax-Exempt Fund - BKB Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning
the provision of shareholder liaison and/or administrative support services to
your customers ("Customers") who may from time to time beneficially own BKB
Shares of the Money Market Fund, U.S. Treasury Fund and Tax-Exempt Fund
collectively, the "Funds") offered by The Galaxy Fund (the "Trust") to investors
maintaining with us certain qualified accounts as described in the applicable
prospectuses pertaining to BKB Shares.
The terms and conditions of this Servicing Agreement are as
follows:
SECTION 1. You agree to offer to provide one or more of the
following administrative support services to Customers who may from time to
time beneficially own BKB Shares: (i) processing dividend payments from us on
behalf of Customers; (ii) providing information periodically to Customers
showing their positions in BKB Shares; (iii) arranging for bank wires; (iv)
responding to Customer inquiries relating to the services performed by you;
(v) providing subaccounting with respect to BKB Shares beneficially owned by
Customers or the information to us necessary for subaccounting; (vi) if
required by law, forwarding shareholder communications from us (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (vii) forwarding to
Customers proxy statements and proxies containing any proposals regarding
this Agreement or the Shareholder Services Plan related hereto; (viii)
aggregating and processing purchase, exchange and redemption requests from
Customers and placing net purchase, exchange and redemption orders with our
distributor or transfer agent; (ix) providing Customers with a service that
invests the assets of their accounts in BKB Shares; and (x) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations. It is
understood that not all Customers may require or wish to avail themselves of
any or all such services.
SECTION 2. We recognize that you may be subject to the
provisions of certain laws governing, among other things, the conduct of
activities by federally-chartered and supervised banks and other banking
organizations. As such, you may be restricted in the activities you may
undertake and for which you may be paid and, therefore, you will perform only
those activities which are consistent with your statutory and regulatory
obligations. You will act solely as an agent for, upon the order of, and for
the account of, your Customers.
SECTION 3. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in
<PAGE>
your business, or any personnel employed by you) as may be reasonably necessary
or beneficial in order to provide the aforementioned services to Customers.
SECTION 4. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning BKB Shares except
those contained in the Trust's then current prospectuses and statements of
additional information pertaining to BKB Shares, copies of which will be
supplied to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
SECTION 5. For all purposes of this Agreement you will be deemed to
be an independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of BKB Shares by or on behalf of Customers.
You and your employees will, upon request, be available during normal business
hours to consult with the Trust or its designees concerning the performance of
your responsibilities under this Agreement.
SECTION 6. In consideration of the services and facilities provided
by you, the Trust will pay to you, and you will accept as full payment therefor,
a fee at the annual rate of [.25%] of the average daily net asset value of the
BKB Shares of the Funds beneficially owned as of the end of each month by your
Customers for whom you are the dealer of record or holder of record or with whom
you have a servicing relationship, which fee will be computed at that time. Fees
for the Funds will be payable monthly. For purposes of determining the fees
payable under this Section 6, the average daily net asset value of your
Customers' BKB Shares will be computed in the manner specified in the Trust's
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of BKB Shares for
purposes of purchases and redemptions. The fee rates stated above may be
prospectively increased or decreased by the Trust, in its sole discretion, at
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of BKB Shares including the sale of
BKB Shares to you for the account of any Customer or Customers. All fees payable
by the Trust under this Agreement with respect to BKB Shares of a particular
Fund shall be payable entirely out of the net investment income allocable to
such BKB Shares, and no shares of the Fund involved, other than BKB Shares, and
no other class of shares of the Trust (or a separate series of shares of any
such class) shall be responsible for such fees. In addition, by your written
acceptance of this Agreement, you agree to and do waive such portion of the fee
payable under this Section 6 as is necessary to assure that the amount of such
fee which is required to be accrued on any day with respect to your Customers'
BKB Shares does not exceed the income to be accrued to your Customers' BKB
Shares on that day.
SECTION 7. Any person authorized to direct the disposition of the
monies paid or payable by the Trust pursuant to this Agreement will provide to
the Board of Trustees of the Trust, and the Board will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish the Trust or
its designees with such information as may be reasonably requested (including,
without
-2-
<PAGE>
limitation, periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with the Trust and its
designees (including, without limitation, any auditors designated by the Trust),
in connection with the preparation of reports to the Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust pursuant
hereto, as well as any other reports or filings that may be required by law.
SECTION 8. The Trust may enter into other similar Servicing
Agreements with any other person or persons without your consent.
SECTION 9. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) in no event will any of the services
provided by you hereunder be primarily intended to result in the sale of any
BKB Shares; (ii) the compensation payable to you hereunder, together with any
other compensation payable to you by Customers in connection with the investment
of their assets in BKB Shares of the Funds, will be disclosed by you to your
Customers, will be authorized by your Customers and will not result in an
excessive or unreasonable fee to you; (iii) you will not advertise or otherwise
promote your Customer accounts primarily as a means of investing in BKB Shares
or establish or maintain Customer accounts for the primary purpose of investing
in BKB Shares; (iv) in the event an issue pertaining to this Agreement or our
Shareholder Services Plan related hereto is submitted for shareholder approval,
you will vote any BKB Shares held for your own account in the same proportion as
the vote of the BKB Shares held for your Customers' accounts; and (v) you will
not engage in activities pursuant to this Agreement which constitute acting as a
broker or dealer under state law unless you have obtained the licenses required
by such law.
SECTION 10. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by the Trust or its designee.
Unless sooner terminated, this Agreement will continue until May 31, 2001 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 13 hereof. This Agreement is terminable with respect
to BKB Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 13 hereof) or by you upon notice to the Trust.
SECTION 11. All notices and other communications between the
parties to this Agreement will be duly given if mailed, telegraphed, telexed or
transmitted by similar telecommunications device to the appropriate address
stated herein, or to such other address as either party shall so provide the
other.
SECTION 12. This Agreement will be construed in accordance with the
laws of the Commonwealth of Massachusetts and is nonassignable by the parties
hereto.
SECTION 13. This Agreement has been approved by vote of a majority
of (i) the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940, as
amended) of the Trust and who have no direct or indirect financial interest in
the operation of the Shareholder Services Plan adopted by the Trust
-3-
<PAGE>
regarding the provision of shareholder liaison and/or administrative support
services to the beneficial owners of BKB Shares or in any agreement related
thereto ("Disinterested Trustees").
SECTION 14. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders, or representatives of
the Trust personally, but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to the Trust, c/o William Greilich, PFPC, Inc., 4400 Computer Drive,
Westborough, MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:_______________________
Date:_______________________ (Authorized Officer)
Accepted and Agreed to:
(Name of Service Organization)
Date:_______________________ By:_______________________
(Authorized Officer)
-4-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
(Short-Term Bond Fund, Intermediate Government Income Fund, High Quality Bond
Fund, Rhode Island Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund, Asset Allocation Fund, Growth and Income Fund, Growth Fund
II and International Equity Fund - BKB Shares)
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of shareholder liaison and/or administrative support services to your
customers ("Customers") who may from time to time beneficially own shares of the
Short-Term Bond Fund, Intermediate Government Income Fund, High Quality Bond
Fund, Rhode Island Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund,
Connecticut Intermediate Municipal Bond Fund, Massachusetts Intermediate
Municipal Bond Fund, Asset Allocation Fund, Growth and Income Fund, Growth Fund
II and International Equity Fund (collectively, the "Funds") offered by The
Galaxy Fund (the "Trust") to investors maintaining with us certain qualified
accounts as described in the applicable prospectuses pertaining to BKB Shares.
The terms and conditions of this Servicing Agreement are as follows:
SECTION 1. You agree to offer to provide one or more of the following
shareholder liaison services to Customers who may from time to time beneficially
own BKB Shares: (i) providing information periodically to Customers showing
their positions in BKB Shares; (ii) responding to Customer inquiries relating to
the services performed by you; (iii) providing Customers with a service that
invests the assets of their accounts in BKB Shares; and (iv) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations. It is
understood that not all Customers may require or wish to avail themselves of any
or all such services.
SECTION 2. You agree to offer to provide one or more of the following
administrative support services to Customers who may from time to time
beneficially own BKB Shares: (i) processing dividend payments from us on behalf
of Customers; (ii) arranging for bank wires; (iii) providing subaccounting with
respect to BKB Shares beneficially owned by Customers or the information to us
necessary for subaccounting; (iv) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Customers; (v) aggregating and processing purchase, exchange and redemption
requests from Customers and placing net purchase, exchange and redemption orders
with our distributor or transfer agent; and (vi) providing such other similar
services as we may reasonably request to the extent you are permitted to do so
under applicable statutes, rules and regulations. It is understood that not all
Customers may require or wish to avail themselves of any or all such services.
<PAGE>
SECTION 3. We recognize that you may be subject to the provisions of
certain laws governing, among other things, the conduct of activities by
federally-chartered and supervised banks and other banking organizations. As
such, you may be restricted in the activities you may undertake and for which
you may be paid and, therefore, you will perform only those activities which are
consistent with your statutory and regulatory obligations. You will act solely
as an agent for, upon the order of, and for the account of, your Customers.
SECTION 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
SECTION 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning BKB Shares offered by the
Trust except those contained in the Trust's then current prospectuses and
statements of additional information pertaining to BKB Shares, copies of which
will be supplied to you, or in such supplemental literature or advertising as
may be authorized by the Trust in writing.
SECTION 6. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for the
Trust in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold the Trust harmless
from and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder for the purchase,
redemption, transfer or registration of BKB Shares by or on behalf of Customers.
You and your employees will, upon request, be available during normal business
hours to consult with the Trust or its designees concerning the performance of
your responsibilities under this Agreement.
SECTION 7. In consideration of the services and facilities provided by
you pursuant to Section 1 hereof, the Trust will pay to you, and you will accept
as full payment therefor, a fee at the annual rate of (a) [.25%] of the average
daily net asset value of BKB Shares of the Asset Allocation Fund, Growth and
Income Fund, Growth Fund II and International Equity Fund (collectively, "Equity
Funds") beneficially owned as of the end of each fiscal quarter by your
Customers for whom you are the dealer of record or holder of record or with whom
you have a servicing relationship, which fee will be computed at that time; and
(b) [.15%] of the average daily net asset value of BKB Shares of the Short-Term
Bond Fund, Intermediate Government Income Fund, High Quality Bond Fund, Rhode
Island Municipal Bond Fund, Intermediate Tax-Exempt Bond Fund, Connecticut
Intermediate Municipal Bond Fund and Massachusetts Intermediate Municipal Bond
Fund (collectively, "Bond Funds") beneficially owned as of the end of each month
by your Customers for whom you are the dealer of record or holder of record or
with whom you have a servicing relationship, which fee will be computed at that
time. In consideration of the additional services provided by you pursuant to
Section 2 hereof, the Trust will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of (a) [.25%] of the average daily net asset
value of BKB Shares of the Equity Funds; and (b) [.15%] of the average daily net
asset value of BKB Shares of the Bond Funds. Fees for the Equity Funds
-2-
<PAGE>
will be payable quarterly and for the Bond Funds, monthly. For purposes of
determining the fees payable under this Section 7, the average daily net asset
value of your Customers' BKB Shares will be computed in the manner specified in
the Trust's Registration Statement (as the same is in effect from time to time)
in connection with the computation of the net asset value of BKB Shares for
purposes of purchases and redemptions. The fee rates stated above may be
prospectively increased or decreased by the Trust, in its sole discretion, at
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of BKB Shares including the sale of
BKB Shares to you for the account of any Customer or Customers. All fees payable
by the Trust under this Agreement with respect to BKB Shares of a particular
Fund shall be payable entirely out of the net investment income allocable to
such BKB Shares, and no shares of the Fund involved, other than the BKB Shares,
and no other class of shares of the Trust (or a separate series of shares of any
such class) shall be responsible for such fees. In addition, by your written
acceptance of this Agreement, you agree to and do waive such portion of the fee
payable under this Section 7 as is necessary to assure that the amount of such
fee which is required to be accrued on any day with respect to your Customers'
BKB Shares does not exceed the income to be accrued to your Customers' BKB
Shares on that day.
SECTION 8. Any person authorized to direct the disposition of the monies
paid or payable by the Trust pursuant to this Agreement will provide to the
Board of Trustees of the Trust, and the Board will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish the Trust or its designees
with such information as may be reasonably requested (including, without
limitation, periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with the Trust and its
designees (including, without limitation, any auditors designated by the Trust),
in connection with the preparation of reports to the Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust pursuant
hereto, as well as any other reports or filings that may be required by law.
SECTION 9. The Trust may enter into other similar Servicing Agreements
with any other person or persons without your consent.
SECTION 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any BKB Shares; (ii)
the compensation payable to you hereunder, together with any other compensation
payable to you by Customers in connection with the investment of their assets in
BKB Shares of the Funds, will be disclosed by you to your Customers, will be
authorized by your Customers and will not result in an excessive or unreasonable
fee to you; (iii) you will not advertise or otherwise promote your Customer
accounts primarily as a means of investing in BKB Shares or establish or
maintain Customer accounts for the primary purpose of investing in BKB Shares;
(iv) in the event an issue pertaining to this Agreement or our Shareholder
Services Plan related hereto is submitted for shareholder approval, you will
vote any BKB Shares held for your own account in the same proportion as the vote
of the BKB Shares held for your Customers' accounts; and (v) you will not engage
in activities pursuant to this Agreement which constitute acting as a broker or
dealer under state law unless you have obtained the licenses required by such
law.
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<PAGE>
SECTION 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee. Unless
sooner terminated, this Agreement will continue until May 31, 2001 and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trust in the
manner described in Section 14 hereof. This Agreement is terminable with respect
to BKB Shares of any of the Funds, without penalty, at any time by the Trust
(which termination may be by a vote of a majority of the Disinterested Trustees
as defined in Section 14 hereof) or by you upon notice to the Trust.
SECTION 12. All notices and other communications between the parties to
this Agreement will be duly given if mailed, telegraphed, telexed or transmitted
by similar telecommunications device to the appropriate address stated herein,
or to such other address as either party shall so provide the other.
SECTION 13. This Agreement will be construed in accordance with the laws
of the Commonwealth of Massachusetts and is nonassignable by the parties hereto.
SECTION 14. This Agreement has been approved by vote of a majority of
(i) the Board of Trustees of the Trust and (ii) those trustees who are not
"interested persons (as defined in the Investment Company Act of 1940, as
amended) of the Trust and who have no direct or indirect financial interest in
the operation of the Shareholder Services Plan adopted by the Trust regarding
the provision of support services to the beneficial owners of BKB Shares or in
any agreement related thereto (the "Disinterested Trustees").
SECTION 15. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders, or representatives of
the Trust personally but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
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<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to the Trust, c/o William Greilich, PFPC, Inc., 4400 Computer Drive,
Westborough, MA 01581-5108.
Very truly yours,
THE GALAXY FUND
By:________________________________
Date: ________________ (Authorized Officer)
Accepted and Agreed to:
[Name of Service Organization]
By:________________________________
Date: _________________ (Authorized Officer)
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<PAGE>
Exhibit (h)(20)
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CREDIT AGREEMENT
AMONG
THE GALAXY FUND,
THE GALAXY VIP FUND,
GALAXY FUND II,
VARIOUS BANKS,
DEUTSCHE BANK SECURITIES INC.
as Arranger and Syndication Agent
AND
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent
--------------------------------
DATED AS OF DECEMBER 29, 1999
--------------------------------
$150,000,000
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<PAGE>
CREDIT AGREEMENT, dated as of December 29, 1999, among The
Galaxy Fund, The Galaxy VIP Fund, and Galaxy Fund II (each a "Fund" and,
collectively, the "Funds") on behalf of the separate mutual fund portfolios
listed from time to time on Schedule I hereto under the name of the Fund of
which such portfolio is a portfolio thereof (each such portfolio a "Borrower"
and, collectively, the "Borrowers"), the Banks party hereto from time to time,
Deutsche Bank Securities Inc., as Arranger and Syndication Agent and Deutsche
Bank AG, New York Branch, as Administrative Agent (all capitalized terms used
herein and defined in Section 10 are used herein as therein defined).
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Banks are willing to make available to the Borrowers the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 THE COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, at any time and from
time to time on and after the Effective Date and prior to the Expiry Date, upon
the request of a Borrower, to make loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to such Borrower, which Loans (i) shall, at
the option of such Borrower, be Base Rate Loans, IBOR Loans or LIBOR Loans,
provided that except as otherwise specifically provided in Section 1.10(b), all
Loans comprising the same Borrowing shall at all times be of the same Type, (ii)
may be repaid and reborrowed in accordance with the provisions hereof, (iii)
shall not exceed for any Bank at any time outstanding, when added to such Bank's
Percentage of all then outstanding Swingline Loans, that aggregate principal
amount which equals the Commitment of such Bank at such time and (iv) shall not
exceed in the aggregate for any Borrower at any time that amount which, when
added to all Swingline Loans made by such Borrower which remain outstanding,
equals such Borrower's Borrowing Base at such time.
(b) Subject to and upon the terms and conditions set forth
herein, the Swingline Bank may, in its sole discretion, agree to make, at any
time and from time to time on and after the Effective Date and prior to the
Swingline Expiry Date, a revolving loan or revolving loans (each a "Swingline
Loan" and, collectively, the "Swingline Loans") to a Borrower, which Swingline
Loans (i) shall, at the option of the respective Borrower, be made and
maintained as Base Rate Loans or IBOR Loans, provided that notwithstanding
anything to the contrary in Section 1.09 or elsewhere in this Agreement, only
Interest Periods of one day shall be available in the case of Swingline Loans
maintained as IBOR Loans, (ii) may be repaid and reborrowed in accordance with
the provisions hereof, (iii) shall not exceed in aggregate principal amount at
any time outstanding, when combined with the aggregate principal amount of all
Revolving Loans then outstanding at such time, an amount equal to the Total
Commitment at such time (after
<PAGE>
giving effect to any reductions to the Total Commitment on such date), (iv)
shall not exceed for any Borrower in aggregate principal amount at any time
outstanding, when combined with the aggregate principal amount of all Revolving
Loans then outstanding to such Borrower at such time, such Borrower's Borrowing
Base at such time and (v) shall not exceed in aggregate principal amount at any
time outstanding the Maximum Swingline Amount. Notwithstanding anything to the
contrary contained in this Section 1.01(b), the Swingline Bank shall not make
any Swingline Loan to any Borrower after it has received written notice from
such Borrower or the Required Banks stating that a Default or an Event of
Default exists and is continuing with respect to such Borrower until such time
as the Swingline Bank shall have received written notice (i) of rescission of
all such notices from the party or parties originally delivering such notice,
(ii) of the waiver of such Default or Event of Default by the Required Banks or
(iii) that the Agents in good faith believe that such Default or Event of
Default no longer exists.
(c) On any Business Day and in any case within five Business
Days of the making of any such Swingline Loan (provided that any failure to give
such notice within such five Business Day period shall not effect the obligation
of the respective Borrower or any other Bank to accept such notice and fund the
Revolving Loan or Revolving Loans referred to below), the Swingline Bank may, in
its sole discretion, give notice to the Banks that its outstanding Swingline
Loans shall be funded with one or more Borrowings of Revolving Loans (provided
that such notice shall be deemed to have been automatically given upon the
occurrence of a Default or an Event of Default under Section 9.05 or upon the
exercise of any of the remedies provided in the last paragraph of Section 9), in
which case one or more Borrowings of Revolving Loans constituting Base Rate
Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the
immediately succeeding Business Day from all Banks with a Commitment (without
giving effect to any reductions thereto pursuant to the last paragraph of
Section 9) PRO RATA based on each such Bank's Percentage (determined before
giving effect to any termination of the Commitments pursuant to the last
paragraph of Section 9) and the proceeds thereof shall be remitted to the
Swingline Bank and applied by the Swingline Bank to repay the Swingline Bank for
such outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to
make Revolving Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding sentence
and on the date specified in writing by the Swingline Bank notwithstanding (i)
that the amount of the Mandatory Borrowing may not comply with the minimum
borrowing amount otherwise required hereunder, (ii) any failure to satisfy any
conditions specified in Section 5, (iii) any Default or Event of Default
existing on such date, (iv) the date of such Mandatory Borrowing and (v) the
amount of the Total Commitment at such time. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to any Borrower), then each such Bank
hereby agrees that it shall forthwith purchase (as of the date the Mandatory
Borrowing would otherwise have occurred, but adjusted for any payments received
by the Swingline Bank from the respective Borrower on or after such date and
prior to such purchase) from the Swingline Bank such participations in the
outstanding Swingline Loans as shall be necessary to cause such Banks to share
in such Swingline Loans ratably based upon their respective Percentages
(determined before giving effect to any termination of the Commitments pursuant
to the last paragraph of Section 9), provided that (x) all interest payable on
the
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<PAGE>
Swingline Loans shall be for the account of the Swingline Bank until the date as
of which the respective participation is required to be purchased and, to the
extent attributable to the purchased participation, shall be payable to the
participant from and after such date and (y) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Bank
shall be required to pay the Swingline Bank interest on the principal amount of
the participation purchased for each day from and including the day upon which
the Mandatory Borrowing would otherwise have occurred to but excluding the date
of payment for such participation, at the overnight Federal Funds Rate for the
first three days and at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter.
1.02 MINIMUM AMOUNT OF EACH BORROWING. The aggregate principal
amount of each Borrowing of (i) Revolving Loans shall not be less than $250,000
and, if greater, shall be in an integral multiple of $100,000 (provided that any
Borrowing which is less than $500,000 shall not be permitted to be maintained
as, or converted into, a LIBOR Loan) and (ii) Swingline Loans shall not be less
than $100,000 and, if greater, shall be in an integral multiple of $100,000.
More than one Borrowing may occur on the same date, but at no time shall there
be outstanding more than five Borrowings of Fixed Rate Loans for the account of
any one Borrower.
1.03 NOTICE OF BORROWING. Whenever a Borrower desires to make
a Borrowing hereunder (excluding Mandatory Borrowings), it shall give the
Administrative Agent at its Notice Office prior notice of each desired Base Rate
Loan or IBOR Loan (which must be given prior to 12:00 Noon (New York time) (or
3:00 P.M. (New York time) in the case of Swingline Loans) if such notice is
given on the day such Borrowing is desired) and at least three Business Days'
prior notice of each desired LIBOR Loan, provided that any such notice shall be
deemed to have been given on a certain day only if given before 12:00 Noon (New
York time) (or, in the case of Swingline Loans 3:00 P.M. (New York time)) on
such day. Each such notice (each a "Notice of Borrowing") shall be given by the
respective Borrower, in the form of Exhibit A and executed by an authorized
signatory for such Borrower, appropriately completed to specify the principal
amount of the Revolving Loan to be made pursuant to such Borrowing, the date of
such Borrowing (which shall be a Business Day), the Borrower on behalf of which
such Revolving Loan is being requested, the Asset Coverage Ratio, together with
the calculations necessary to compute the Asset Coverage Ratio, of such Borrower
as of the close of business on the latest Business Day preceding the date of
such Notice of Borrowing after giving PRO FORMA effect to such Borrowing,
whether the Loan being made pursuant to such Borrowing is to be initially
maintained as a Base Rate Loan, IBOR Loan or, if such Loan is a Revolving Loan,
LIBOR Loan and, if a Revolving Loan to be maintained as a Fixed Rate Loan, the
initial Interest Period to be applicable thereto, provided that a Borrower may
provide telephonic notice to the Administrative Agent of its intent to make a
Borrowing, which telephonic notice shall be deemed effective if given within the
time required above in this Section 1.03 and promptly followed by a Notice of
Borrowing, which Notice of Borrowing shall be received by the Administrative
Agent on the day of such telephonic notice and prior to any disbursement of
funds in connection with such Borrowing. Any telephonic notice given pursuant to
the immediately preceding sentence shall be deemed to be a representation and
warranty by the Borrower giving such notice that all of the facts required to be
set forth in a Notice of Borrowing are true as of the time of the giving of such
notice. The Administrative Agent shall promptly give each Bank notice of such
proposed
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<PAGE>
Borrowing, of such Bank's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
1.04 DISBURSEMENT OF FUNDS. Except as otherwise specifically
provided in the immediately succeeding sentence, no later than 2:00 P.M. (New
York time) on the date specified in each Notice of Borrowing, each Bank will
make available its PRO RATA portion of each such Borrowing requested to be made
on such date, in Dollars and in immediately available funds at the Payment
Office of the Administrative Agent, and the Administrative Agent will make the
aggregate of the amounts so made available by the Banks available to the
appropriate Borrower at the Payment Office or, if specified in the Notice of
Borrowing, such Borrower's account with its Custodian in accordance with the
wiring instructions provided in the Notice of Borrowing. Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Administrative
Agent such Bank's portion of any Borrowing to be made on such date, the
Administrative Agent may assume that such Bank has made such amount available to
the Administrative Agent on such date of Borrowing and the Administrative Agent
may, in reliance upon such assumption, make available to the respective Borrower
a corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Bank, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such Bank.
If such Bank does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the respective Borrower or Borrowers, and such Borrower shall immediately
pay (from the assets of such Borrower or Borrowers) such corresponding amount to
the Administrative Agent. The Administrative Agent shall also be entitled to
recover on demand from such Bank or the respective Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to such
Borrower or Borrowers until the date such corresponding amount is recovered by
the Administrative Agent, at a rate per annum equal to (i) if recovered from
such Bank, at the overnight Federal Funds Rate and (ii) if recovered from the
respective Borrower, the rate of interest applicable to the respective
Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04
shall be deemed to relieve any Bank from its obligation to make Loans hereunder
or to prejudice any rights which any Borrower may have against any Bank as a
result of any failure by such Bank to make Loans hereunder.
1.05 LEDGER. Each Bank will note on its internal records the
amount of each Revolving Loan made by it (and the Swingline Bank shall note the
amount of each Swingline Loan made by it), the Borrower to whom such Loan was
made, and each payment in respect thereof, and will, prior to any transfer of
any of its interest therein, note the outstanding principal amount of Loans
(broken down by Borrower) to be so transferred. Failure to make any such
notation (or any error in such notation) shall not affect the Obligations of the
respective Borrowers in respect of such Loans.
1.06 CONVERSIONS. The Borrowers shall have the option to
convert, on any Business Day occurring on or after the Effective Date, all or a
portion equal to at least $250,000 (or at least $500,000 with respect to LIBOR
Loans and, in any event, if greater, in an integral
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<PAGE>
multiple of $100,000) of the outstanding principal amount of a Borrowing of one
or more Types of Revolving Loans made to a particular Borrower into a Borrowing
of another Type of Revolving Loan to such Borrower, provided that (i) except as
otherwise provided in Section 1.10(b), Fixed Rate Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable to the
Loans being converted and no such partial conversion of LIBOR Loans shall reduce
the outstanding principal amount of such LIBOR Loans made pursuant to a single
Borrowing to less than $500,000, (ii) Base Rate Loans may only be converted into
Fixed Rate Loans if no Default or Event of Default is in existence on the date
of the conversion and (iii) no conversion pursuant to this Section 1.06 shall
result in a greater number of Borrowings of Fixed Rate Loans than is permitted
under Section 1.02. Each such conversion shall be effected by the respective
Borrower giving the Administrative Agent at its Notice Office prior to 12:00
Noon (New York time) at least three Business Days' prior notice (each a "Notice
of Conversion") specifying the Revolving Loans to be so converted, the
Borrowing(s) pursuant to which such Revolving Loans were made and, if to be
converted into Fixed Rate Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall give each Bank prompt notice of any such
proposed conversion.
1.07 PRO RATA BORROWINGS. All Borrowings of Revolving Loans
under this Agreement shall be incurred from the Banks PRO RATA on the basis of
their respective Commitments. It is understood that no Bank shall be responsible
for any default by any other Bank of its obligation to make respective Loans
hereunder and that each Bank shall be obligated to make the respective Revolving
Loans provided to be made by it hereunder, regardless of the failure of any
other Bank to make its Revolving Loans hereunder.
1.08 INTEREST. (a) Each Borrower to which a Base Rate Loan is
made agrees to pay interest in respect of the unpaid principal amount of such
Base Rate Loan made to such Borrower from the date the proceeds thereof are made
available to such Borrower until the maturity thereof (whether by acceleration
or otherwise) at a rate per annum which shall be equal to the sum of the
Applicable Margin plus the Base Rate in effect from time to time.
(b) Each Borrower to which a LIBOR Loan is made agrees to pay
interest in respect of the unpaid principal amount of such LIBOR Loan made to
such Borrower from the date the proceeds thereof are made available to such
Borrower until the maturity thereof (whether by acceleration or otherwise) at a
rate per annum which shall, during each Interest Period applicable thereto, be
equal to the sum of the Applicable Margin plus the LIBOR for such Interest
Period.
(c) Each Borrower to which an IBOR Loan is made agrees to pay
interest in respect of the unpaid principal amount of such IBOR Loan made to
such Borrower from the date the proceeds thereof are made available to such
Borrower until the maturity thereof (whether by acceleration or otherwise) at a
rate per annum which shall, during each Interest Period applicable thereto, be
equal to the sum of the Applicable Margin plus the IBOR for such Interest
Period.
(d) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear
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<PAGE>
interest at a rate per annum equal to the greater of (i) 2% per annum in excess
of the rate otherwise applicable to Revolving Loans maintained as Base Rate
Loans from time to time and (ii) the rate which is 2% in excess of the rate then
borne by such Loans, in each case with such interest to be payable on demand.
(e) Accrued (and theretofore unpaid) interest shall be payable
(i) in respect of each Base Rate Loan, monthly in arrears on the first Business
Day of each month, (ii) in respect of each Fixed Rate Loan, on the last day of
each Interest Period applicable thereto and (iii) in respect of each Loan, on
any repayment or prepayment (on the amount repaid or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(f) Upon each Interest Determination Date, the Administrative
Agent shall determine the Fixed Rate for each Interest Period applicable to
Fixed Rate Loans and shall promptly notify the respective Borrower and the Banks
thereof. Each such determination shall, absent manifest error, be final and
conclusive and binding on all parties hereto.
1.09 INTEREST PERIODS. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Fixed Rate Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to any such LIBOR Loan or one Business Day prior to the
expiration of an Interest Period applicable to any such IBOR Loan (in the case
of any subsequent Interest Period), the relevant Borrower shall have the right
to elect, by giving the Administrative Agent notice thereof, the interest period
(each an "Interest Period") applicable to such Fixed Rate Loan, which Interest
Period shall be (x) in the case of a LIBOR Loan, a one month period, and (y) in
the case of an IBOR Loan, a period of up to thirty days, at the option of such
Borrower, provided that: (i) all Fixed Rate Loans comprising a Borrowing shall
at all times have the same Interest Period; (ii) the initial Interest Period for
any Fixed Rate Loan shall commence on the date of Borrowing of such Revolving
Loan (including the date of any conversion thereof into a Revolving Loan of a
different Type) and each Interest Period occurring thereafter in respect of such
Revolving Loan shall commence on the day on which the next preceding Interest
Period applicable thereto expires; (iii) if any Interest Period relating to a
LIBOR Loan begins on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month; (iv) if any Interest
Period would otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day, provided that
if any Interest Period for a LIBOR Loan would otherwise expire on a day which is
not a Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next preceding
Business Day; (v) no Interest Period shall extend beyond the Expiry Date; and
(vi) no Interest Period may extend beyond the date upon which the Loans to such
Borrower are required to be repaid pursuant to Section 3.02(c). If, upon the
expiration of any Interest Period applicable to a Borrowing of Fixed Rate Loans,
the respective Borrower has failed to elect, or is not permitted to elect, a new
Interest Period to be applicable to such Fixed Rate Loans as provided in this
Section 1.09, such Borrower shall be deemed to have elected to convert such
Fixed Rate Loans into Base Rate Loans effective as of the expiration date of
such current Interest Period.
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<PAGE>
1.10 INCREASED COSTS; ILLEGALITY; ETC. (a) In the event that
any Bank shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the London
interbank Eurodollar market or the domestic interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
LIBOR or IBOR; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Fixed Rate Loan because of (x) any change since the date
of this Agreement in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having the
force of law) or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule,
regulation, order, guideline or request, such as, for example, but not
limited to (A) a change in the basis of taxation of payment to any Bank
of the principal of or interest on the Loans or any other amounts
payable hereunder (except for changes in the rate of tax on, or
determined by reference to, the net income or profits of such Bank,
pursuant to the laws of the jurisdiction in which it is organized or in
which its principal office or applicable lending office is located or
any subdivision thereof or therein) or (B) a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the LIBOR or
IBOR and/or (y) other circumstances since the date of this Agreement
affecting such Bank, the London interbank Eurodollar market or the
domestic interbank Eurodollar market or the position of such Bank in
either such market; or
(iii) at any time, that the making or continuance of any Fixed
Rate Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Bank in good
faith with any governmental request (whether or not having force of
law) or (z) impracticable as a result of a contingency occurring after
the date of this Agreement which materially and adversely affects the
London interbank Eurodollar market or the domestic interbank Eurodollar
market;
then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the affected Borrower or Borrowers and, except in the case of clause
(i) above, to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Banks) not
later than 11:00 A.M. (New York time) on the date such Borrowing was to occur.
Thereafter (x) in the case of clause (i) above, LIBOR Rate Loans and/or IBOR
Rate Loans, as the case may be, shall no longer be available until such time as
the Administrative Agent notifies the Borrowers and the Banks that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by any of the
Borrowers with respect to any affected Fixed Rate Loans which have not yet
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<PAGE>
been incurred (including by way of conversion) shall be deemed rescinded, (y) in
the case of clause (ii) above, the respective Borrowers shall pay to such Bank,
promptly upon its written demand therefor, such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the affected Borrowers by such Bank shall, absent manifest error,
be final and conclusive and binding on all the parties hereto) and (z) in the
case of clause (iii) above, the respective Borrowers shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Fixed Rate Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the respective Borrower
may (and in the case of a Fixed Rate Loan affected by the circumstances
described in Section 1.10(a)(iii) shall) either (x) if the affected Fixed Rate
Loan is then being made initially or pursuant to a conversion, cancel the
respective Borrowing by giving the Administrative Agent telephonic notice
(confirmed in writing) on the same date that such Borrower was notified by the
affected Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or
(iii) or (y) if the affected Fixed Rate Loan is then outstanding, upon at least
three Business Days' written notice to the Administrative Agent, require the
affected Bank to convert such Fixed Rate Loan into a Base Rate Loan, provided
that, if more than one Bank is affected at any time, all affected Banks must be
treated the same pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Bank
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's portion of the Total
Commitment or its obligations hereunder, then the Borrowers shall pay to such
Bank, promptly upon its written demand therefor, such additional amounts as
shall be required to compensate such Bank or such other corporation for the
increased cost to such Bank or such other corporation or the reduction in the
rate of return to such Bank or such other corporation as a result of such
increase of capital. In determining such additional amounts, each Bank will act
reasonably and in good faith and will use averaging and attribution methods
which are reasonable, provided that such Bank's determination of compensation
owing under this Section 1.10(c) shall, absent manifest error, be final and
conclusive and binding on all the parties hereto. Each Bank, upon determining
that any additional amounts will be payable pursuant to this Section 1.10(c),
will give prompt written notice thereof to the affected Borrowers, which notice
shall show the basis for calculation of such additional amounts, provided,
however, that failure to give any such notice shall not release or diminish any
obligation of the Borrowers to pay additional amounts pursuant to this Section
1.10(c) upon receipt of such notice.
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1.11 COMPENSATION. Each Borrower agrees that it shall
compensate each Bank, upon its written request (which request shall set forth
the basis for requesting such compensation), for all reasonable losses, expenses
and liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Fixed Rate Loans) which such Bank may sustain
in respect of Loans made to such Borrower or a Notice of Borrowing or Notice of
Conversion delivered by such Borrower: (i) if for any reason (other than a
default by such Bank or the Administrative Agent) a Borrowing by such Borrower
of, or conversion from or into, Fixed Rate Loans does not occur on a date
specified therefor in a Notice of Borrowing or Notice of Conversion (whether or
not withdrawn by such Borrower or deemed withdrawn pursuant to Section 1.10(a)
or otherwise); (ii) if any repayment (including any repayment made pursuant to
Section 3.02 or a result of an acceleration of the Revolving Loans of such
Borrower pursuant to Section 9) or conversion of any of such Borrower's Fixed
Rate Loans occurs on a date which is not the last day of an Interest Period with
respect thereto; (iii) if any prepayment of a Fixed Rate Loan of such Borrower
is not made on any date specified in a notice of prepayment given by such
Borrower; or (iv) as a consequence of (a) any other default by such Borrower to
repay any Loan when required by the terms of this Agreement or (b) any election
made by such Borrower pursuant to Section 1.10(b).
1.12 REPLACEMENT OF BANKS. (x) If any Bank defaults in its
obligations to make Loans (a "Defaulting Bank") or (y) upon the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) and (iii), Section
1.10(c) or Section 3.04(a) with respect to any Bank which results in such Bank
charging to the Borrower increased costs materially in excess of those being
generally charged by the other Banks, the Borrower shall have the right, if no
Default or Event of Default will exist immediately after giving effect to the
respective replacement, to replace such Bank (the "Replaced Bank") with one or
more other Eligible Transferees, none of whom shall constitute a Defaulting Bank
at the time of such replacement (collectively, the "Replacement Bank")
reasonably acceptable to the Administrative Agent, provided that (i) at the time
of any replacement pursuant to this Section 1.12, the Replacement Bank shall
enter into one or more Assignment and Assumption Agreements pursuant to Section
12.04(b) pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of the Replaced Bank and, in connection
therewith, shall pay to the Replaced Bank in respect thereof an amount equal to
the sum of (A) an amount equal to the principal of, and all accrued interest on,
all outstanding Loans together with all then unpaid interest with respect
thereof at such time and (B) an amount equal to all accrued, but theretofore
unpaid, Fees owing to the Replaced Bank pursuant to Section 2.01, and (ii) all
obligations of the Borrowers owing to the Replaced Bank (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Bank concurrently with such replacement. Upon the execution of
the respective Assignment and Assumption Agreements and the payment of amounts
referred to in clauses (i) and (ii) above, the Replacement Bank shall become a
Bank hereunder and the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions under this Agreement which
shall survive as to such Replaced Bank.
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1.13 EXTENSION OF EXPIRY DATE. Not less than 60 days and not
more than 90 days prior to the Expiry Date then in effect, the Borrowers may
make a written request (the "Extension Request") to the Administrative Agent at
its Notice Office, which request the Administrative Agent shall promptly
transmit to each of the Banks, that the Expiry Date then in effect be extended
to the date which occurs 364 days after the Requested Extension Effective Date
specified by the Borrowers in the Extension Request. Each Extension Request
shall specify a date (the "Requested Extension Effective Date"), which shall be
a Business Day not earlier than 40 days after the giving of the respective
notice and not later than the Expiry Date then in effect, on which such
extension of the Expiry Date, if granted by the Banks, shall occur. Each
Extension Request shall also be accompanied by a certificate of an authorized
officer of the Borrowers stating that no Default or Event of Default has
occurred and is continuing. Each Bank, acting in its sole discretion and with no
obligation to grant any extension pursuant to this Section 1.13, shall, by
written notice to the Borrowers and the Administrative Agent, such notice to be
given within 30 days of its receipt of the relevant Extension Request, advise
the Borrowers and the Administrative Agent whether such Bank agrees to such
extension, provided that:
(a) (i) any Bank that fails to so notify the Borrowers and the
Administrative Agent shall be deemed to have elected not to grant such extension
as to itself and (ii) any extension of the Expiry Date pursuant to this Section
1.13 shall be effective on the Requested Extension Expiry Date only to those
Banks (the "Extending Banks") (and their respective Commitments) which have
consented to such extension pursuant to such Extension Request. The Expiry Date
for each Bank which does not consent to such extension pursuant to such
Extension Request (each a "Non-Extending Bank") shall be the Expiry Date as in
effect immediately before giving effect to such Extension Request. No Bank shall
be under any obligation whatsoever to consent to an Extension Request and may
refuse to extend the Expiry Date as to itself in its sole and absolute
discretion. The Administrative Agent shall notify the Borrowers and each Bank of
the effectiveness of any such extension.
(b) The Commitment of each Non-Extending Bank shall terminate
permanently and irrevocably on the Expiry Date in effect for such Bank before
giving effect to any extension of such Expiry Date pursuant to an Extension
Request to which such Bank has not consented, and the Borrower shall pay to each
Non-Extending Bank an amount equal to all Obligations then owing to such
Non-Extending Bank and such Non-Extending Bank shall thereafter cease to be a
"Bank" hereunder (except with respect to its rights under Sections 2.01, 3.04
and 12.01 and any provision of this Agreement which by its terms survives the
termination of this Agreement and its obligations under Section 12.16); PROVIDED
that, the Borrowers may at their option (i) allocate all or any portion of the
Commitment of any Non-Extending Bank to any Extending Bank or Extending Banks
which agree in their sole and absolute discretion to accept such allocation
and/or (ii) permit any Eligible Transferee acceptable to the Agents that is not
a party to this Agreement, to assume all or a portion of such Non-Extending
Bank's Commitment, in each case pursuant to one or more Assignment and
Assumption Agreements to be executed and effected in accordance with Section
12.04(b). Upon (A) the execution of such Assignment and Assumption Agreement (or
on such date specified in such Assignment and Assumption Agreement, which date
shall not be later than the Expiry Date as in effect for such Non-Extending
Bank), (B) the payment to such Non-Extending Banks of all amounts of principal,
interest, fees and other
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amounts payable to such Non-Extending Banks hereunder and (C) the delivery of
each such Assignment and Assumption Agreement to the Administrative Agent, (i)
the entire Commitment of such Non-Extending Banks shall terminate and such
Non-Extending Banks shall cease to be a "Bank" and shall cease to have any
rights or obligations hereunder (other than (x) its rights under Sections 2.01,
3.04 and 12.01 and any provision of this Agreement which by its terms survives
the termination of this Agreement and (y) its obligations under Section 12.16)
and (ii) each Extending Bank and/or new Bank which is being allocated a portion
of such Non-Extending Bank(s) commitment(s) shall succeed to such rights and
obligations of the Non-Extending Bank to the extent of the Commitment or Loans
of the Non-Extending Bank allocated to such Extending Bank and/or new Bank
(except that the Expiry Date applicable to such commitments assigned to such
Extending Bank and/or new Bank shall be the Expiry Date applicable to Extending
Banks pursuant to Section 1.13(a)(ii) above); PROVIDED, HOWEVER, that the
Commitment of each Non-Extending Bank shall in any event terminate on the Expiry
Date applicable to such Non-Extending Bank. Notwithstanding anything to the
contrary contained in this Agreement, Schedule II shall be deemed amended
without the consent of any Bank (other than a new Bank to the extent provided
herein) to reflect the new Commitments of each Extending Bank and/or new Bank
pursuant to this Section 3.03(b).
1.14 ADDITION OF NEW BORROWERS. Any Fund may from time to time
request in writing (each such request, an "Additional Borrower Request") that a
separate affiliated mutual fund portfolio which is a portfolio of such Fund be
included hereunder as an additional Borrower subject to the terms and conditions
of this Agreement (any such separate mutual fund portfolio, an "Additional
Borrower"). Such Additional Borrower Request shall be delivered to each of the
Banks and the Administrative Agent and shall include (a) a certification by an
authorized officer of such Fund that (i) the representations, warranties and
agreements of the Borrowers contained in Section 6 are true and correct as if
made on the date of such certification and on the date such Additional Borrower
becomes a Borrower hereunder and (ii) no Default or Event of Default has
occurred and is continuing or will occur as a result of such Additional Borrower
becoming a Borrower hereunder and (b) true and correct copies of the most recent
audited and unaudited financial statements of such Additional Borrower. Upon
receipt of an Additional Borrower Request each Bank shall in its sole discretion
determine whether it shall consent to such request, any such consent to be in
writing and delivered to the Administrative Agent. Failure by any Bank to
deliver such a consent within 30 days after receipt of such request shall be
deemed a refusal to consent on the part of such Bank. To the extent the
Administrative Agent receives written consents from all Banks with respect to a
particular Additional Borrower Request, the Administrative Agent shall notify
the Borrowers thereof, and such Additional Borrower shall become a Borrower
hereunder (at which time Schedule I hereto shall be deemed to be amended to
include such new Borrower) upon delivery to the Agents of (x) certified copies
of documents relating to such Additional Borrower of the type referred to in
Section 4.05 and (y) an executed counterpart hereof and/or an assumption
agreement in form satisfactory to the Administrative Agent.
1.15 REMOVAL OF BORROWERS. Any Fund may, from time to time
upon written notice to the Administrative Agent, elect to remove a Borrower
which is a portfolio of such Fund as a Borrower hereunder, provided that at such
time such removed Borrower has no Loans or
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other Obligations outstanding under this Agreement. Upon the effectiveness of
such removal, such removed Borrower shall cease to be a Borrower for all
purposes of this Agreement, except that all indemnification provisions of this
Agreement shall survive as to such removed Borrower.
SECTION 2. FEES; REDUCTIONS OF COMMITMENT.
2.01 FEES. (a) Each Borrower agrees to pay to the
Administrative Agent, for PRO RATA distribution to each Bank, its PRO RATA share
(as calculated in accordance with the last sentence of this Section 2.01(a)) of
a commitment fee (the "Commitment Fee") for the period from the Effective Date
to and including the Expiry Date (or such earlier date as the Total Commitment
shall have been terminated), computed at a rate equal to 0.10% per annum on the
daily average Total Unutilized Commitment. Accrued Commitment Fees shall be due
and payable quarterly in arrears on the fifteenth day of the month following
such quarter end (unless such day is not a Business Day, in which case such
accrued Commitment Fees shall be payable on the latest preceding Business Day)
and on the Expiry Date, or such earlier date upon which the Total Commitment is
terminated, with the allocation of such obligation among the Borrowers to be PRO
RATA according to the relevant asset size of the respective Borrowers or, upon
prior written notice to the Administrative Agent, based on such other method
acceptable to the Administrative Agent as the Investment Advisor shall determine
in compliance with the Investment Company Act.
(b) Each Borrower agrees to pay to the Agents, for the Agents'
own account, its PRO RATA share according to the relevant asset size of the
respective Borrowers (or, upon prior written notice to the Administrative Agent,
such other method of allocation acceptable to the Administrative Agent as the
Investment Advisor shall determine in compliance with the Investment Company
Act) of such other fees as have been agreed to in writing by the Borrowers and
the Agents.
2.02 VOLUNTARY TERMINATION OF UNUTILIZED COMMITMENTS;
TERMINATION OF COMMITMENTS. Upon at least three Business Days' prior notice to
the Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Banks), the Borrowers shall have
the right, at any time or from time to time, without premium or penalty, to
terminate the Total Unutilized Commitment, in whole or in part, in integral
multiples of $1,000,000 in the case of partial reductions to the Total
Unutilized Commitment, provided that each such reduction shall apply
proportionately to permanently reduce the Commitment of each Bank.
SECTION 3. PREPAYMENTS; PAYMENTS; TAXES.
3.01 VOLUNTARY PREPAYMENTS. Each Borrower shall have the right
to prepay any Loan or Loans made to such Borrower, without premium or penalty,
in whole or in part at any time and from time to time on the following terms and
conditions: (i) such Borrower shall give the Administrative Agent prior to 11:00
A.M. (New York time) at its Notice Office (x) at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Base Rate Loans or IBOR Loans and (y) at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
of its intent to prepay LIBOR
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Loans, the amount of such prepayment and the Types of Loans to be prepaid, and,
in the case of Fixed Rate Loans, the Borrowing or Borrowings pursuant to which
made, which notice the Administrative Agent shall promptly transmit to each of
the Banks; (ii) each prepayment shall be in an aggregate principal amount of at
least $100,000, provided that if any partial prepayment of Fixed Rate Loans made
pursuant to any Borrowing shall reduce the outstanding Fixed Rate Loans made
pursuant to such Borrowing to an amount less than $500,000, then such Borrowing
may not be continued as a Borrowing of Fixed Rate Loans and any election of an
Interest Period with respect thereto shall have no force or effect; (iii)
prepayments of Fixed Rate Loans made pursuant to this Section 3.01 may only be
made on the last day of an Interest Period applicable thereto; and (iv) each
prepayment in respect of Loans made pursuant to a Borrowing shall be applied PRO
RATA among such Loans.
3.02 MANDATORY REPAYMENTS. (a) On any day on which the
aggregate outstanding principal amount of Loans exceeds the Total Commitment as
then in effect, the Borrowers shall prepay principal of Loans made to the
Borrowers in an aggregate amount equal to such excess, provided that, in the
event that such repayment is required as a result of a partial reduction in the
Total Commitment, (x) the allocation of such required prepayment of Loans of the
Borrowers shall be determined by the Borrowers or (y) in the absence of a
determination by the Borrowers, the Administrative Agent shall allocate such
mandatory repayments to outstanding Loans in its discretion, with an eye toward,
but no obligation to, minimize breakage costs owing pursuant to Section 1.11.
(b) On any day on which the aggregate outstanding principal
amount of Loans made to any Borrower exceeds the Borrowing Base of such Borrower
as then in effect, such Borrower shall prepay principal of such Loans equal to
such excess.
(c) On any day upon which any Borrower has had any Loans in
any principal amount outstanding for more than 45 consecutive days, such
Borrower shall repay on such day all then outstanding Loans made to such
Borrower, together with accrued interest thereon.
(d) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, all then outstanding Revolving Loans shall be
repaid in full on the Expiry Date, and all then outstanding Swingline Loans
shall be repaid on the Swingline Expiry Date.
3.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made
(or a federal reserve wire number delivered) to the Administrative Agent for the
account of the Bank or Banks entitled thereto not later than 12:00 Noon (New
York time) on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office of the Administrative Agent. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
3.04 NET PAYMENTS. (a) All payments made by the Borrowers
hereunder will be made without setoff, counterclaim or other defense. Except as
provided in Section 3.04(b), all such payments will be made free and clear of,
and without deduction or withholding for, any
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present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, taxes imposed on or measured by the net income or profits of a Bank
pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or any subdivision thereof or therein, or any interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
each Borrower agrees to pay the full amount of such Taxes levied in respect of
the payments of such Borrower, and such additional amounts as may be necessary
so that every payment of all amounts due from such Borrower under this
Agreement, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein. If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, then the applicable
Borrower agrees to reimburse each Bank, upon the written request of such Bank,
for taxes imposed on or measured by the net income or profits of such Bank
pursuant to the laws of the jurisdiction in which such Bank is organized or in
which the principal office or applicable lending office of such Bank is located
or under the laws of any political subdivision or taxing authority of any such
jurisdiction and for any withholding of taxes such Bank shall determine are
payable by, or withheld from, such Bank in respect of such amounts so paid to or
on behalf of such Bank pursuant to the preceding sentence and in respect of any
amounts paid to or on behalf of such Bank pursuant to this sentence. Each
Borrower will furnish to the Administrative Agent, within 45 days after the date
the payment of any Taxes is due pursuant to applicable law, certified copies of
tax receipts evidencing such payment by such Borrower. Each Borrower agrees to
indemnify and hold harmless each Bank, and reimburse each Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank
in respect of payments made, or required to be made, by such Borrower.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrowers and the Administrative Agent, on or
prior to the Effective Date, or in case of Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.12 or 12.04
(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer), upon the date of such assignment or transfer to
such Bank (i) two accurate and complete original signed copies of Internal
Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption
under an income tax treaty) (or successor forms) certifying to such Bank's
entitlement as of such date to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form W-8ECI or Form
W-8BEN (with respect to a complete exemption under an income tax treaty)
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit F (any such certificate, a "Section 3.04(b)(ii) Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue Service
Form W-8BEN (with respect to the portfolio interest exemption)(or successor
form) certifying to such Bank's entitlement to a complete exemption from United
States withholding tax with respect to
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payments of interest to be made under this Agreement. In addition, each Bank
agrees that from time to time after the Effective Date, when a lapse in time or
change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrowers and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect to the benefits
of any income tax treaty), or Form W-8BEN (with respect to the portfolio
interest exemption) and a Section 3.04(b)(ii) Certificate, as the case may be,
and such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from or reduction in United
States withholding tax with respect to payments under this Agreement, or it
shall immediately notify the Borrowers and the Administrative Agent of its
inability to deliver any such Form or Certificate, in which case such Bank shall
not be required to deliver any such Form or Certificate pursuant to this Section
3.04(b). Notwithstanding anything to the contrary contained in Section 3.04(a),
but subject to the immediately succeeding sentence, (x) the Borrowers shall be
entitled, to the extent they are required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to such Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) such Borrower shall not be
obligated pursuant to Section 3.04(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to such Borrower the Internal Revenue Service Forms
required to be provided to such Borrower pursuant to this Section 3.04(b) or
(II) in the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 3.04
and except as set forth in Section 12.04(b), each Borrower agrees to pay any
additional amounts and to indemnify each Bank in the manner set forth in Section
3.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
that are effective after the Effective Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of income or similar Taxes.
(c) Except to the extent that the Borrowers make payments
pursuant to subsections (a) or (b) of this Section 3.04, the Borrowers will
indemnify each Bank and the Administrative Agent against, and reimburse each
upon demand for, the full amount of Taxes (including, without limitation, any
Taxes imposed by any jurisdiction on amounts payable under this Section 3.04)
incurred or paid by such Bank or the Administrative Agent (as the case may be)
or any of their respective affiliates and any liability (including penalties,
interest and expenses) arising therefrom and or with respect thereto, whether or
not such Taxes were correctly or legally asserted. Each Bank agrees, within a
reasonable time after receiving a written request from the Borrowers, to provide
the Borrowers and the Administrative Agent with such certificates as are
reasonably required, and to take such other actions as are reasonably necessary,
to claim such exemptions as such Bank may be entitled to claim in respect of all
or a portion of
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any Taxes which are otherwise required to be paid or deducted or withheld
pursuant to this Section 3.04 in respect of any payments under this Agreement.
If the Borrowers are compelled to make the additional payments required by
subsections (a) and (b) of this Section 3.04, or this subsection (c), the
Borrowers may be entitled to remove the Bank with respect to which such payment
is made in accordance with Section 1.12.
(d) Each Bank agrees that, upon the occurrence of any event
giving rise to the operation of Section 3.04 with respect to such Bank, it will,
if requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any Loans
affected by such event, PROVIDED that such designation is made on such terms
that such Bank and its lending office suffer no material economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of Section 3.04. Nothing in this Section
3.04(d) shall affect or postpone any of the obligations of the Borrowers or the
right of any Bank provided in Section 3.04. If such additional amounts cannot be
eliminated by such actions, the Borrowers may have the right to replace the
affected Bank hereunder in accordance with Section 1.12.
SECTION 4. CONDITIONS PRECEDENT TO THE EFFECTIVE DATE. The
obligation of each Bank to make Loans hereunder and the occurrence of the
Effective Date are subject to the satisfaction of each of the following
conditions:
4.01 EXECUTION OF AGREEMENT. On or prior to the Effective
Date, this Agreement shall have been executed and delivered as provided in
Section 12.10.
4.02 OFFICERS' CERTIFICATES. On the Effective Date, the
Administrative Agent shall have received certificates dated the Effective Date
signed on behalf of each of the Borrowers by any authorized officer of any Funds
of which such Borrowers are portfolios and attested to by the Secretary or any
Assistant Secretary of such Fund, in the form of Exhibit B with appropriate
insertions, together with copies of the Declaration of Trust or Agreement and
Declaration of Trust, as the case may be, and Code of Regulations or By-Laws, as
the case may be, of such Fund and the resolutions of the Funds of which the
Borrowers referred to in such certificates are portfolios, and the foregoing
shall be in form acceptable to the Administrative Agent.
4.03 OPINION OF COUNSEL. On the Effective Date, the
Administrative Agent shall have received from Drinker Biddle & Reath LLP,
counsel to the Funds, an opinion addressed to the Agents and each of the Banks
and dated the Effective Date covering the matters set forth in Exhibit C and
such other matters incident to the transactions contemplated herein as the
Administrative Agent may request.
4.04 PROCEEDINGS; ETC. On the Effective Date, all corporate
and legal proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to the Administrative Agent and the
Required Banks, and the Administrative Agent shall have received all information
and copies of all documents and papers, including records of corporate
proceedings, governmental approvals, good standing certificates and bring-down
telegrams, if any, which the Administrative Agent reasonably may have requested
in connection therewith,
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such documents and papers where appropriate to be certified by proper corporate
or governmental authorities.
4.05 MATERIAL AGREEMENTS. On the Effective Date, there shall
have been delivered to the Administrative Agent true and correct copies,
certified as true and complete by an authorized officer of the Funds, of the
Registration Statement, the Prospectuses, the Investment Advisory Agreements,
the Custody Agreements and all other material agreements to which any of the
Funds or Borrowers is a party or subject to, and all of the foregoing
instruments shall be in form and substance satisfactory to the Administrative
Agent and shall be in full force and effect on the Effective Date.
4.06 ADVERSE CHANGE; ETC. (a) On the Effective Date, nothing
shall have occurred (and the Banks shall not have become aware of any facts or
conditions not previously known), including any change in government (domestic
or foreign) statutes, regulations, rules or policies, which the Administrative
Agent shall determine has, or could reasonably be expected to have, a material
adverse effect on the rights or remedies of the Agents or the Banks, or on the
ability of any Borrower to perform its obligations to the Agents and the Banks
under any Credit Document or which has, or could reasonably be expected to have,
a Material Adverse Effect.
(b) On or prior to the Effective Date, all necessary
governmental (domestic and foreign) and third party approvals in connection with
the transactions contemplated by the Credit Documents and otherwise referred to
therein shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of the transactions contemplated by the Credit
Documents and otherwise referred to therein. Additionally, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the transactions
contemplated by the Credit Documents or the making of any Loans.
4.07 LITIGATION. On the Effective Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect to
this Agreement or any documentation executed in connection herewith or the
transactions contemplated hereby, or which the Administrative Agent shall
determine could reasonably be expected to have a Material Adverse Effect.
4.08 FEES, ETC. On the Effective Date, the Borrowers shall
have paid to the Agents and the Banks all costs, fees and expenses (including,
without limitation, outside legal fees and expenses) payable to the Agents and
the Banks to the extent then due.
4.09 FORM FR U-1. On the Effective Date, the Administrative
Agent shall have received from the Borrowers a Form FR U-1 certificate in the
form of Exhibit E hereto, dated as of the Effective Date.
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SECTION 5. CONDITIONS PRECEDENT TO ALL LOANS. No Loan (other
than a Mandatory Borrowing which shall be made as provided in Section 1.01(c))
shall be made to any Borrower hereunder unless the following conditions are
satisfied:
5.01 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time
of each such Loan and also after giving effect thereto (i) there shall exist no
Default or Event of Default with respect to the Borrower receiving such Loan,
(ii) the respective Borrower shall be in full compliance with the Investment
Company Act (including, without limitation, Section 18 thereof), except such
noncompliance as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and (iii) all representations and
warranties by or with respect to such Borrower contained herein shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on the date of the making of such
Loan (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date).
5.02 NOTICE OF BORROWING. Prior to the making of each Loan,
the Administrative Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03.
The acceptance of the proceeds of each Loan shall constitute a representation
and warranty by the respective Borrower receiving such proceeds to the Banks
that all the conditions specified in Section 4 and in Sections 5.01 and 5.02 and
applicable to such Loan are satisfied as of that time. All of the certificates,
legal opinions and other documents and papers referred to in Section 4 and in
Section 5, unless otherwise specified, shall have been delivered to the
Administrative Agent at its Notice Office and shall be in form and substance
satisfactory to the Administrative Agent.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Banks to enter into this Agreement and to make the Loans,
each of the Borrowers makes the following representations, warranties and
agreements as to itself, all of which shall survive the execution and delivery
of this Agreement and the making of the Loans, with the incurrence of each Loan
on or after the Effective Date being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the Effective Date and on the date of each
such Loan:
6.01 CORPORATE STATUS. Each Borrower (i) is a portfolio of one
of the Funds, each of which is a business trust which is duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts, (ii) has the power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where the ownership, leasing or operation of
its property or the conduct of its business requires such qualifications except
for failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
6.02 POWER AND AUTHORITY. Each Borrower has the power and
authority to execute, deliver and perform the terms and provisions of each of
the Credit Documents and has taken all necessary action (or such action has been
taken on its behalf) to authorize the execution,
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delivery and performance by it of each of the Credit Documents. Each Borrower
(or the Fund of which it is a series) has duly executed and delivered each of
the Credit Documents, and each of the Credit Documents constitutes its legal,
valid and binding obligation enforceable against it in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery or
performance (including the incurrence of Loans hereunder) by any Borrower of any
of the Credit Documents, nor compliance by any such Borrower with the terms and
provisions thereof, (i) will contravene any provision of any material law,
statute, rule or regulation (including, without limitation, the Investment
Company Act) or any order, writ, injunction or decree of any court or
governmental instrumentality applicable to such Borrower, (ii) will conflict
with or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of the
property or assets of any Borrower pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement or loan agreement, or any other
material agreement, contract or instrument to which such Borrower is a party or
by which it or any of its property or assets is bound or to which it may be
subject or (iii) will violate or conflict with the Investment Practices,
Prospectus, statement of additional information or any provision of the
Agreement and Declaration of Trust or Declaration of Trust, as the case may be,
or Code of Regulations or By-Laws, as the case may be, of such Borrower.
6.04 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Effective Date and which
remain in full force and effect), or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery or performance by any
Borrower of any Credit Document to which it is a party or (ii) the legality,
validity, binding effect or enforceability of any such Credit Document.
6.05 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED
LIABILITIES; ETC. (a) The financial statements, together with the notes and
schedules thereto, of each Borrower furnished to the Banks prior to the
Effective Date (or, if such Borrower became a party to this Agreement after the
Effective Date in accordance with Section 1.14, prior to the date such Borrower
first became a party hereto) present fairly the financial condition of each
respective Borrower at the respective dates of such statements and the results
of the operations of each respective Borrower for the period covered thereby.
All such financial statements have been prepared in accordance with generally
accepted accounting principles and practices consistently applied. As of the
Effective Date, since the respective dates of such financial statements, there
has been no material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of any
Borrower, the Fund of which such Borrower is a portfolio, or, to the best
knowledge of any Borrower, all of the Borrowers taken as
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a whole that would materially and adversely affect the ability of any Borrower
to perform its obligations hereunder.
(b) Except as fully disclosed in the financial statements
delivered pursuant to Section 6.05(a) and open trading and shareholder
redemption obligations incurred in the ordinary course of business, there were
as of the Effective Date no liabilities or obligations with respect to any
Borrower of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in the
aggregate, would be material to any Borrower. As of the Effective Date (or, if
such Borrower becomes a party to this Agreement after the Effective Date in
accordance with Section 1.14, the date such Borrower first becomes a party
hereto), except for open trading and shareholder redemption obligations incurred
in the ordinary course of business, no Borrower knows of any basis for the
assertion against it or any other Borrower of any liability or obligation of any
nature whatsoever that is not fully disclosed in the financial statements
delivered pursuant to Section 6.05(a) which, either individually or in the
aggregate, could be material to any Borrower.
6.06 LITIGATION. There are no actions, suits or proceedings
pending or, to the best knowledge of any Borrower after due inquiry, threatened
(i) with respect to any Credit Document or (ii) that could reasonably be
expected to have a Material Adverse Effect.
6.07 TRUE AND COMPLETE DISCLOSURE. All factual information
furnished by or on behalf of the Borrowers in writing to the Banks (including,
without limitation, all information contained in the Credit Documents) for
purposes of or in connection with this Agreement, the other Credit Documents or
any transaction contemplated herein or therein is, and all other such factual
information hereafter furnished by or on behalf of such Borrower in writing to
the Administrative Agent or any of the Banks will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information not misleading in any material respect at such time in light of the
circumstances under which such information was provided.
6.08 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of
all Loans shall be used by the Borrower receiving such proceeds to finance
temporarily until settlement the sale or purchase of portfolio securities by
such Borrower, the repurchase or redemption of shares of such Borrower, or for
other temporary or emergency purposes consistent with the such Borrower's
Investment Practices.
(b) Neither the making of any Loan nor the use of the proceeds
thereof by any Borrower will violate or be inconsistent with the provisions of
Regulations T, U or X of the Board of Governors of the Federal Reserve System or
any other applicable regulation or agreement binding upon such Borrower.
6.09 ERISA. None of the Borrowers nor any Subsidiary of any of
the Borrowers nor any ERISA Affiliate has ever maintained or contributed to (or
had an obligation to contribute to) any Plan.
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6.10 COMPLIANCE WITH STATUTES, ETC. Each Borrower is in
compliance with (i) all applicable statutes (including, without limitation, the
Investment Company Act), regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property, except
such noncompliance as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, or any adverse effect on the
legality, validity or enforceability of this Agreement or any of the other
Credit Documents and (ii) all investment policies and restrictions set forth in
such Borrower's Prospectus, Agreement and Declaration of Trust or Declaration of
Trust, as the case may be, Code of Regulations or By-Laws, as the case may be,
and Investment Practices in all material respects.
6.11 INVESTMENT COMPANY. Each Borrower is duly registered as
an open-end management investment company or is a series thereof under the
Investment Company Act, and such registration has not been revoked or rescinded
and is in full force and effect.
6.12 INVESTMENT ADVISER. The Investment Adviser is the sole
investment advisor to each of the Borrowers and is duly registered as an
investment adviser under the Investment Advisers Act, provided that, when not
prohibited by law or regulation or by any other restriction (contractual or
otherwise), and so long as no Default or Event of Default exists or would result
therefrom, upon prior written notice to the Administrative Agent, the Investment
Advisor may delegate certain of its duties to third party investment advisors
which are also duly registered under the Investment Advisors Act.
6.13 AFFILIATION WITH THE BANKS. No Borrower or any Affiliated
Person of such Borrower is an Affiliated Person of any Bank.
6.14 SENIOR STATUS. Except to the extent secured by Liens
permitted by Section 8.01, the Indebtedness of each Borrower hereunder ranks
PARI PASSU with all other senior Indebtedness of such Borrower.
6.15 TAX RETURNS AND PAYMENTS. Each Borrower has filed all
federal income tax returns and all other material tax returns, domestic and
foreign, required to be filed by it and has paid all material taxes and
assessments payable by it which have become due, except for those contested in
good faith and adequately disclosed and fully provided for on the financial
statements of the Borrowers in accordance with generally accepted accounting
principles. The Borrowers have at all times paid, or have provided adequate
reserves (in the good faith judgment of the management of the Borrowers) for the
payment of, all federal, state and foreign income taxes applicable for all prior
fiscal years and for the current fiscal year to date. There is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of the Borrowers, threatened by any authority regarding any taxes
relating to the Borrowers. The Borrowers have not entered into an agreement or
waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of the
Borrowers, or is aware of any circumstances that would cause the taxable years
or other taxable periods of the Borrowers not to be subject to the normally
applicable statute of limitations.
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SECTION 7. AFFIRMATIVE COVENANTS. Each Borrower covenants and
agrees that on and after the Effective Date and until the Commitments have
terminated and the Loans, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
7.01 INFORMATION COVENANTS. The Funds will deliver, or cause
to be delivered, to each Bank:
(a) SEMI-ANNUAL AND ANNUAL FINANCIAL STATEMENTS. Within 75
days after the close of each semi-annual and annual accounting period in each
fiscal year of each Borrower, a statement of assets and liabilities and a
statement of operations as of the end of such accounting period, in each case
with respect to such Borrower and setting forth comparative figures applicable
for the related periods in the prior fiscal year, all of which shall be
certified by an officer of the Fund of which the relevant Borrower is a
portfolio, subject to normal year-end audit adjustments, together with, in the
case of annual statements, a certification by an independent certified public
accountant of recognized standing stating that its regular audit was conducted
in accordance with generally accepted audit standards.
(b) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 7.01(a), a certificate of an
officer of the Fund of which the relevant Borrower is a portfolio to the effect
that the representations and warranties by or with respect to such Borrower are
true and correct in all material respects and no Default or Event of Default has
occurred and is continuing or, if any Default or Event of Default has occurred
and is continuing, specifying the nature and extent thereof.
(c) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any
event within three Business Days after any executive officer of the Fund of
which the relevant Borrower is a portfolio obtains knowledge thereof, notice of
(i) the occurrence of any event which constitutes a Default or an Event of
Default or (ii) any litigation or governmental investigation or proceeding
pending (A) against such Borrower which could reasonably be expected to have a
Materially Adverse Effect or (B) with respect to any Credit Document.
(d) ERISA REPORTS. As soon as possible and, in any event,
within ten (10) days after any Borrower knows or has reason to know of the
occurrence of any of the following, such Borrower will deliver to each of the
Banks a certificate of an executive officer of such Borrower setting forth the
full details as to such occurrence and the action, if any, that the Borrower or
its ERISA Affiliates are required or propose to take, together with any notices
required or proposed to be given to or filed with or by such Borrower, a Defined
Contribution Plan participant or the Defined Contribution Plan administrator
with respect thereto: (i) that any contribution required to be made with respect
to a Defined Contribution Plan has not been timely made; (ii) that such Borrower
will or may incur any liability with respect to a Defined Contribution Plan
under Section 4975 of the Code or Section 409, 502(i) or 502(l) of ERISA; or
(iii) that such Borrower may incur any material liability pursuant to any
Defined Contribution Plan.
(e) OTHER REPORTS AND FILINGS. Promptly, copies of all
financial information, proxy materials, Prospectuses, Registration Statements
and other information and reports
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(including without limitation all information, material and reports filed or
distributed pursuant to Section 30 of the Investment Company Act) which the
Borrowers shall deliver to their shareholders.
(f) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) with respect to a Borrower
(including, without limitation, the investments of such Borrower) as any Bank
may reasonably request in writing through the Administrative Agent.
7.02 BOOKS, RECORDS AND INSPECTIONS. Each Fund of which the
relevant Borrower is a portfolio will keep proper books of record and account
with respect to its operations in which full, true and correct entries in
conformity with generally accepted accounting principles and all requirements of
law shall be made of all dealings and transactions in relation to the business
and activities of such Borrower. Each Fund will permit officers and designated
representatives of the Administrative Agent or any Bank to visit and inspect,
under guidance of officers of such Fund, any of the properties of such Borrower,
and to examine the books of account of such Borrower and discuss the affairs,
finances and accounts of such Borrower with, and be advised as to the same by,
its respective officers, portfolio managers and independent accountants, all at
such reasonable times and intervals and (to the extent permitted in the context
of such inspection) upon reasonable notice and to such reasonable extent as the
Administrative Agent or such Bank may request; provided, that, unless a Default
or an Event of Default shall have occurred and be continuing, the Administrative
Agent shall provide such Fund with five Business Days' prior notice of such
visit and only one such visit shall be made each year.
7.03 COMPLIANCE WITH STATUTES; ETC. Each Borrower will comply
with (i) all applicable statutes (including, without limitation, the Investment
Company Act), regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies (including the SEC), domestic or foreign, in respect
of the conduct of its business and the ownership of its property, except such
noncompliance as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, or any adverse effect on the
legality, validity or enforceability of this Agreement or any of the other
Credit Documents and (ii) all investment policies and restrictions set forth in
such Borrower's Prospectus, Agreement and Declaration of Trust or Declaration of
Trust, as the case may be, Code of Regulations or By-Laws, as the case may be,
and Investment Practices in all material respects.
7.04 INVESTMENT COMPANY. Each Borrower will at all times (i)
be a portfolio of a registered, open-end management investment company under the
Investment Company Act and (ii) qualify and be treated as a regulated investment
company under the Code.
7.05 COMPLIANCE WITH INVESTMENT PRACTICES. Each Borrower will
at all times comply in all material respects with the investment policies and
restrictions set forth in its respective Investment Practices.
7.06 COMPLIANCE WITH REGULATION U. Upon the request of any
Bank, each Borrower will furnish to any Bank such information as such Bank may
reasonably require to determine compliance by such Borrower with Regulation U.
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7.07 USE OF PROCEEDS. All proceeds of the Loans shall be used
as provided in Section 6.08(a).
7.08 PAYMENT OF TAXES. Each Borrower will pay and discharge
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits, or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and all lawful claims for sums that have
become due and payable which, if unpaid, might become a Lien not otherwise
permitted under Section 8.01(i); PROVIDED, that each Borrower shall not be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves with respect thereto in accordance with generally accepted accounting
principles.
SECTION 8. NEGATIVE COVENANTS. Each Borrower covenants and
agrees that on and after the Effective Date and until the Commitments have
terminated and the Loans, together with interest, Fees and all other Obligations
incurred by such Borrower hereunder are paid in full:
8.01 LIENS. Such Borrower will not create, incur, assume or
suffer to exist any Lien upon or with respect to any of its property or assets
(real or personal, tangible or intangible, including portfolio securities),
whether now owned or hereafter acquired, or sell any such property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets, assign any right to receive income or permit the filing
of any financing statement under the UCC or any other similar notice of Lien
under any similar recording or notice statute or execute any control agreement
with respect to any of its property or assets; provided that the provisions of
this Section 8.01 shall not prevent the creation, incurrence, assumption or
existence of the following (Liens described below are herein referred to as
"Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting
principles;
(ii) Liens in respect of property or assets of a Borrower
imposed by law, which were incurred in the ordinary course of business
and do not secure Indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's, mechanics', brokers' and custodians'
liens and other similar Liens arising in the ordinary course of
business and (a) which do not in the aggregate materially detract from
the value of such Borrower's property or assets or materially impair
the use thereof in the operation of the business of such Borrower or
(b) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale
of the property or assets subject to any such Lien;
(iii) Hedging Agreements and Liens in respect thereof;
(iv) Liens incurred by a Borrower in favor of such Borrower's
Custodian;
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(v) Liens incurred by a Borrower in the ordinary course of
business in connection with portfolio investments to the extent such
Liens are permitted by the provisions of such Borrower's Prospectus;
and
(vi) Liens to secure surety and appeal bonds, provided that
such Liens do not secure assets of any Borrower with an aggregate value
greater than the lesser of (x) 1.0% of the Asset Coverage Numerator of
such Borrower and (y) $10,000,000.
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
Such Borrower will not wind up, liquidate or dissolve its affairs or enter into
any transaction of merger or consolidation, or convey, sell, lease or otherwise
dispose of all or substantially all of its property or assets, or enter into any
sale-leaseback transactions, or purchase or otherwise acquire (in one or a
series of related transactions) all or substantially all of the property or
assets of any Person (or agree to do any of the foregoing at any future time)
without the consent of the Required Banks (which consent shall not be
unreasonably withheld), except:
(i) any Borrower may merge with or into another Borrower so
long as the surviving Borrower assumes all of the Obligations
(including, without limitation, all indemnity obligations) of such
non-surviving Borrower;
(ii) any Borrower may sell its assets and purchase
investments, in each case in the ordinary course of business as
described in such Borrower's Prospectus; and
(iii) the Funds may acquire all of the assets and assume all
of the liabilities of the Boston 1784 Funds in a tax-free
reorganization, so long as:
(a) no Default or Event of Default is in effect;
(b) no Default or Event of Default occurs as a
result of such reorganization; and
(c) no investments, assets or liabilities acquired or
assumed by any Borrower violates, amends or modifies such Borrower's
Investment Practices.
8.03 INDEBTEDNESS. Such Borrower will not contract, create,
incur, assume or suffer to exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(ii) accrued expenses, deferred taxes and current trade
accounts payable, in each case incurred in the ordinary course of
business;
(iii) Indebtedness not to exceed $1,000,000 in aggregate
principal amount at any one time outstanding in favor of such
Borrower's Custodian consisting of extensions of credit from the
Custodian in the ordinary course of business;
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(iv) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as judgments or awards do not constitute an Event of Default
and so long as execution is not levied thereunder or in respect of
which such Borrower (A) shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review or (B)
shall have obtained a performance bond, which performance bond shall,
except to the extent permitted by Section 8.01(vi), be unsecured, and
Indebtedness in respect of such performance bond; and
(v) Indebtedness (other than Indebtedness for borrowed money)
arising in connection with any other transaction permissible under the
Investment Company Act and such Borrower's investment objectives and
fundamental investment restrictions, including, but not limited to,
Reverse Repurchase Agreements, mortgage dollar rolls, delayed delivery
transactions (provided that the assets with respect thereto are
segregated), when-issued securities (provided that the assets with
respect thereto are segregated) and loans from other Borrowers or any
other Borrower.
Notwithstanding anything to the contrary contained in this Agreement, in no
event shall any Borrower contract, create, incur, assume or suffer to exist any
Senior Securities other than the Loans pursuant to this Agreement.
8.04 RESTRICTIONS ON ISSUANCE OF CAPITAL STOCK. Such Borrower
will not issue any preferred stock.
8.05 MODIFICATIONS OF INVESTMENT PRACTICES, GOVERNING
DOCUMENTS, AND CERTAIN OTHER AGREEMENTS. Without the consent of the Required
Lenders, such Borrower will not amend or modify, or permit the amendment or
modification of, (i) such Borrower's Investment Practices, (ii) such Borrower's
Agreement and Declaration of Trust or Declaration of Trust, as the case may be,
(including, without limitation, by the filing or modification of any certificate
of designation or similar document) or Code of Regulations or By-Laws, as the
case may be, or any agreement entered into by such Person with respect to its
capital stock (to the extent adverse to the interests of the Banks), or enter
into any new agreement with respect to such Person's capital stock (to the
extent adverse to the interests of the Banks) or (iii) the Investment Advisory
Agreement or the Custody Agreements other than any amendments or modifications
pursuant to this clause (iii) which are not in any way adverse to the interests
of the Banks.
8.06 BUSINESS. Such Borrower will not engage (directly or
indirectly) in any business other than the business in which such Borrower is
engaged on the Effective Date.
8.07 ERISA. Neither such Borrower or any Subsidiary of such
Borrower nor any ERISA Affiliate of such Borrower will maintain or contribute to
(or have an obligation to contribute to) a Plan.
8.08 AFFILIATED PERSON. Neither such Borrower nor any
Affiliated Person of such Borrower will directly or indirectly own, control or
hold with power to vote 5% or more of the
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outstanding voting securities of (or otherwise be or become an Affiliated Person
of) any Agent or any Bank.
8.09 ASSET COVERAGE RATIO. Such Borrower will not at any time
permit its Asset Coverage Ratio to be less than 3:1 or such greater ratio as
provided in such Borrower's Prospectus.
SECTION 9. EVENTS OF DEFAULT. If at any time any of the
following specified events (each an "Event of Default") shall be in effect with
respect to a Borrower:
9.01 PAYMENTS. Such Borrower shall (i) default in the payment
when due of any principal of any Loan other than payments required solely as a
result of the operation of Section 3.02(b), (ii) default, and such default shall
continue unremedied for three or more Business Days, in the repayment of
principal required solely as a result of the operation of Section 3.02(b) or
(iii) default, and such default shall continue unremedied for three or more
Business Days, in the payment when due of any interest on any Loan, or any Fees
or any other amounts owing under this Agreement or with respect to any Loan
other than as covered above in clauses (i) and (ii); or
9.02 REPRESENTATIONS; ETC. Any representation, warranty or
statement made by such Borrower herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
9.03 COVENANTS. Such Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 7.01(c), 7.04, 7.05, 7.07 or Section 8 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and such default shall continue unremedied for a
period of 30 days after written notice to such Borrower by the Administrative
Agent or any Bank; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. Such Borrower shall (i)
default in any payment of any Indebtedness (other than the Obligations) having
an aggregate principal amount in excess of the lesser of (x) 3% of such
Borrower's net asset value (determined in accordance with the Investment Company
Act) and (y) $5,000,000, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause (determined without regard to whether
any notice is required), any such Indebtedness to become due prior to its stated
maturity;
9.05 BANKRUPTCY; ETC. Such Borrower or the Fund of which such
Borrower is a portfolio shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against any such Borrower or such
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Fund, and the petition is not controverted within 10 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of such Borrower or such Fund, or such Borrower or such Fund
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to such
Borrower or such Fund, or there is commenced against such Borrower or such Fund
any such proceeding which remains undismissed for a period of 60 days, or such
Borrower or such Fund is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or such
Borrower or such Fund suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or such Borrower or such Fund makes a general
assignment for the benefit of creditors; or any action is taken by such Borrower
or such Fund for the purpose of effecting any of the foregoing; or
9.06 JUDGMENTS. One or more judgments or decrees shall be
entered against such Borrower (whether or not other Borrowers are parties
thereto) involving a liability (not paid or fully covered by a reputable and
solvent insurance company) in the aggregate amount of $500,000 and such
judgments and decrees either shall be final and non-appealable or shall not be
vacated, discharged or stayed or bonded pending appeal for any period of 30
consecutive days; or
9.07 INVESTMENT ADVISER. (i) The Investment Adviser shall
cease to be such Borrower's primary investment adviser or (ii) any Investment
Advisory Agreement shall cease to be in full force and effect or the Investment
Adviser shall deny or disaffirm any material obligations to be performed by it
under any Investment Advisory Agreement or shall default in the performance of
any of its obligations thereunder; or
9.08 CUSTODY AGREEMENT. Any Custody Agreement shall cease to
be in full force and effect, or the Fund of which such Borrower is a portfolio
or the Custodian shall have given notice, pursuant to any Custody Agreement, of
the termination of such Custody Agreement, except in either case to the extent
the Banks have received prior notice of the appointment of a successor custodian
that is a bank or trust company organized under the laws of the U.S. having
assets under custody of at least $10,000,000,000 and a long-term debt rating of
not less than A from a recognized rating organization and such successor
Custodian has entered into an agreement that is in all material respects the
same as such Custody Agreement immediately prior to the termination thereof or
otherwise in form and substance satisfactory to the Administrative Agent; then,
and in any such event, and at any time thereafter, if any Event of Default shall
then be continuing, the Administrative Agent, upon the written request of the
Required Banks, shall by written notice to the Fund of which such Borrower is a
portfolio, take any or all of the following actions, without prejudice to the
rights of the Administrative Agent or any Bank to enforce its claims against
such Borrower (provided, that, if an Event of Default specified in Section 9.05
shall occur, the result which would occur upon the giving of written notice by
the Administrative Agent to such Borrower as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment with respect to such Borrower terminated,
whereupon the Total Commitment with respect to such
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Borrower shall forthwith terminate immediately and any accrued but unpaid
Commitment Fee owing by such Borrower shall forthwith become due and payable
without any other notice of any kind; and (ii) declare the principal of and any
accrued interest in respect of all Loans, and all other Obligations owing from
such Borrower hereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.
SECTION 10. Definitions and Accounting Terms.
10.01 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Additional Borrower" shall have the meaning provided in
Section 1.14.
"Additional Borrower Request" shall have the meaning provided
in Section 1.14.
"Administrative Agent" shall mean Deutsche Bank AG, acting
through its New York Branch, in its capacity as Administrative Agent.
"Affiliated Person" shall have the meaning provided in the
Investment Company Act.
"Agents" shall mean, collectively, the Administrative Agent
and the Arranger and the Syndication Agent.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Margin" shall mean (i) in the case of Loans
maintained as Base Rate Loans, 0% and (ii) in the case of Loans maintained as
Fixed Rate Loans, 0.50%.
"Arranger" shall mean Deutsche Bank Securities Inc., in its
capacity as Arranger.
"Asset Coverage Denominator" shall mean, at any time with
respect to any Borrower, the aggregate amount of Senior Securities (including in
any event all Loans hereunder) representing Indebtedness of such Borrower at
such time, determined in accordance with Section 18 of the Investment Company
Act.
"Asset Coverage Numerator" shall mean, at any time with
respect to any Borrower, the total value of the investments and other assets of
such Borrower, less all liabilities and Indebtedness of such Borrower not
represented by Senior Securities, all determined in accordance with Section 18
of the Investment Company Act, provided that for purposes of this Agreement (i)
in no event shall the total value of the investments and other assets of such
Borrower as so calculated exceed such total value as would be determined in
computing net asset value as described in the relevant Prospectus and (ii) in no
event shall the liabilities and Indebtedness (other than Senior Securities) of
such Borrower be less than the respective
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liabilities attributed to such Borrower for purposes of calculating net asset
value as described in such Borrower's Prospectus.
"Asset Coverage Ratio" shall mean, at any time with respect to
any Borrower, the ratio of the Asset Coverage Numerator for such Borrower at
such time to the Asset Coverage Denominator for such Borrower at such time.
"Assignment and Assumption Agreement" shall mean an Assignment
and Assumption Agreement substantially in the form of Exhibit D (appropriately
completed).
"Bank" shall mean each financial institution listed on
Schedule II, as well as any Person which becomes a "Bank" hereunder pursuant to
Section 12.04(b).
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate" at any time shall mean the higher of (i) 0.50% in
excess of the Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan designated or deemed
designated as such by the respective Borrower at the time of the incurrence
thereof or conversion thereto.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean and include the borrowing of one Type
of Loan from all the Banks on a given date (or resulting from a conversion or
conversions on such date) having in the case of Fixed Rate Loans the same
Interest Period, provided that Base Rate Loans incurred pursuant to Section
1.10(b) shall be considered part of the related Borrowing of Fixed Rate Loans.
"Borrowing Base" shall mean, at any time for each Borrower, an
amount equal to the lesser of (i) 33 1/3% of the total current market value of
the total assets contained in such Borrower's portfolio, determined daily
according to independent pricing sources and (ii) any explicit maximum borrowing
amount then specified by such Borrower's Prospectus.
"Boston 1784 Funds" shall mean the Boston 1784 Funds a
Massachusetts business trust, and each of the following portfolios of such
trust: Tax-Free Money Market Fund, U.S. Treasury Money Market Fund, Prime Money
Market Fund, Short-Term Income Fund, Income Fund, U.S. Government Medium-Term
Income Fund, Rhode Island Tax-Exempt Income Fund, Asset Allocation Fund, Growth
and Income Fund, Growth Fund, International Equity Fund, Institutional U.S.
Treasury Money Market Fund, Institutional Prime Money Market Fund, Tax-Exempt
Medium-Term Income Fund, Connecticut Tax-Exempt Income Fund, Massachusetts
Tax-Exempt Income Fund, Florida Tax-Exempt Income Fund.
"Business Day" shall mean (i) for all purposes other than as
covered by clauses (ii) and (iii) below, any day except Saturday, Sunday and any
day which shall be in New York
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City or Boston a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close, (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Fixed Rate Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the domestic or London (as the case may be) interbank Eurodollar market
and (iii) with respect to the Asset Coverage Ratio information required to be
delivered in each Notice of Borrowing, any day on which the respective
Borrower's net asset value is required to be calculated in accordance with its
Prospectus as in effect on the Effective Date.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Commitment" shall mean, for each Bank, the amount set forth
opposite such Bank's name in Schedule II directly below the column entitled
"Commitment," as same may be (i) reduced from time to time pursuant to Sections
2.02 and/or 9 or (ii) adjusted from time to time as a result of assignments to
or from such Bank pursuant to Section 12.04(b).
"Commitment Fee" shall have the meaning provided in Section
2.01(a).
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, lease, dividend or other obligation ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (a) for the purchase or payment of any such primary obligation or
(b) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Credit Documents" shall mean this Agreement and any other
documents executed and delivered in connection herewith.
"Credit Event" shall mean the making of a Loan.
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"Custodian" shall mean The Chase Manhattan Bank or any
successor Custodian appointed pursuant to the requirements of Section 9.08.
"Custody Agreements" shall mean the custody agreements listed
on Schedule IV hereto, as amended from time to time in accordance with the terms
hereof and thereof and any similar agreements with any successor Custodian to
the extent such agreements meet the requirements of Section 9.08.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defined Contribution Plan" shall mean any pension plan as
defined in Section 3(34) of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute) the Investment Advisor or any
Borrower.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Effective Date" shall have the meaning provided in Section
12.10.
"Eligible Transferee" shall mean and include any bank (as
defined in the Investment Company Act) that is a domestic bank (including the
domestic branch of a foreign bank); provided, that no Affiliated Person of any
Borrower and no Affiliated Person of such an Affiliated Person of any Borrower
shall be an Eligible Transferee.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with any Borrower or any Subsidiary of
such Borrower would be deemed to be a "single employer" (i) within the meaning
of Section 414(b),(c), (m) or (o) of the Code or (ii) as a result of any
Borrower or any Subsidiary of such Borrower being or having been a general
partner of such person.
"Event of Default" shall have the meaning provided in Section
9.
"Expiry Date" shall mean December 27, 2000 or such date to
which the Expiry Date may be extended in accordance with Section 1.13 of this
Agreement.
"Extending Bank" shall have the meaning provided in Section
1.13.
"Extension Request" shall have the meaning provided in Section
1.13.
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"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 2.01.
"Fixed Rate Loan" shall mean collectively IBOR Loans and LIBOR
Loans.
"Form FR U-1" shall mean a Form FR U-1 certificate
substantially in the form of Exhibit E (appropriately completed).
"Fund" shall have the meaning provided in the first paragraph
of this Agreement.
"Hedging Agreement" shall mean any financial futures
contracts, agreement to purchase and sell (or write) exchange listed or
over-the-counter put and call options on securities, fixed income indices and
securities indices, Interest Rate Protection Agreements, foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements,
Repurchase Agreements, Reverse Repurchase Agreements or any other securities or
financial instruments or arrangements with a leveraging effect created in the
ordinary course of the investment process or operations of any Borrower to the
extent permitted by such Borrower's Investment Practices.
"IBOR" shall mean (i) the average of the offered quotations to
the Administrative Agent in the domestic interbank Eurodollar market for Dollar
deposits of amounts in immediately available funds comparable to the principal
amount of the IBOR Loan of the Administrative Agent for which an interest rate
is then being determined with maturities comparable to the Interest Period to be
applicable to such IBOR Loan determined as of 12:00 Noon (New York time) on the
date which is the commencement of such Interest Period, divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves required by applicable law) applicable to any member bank of the
Federal Reserve system in respect of Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"IBOR Loan" shall mean each Loan designated as such by the
respective Borrower at the time of the incurrence thereof or conversion thereto
bearing interest at the rates provided in Section 1.08(c).
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money
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or for the deferred purchase price of property or services, (ii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iii) all Indebtedness of the types
described in clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this
definition secured by any Lien on any property owned by such Person, whether or
not such Indebtedness has been assumed by such Person, (iv) the aggregate amount
required to be capitalized under leases under which such Person is the lessee,
(v) all obligations of such person to pay a specified purchase price for goods
or services, whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person, (vii) borrowings of
securities by such Person and (viii) all obligations under any Hedging Agreement
or under any similar type of agreement.
"Interest Determination Date" shall mean, (i) with respect to
any LIBOR Loan, the second Business Day prior to the commencement of any
Interest Period relating to such LIBOR Loan and (ii) with respect to any IBOR
Loan, the Business Day which is the first day of any Interest Period relating to
such IBOR Loan.
"Interest Period" shall have the meaning provided in Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Investment Adviser" shall mean Fleet Investment Advisors Inc.
or an affiliate thereof and Oechsle International Advisors, LLC.
"Investment Advisers Act" shall mean the Investment Advisers
Act of 1940, as amended, including the rules and regulations promulgated
thereunder.
"Investment Advisory Agreement" shall mean the Investment
Advisory Agreements, listed on Schedule V hereto.
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, including the rules and regulations promulgated thereunder.
"Investment Practices" shall mean the investment objectives
and fundamental investment policies and restrictions of a respective Borrower as
set forth in such Borrower's Prospectus.
"LIBOR" shall mean with respect to each Interest Period for a
LIBOR Loan, (i) the offered rate (rounded upward to the nearest 1/16 of one
percent) for deposits of Dollars for a period equivalent to such Interest Period
at or about 11:00 A.M. (London time) on the second Business Day before the first
day of such Interest Period that is displayed on Telerate page 3750 (British
Bankers' Association Interest Settlement Rates) (or such other page as may
replace such page 3750 on such system or on any other system of the information
vendor for the time being designated by the British Bankers' Association to
calculate the BBA Interest Settlement Rate (as defined in the British Bankers'
Association's Recommended Terms and Conditions ("BBAIRS"
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terms) dated August 1985)), provided that if on such date no such rate is so
displayed, the Eurodollar Rate for such period shall be the rate quoted to the
Administrative Agent as the offered rate for deposits of Dollars in an amount
approximately equal to the amount in relation to which LIBOR is to be determined
for a period equivalent to such period by prime banks in the London interbank
market at or about 11:00 A.M. (London time) on the second Banking Day before the
first day of such period, divided (and rounded upward to the next whole multiple
of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum
rate of all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves required by applicable law)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"LIBOR Loan" shall mean each Loan designated as such by the
respective Borrower at the time of the making thereof or conversion thereto
bearing interest at the rates provided in Section 1.08(b).
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(c).
"Margin Stock" shall have the meaning provided in Regulations
T, U and X.
"Material Adverse Effect" shall mean an event or occurrence
that could, individually or in the aggregate (taken with the context of the
circumstances) reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the relevant Borrower or Borrowers taken as a whole.
"Maximum Swingline Amount" shall mean $25,000,000.
"Non-Extending Bank" shall have the meaning provided in
Section 1.13.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent located at 31 West 52nd Street, New York, New York 10019, Attention: Lynn
Sweeney, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto.
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"Obligations" shall mean all amounts owing to the Agents or
any Bank pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Administrative
Agent located at 31 West 52nd Street, New York, New York 10019, Attention: Lynn
Sweeney, or such other office as the Administrative Agent may hereafter
designate in writing as such to the other parties hereto.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Commitment of such
Bank at such time and the denominator of which is the Total Commitment at such
time; provided that if a Percentage of any Bank is to be determined after the
Total Commitment has been terminated, then the Percentage of such Bank shall be
determined immediately prior (and without giving effect) to such termination.
"Person" shall mean any individual, partnership, limited
liability company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Plan" shall mean any "employee benefit plan" as defined in
Section 3(3) of ERISA subject to Title I of ERISA or any "plan" subject to
Section 4975 of the Code.
"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime lending rate, the
Prime Lending Rate to change when and as such prime lending rate changes. The
Prime Lending Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Administrative Agent
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate.
"Prospectus" shall mean each Borrower's prospectus, in each
case together with any Statement of Additional Information incorporated therein
and as supplemented, amended or modified from time to time in accordance with
the provisions of this Agreement.
"Registration Statement" shall mean the Registration Statement
as currently in effect of each Fund delivered to the Banks pursuant to Section
4.05.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
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"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
"Repurchase Agreement" shall mean any agreement to purchase an
asset presently and then to sell such asset to any other Person in the future.
"Requested Extension Effective Date" shall have the meaning
provided in Section 1.13.
"Required Banks" shall mean Banks, the sum of whose
outstanding Commitments (or after the termination thereof, the total outstanding
Loans) at such time exceeds 50% of the Total Commitment (or after the
termination thereof, the total outstanding Loans).
"Reverse Repurchase Agreement" shall mean any agreement to
sell an asset presently and then to repurchase such asset in the future.
"Revolving Loan" shall have the meaning set forth in Section
1.01.
"Senior Securities" shall have the meaning ascribed to such
term in Section 18 of the Investment Company Act.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Swingline Bank" shall mean Deutsche Bank AG, New York Branch.
"Swingline Expiry Date" shall mean the date which is five
Business Days prior to the Expiry Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(b).
"Syndication Agent" shall mean Deutsche Bank Securities Inc.,
in its capacity as Syndication Agent.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Unutilized Commitment" shall mean, at any time, an
amount equal to the remainder of (i) the Total Commitment at such time less (ii)
the aggregate principal amount of
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Loans then outstanding, provided that, for purposes of calculating the
Commitment Fee pursuant to Section 2.01(a), "Total Unutilized Commitment" shall
mean an amount equal to the remainder of (i) the Total Commitment at such time
less (ii) the aggregate principal amount of Revolving Loans then outstanding.
"Type" shall mean the type of Loan determined with regard to
the interest option applicable thereto, I.E., whether a Base Rate Loan or a
Fixed Rate Loan.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
"United States" and "U.S." shall each mean the United States
of America.
10.02 ASSUMPTIONS REGARDING STRUCTURE; MASSACHUSETTS BUSINESS
TRUSTS. (a) For the sake of clarity and construction, the parties hereto hereby
set forth their acknowledgment and agreement that each Borrower is an investment
portfolio of a Fund and is not a separately existing legal entity entitled to
enter into contractual agreements or to execute instruments and, for these
reasons, any such Fund is executing this Agreement and each respective Note on
behalf of its investment portfolios, as Borrowers, and that such investment
portfolios will utilize the Loans thus made on their behalf. Notwithstanding
anything to the contrary in this Agreement, each Borrower shall be liable
hereunder only for the Loans made to such Borrower hereunder and interest
thereon and for the fees and expenses associated therewith and as otherwise set
forth herein, and in no event shall any Borrower or its assets be held liable
for the Loans made to any other Borrower hereunder or interest thereon or for
the fees and expenses associated therewith.
(b) Each of the Funds is a Massachusetts business trust and
all persons dealing with any Fund must look solely to the property of such Fund
for the enforcement of any claim against such Fund because neither the trustees,
officers, agents nor shareholders of such Fund assume any personal liability for
obligations entered into on behalf of such Fund. The obligations of each
Borrower hereunder shall be several (and neither joint or joint and several) and
the obligations of each Borrower hereunder shall be payable solely from the
revenues and assets of such Borrower and not the assets or revenues of any other
Borrower.
SECTION 11. THE AGENTS.
11.01 APPOINTMENT. The Banks hereby designate Deutsche Bank
Securities Inc. as Arranger and Syndication Agent and Deutsche Bank AG, New York
Branch, as Administrative Agent to act as specified herein and in the other
Credit Documents. Each Bank hereby irrevocably authorizes the Agents to take
such action on its behalf under the provisions of this Agreement, the other
Credit Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agents by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agents may perform any of their duties hereunder by or through its
respective officers, directors, agents, employees or affiliates.
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11.02 NATURE OF DUTIES. The Agents shall not have any duties
or responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. None of the Agents nor any of their respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agents shall be mechanical and
administrative in nature; the Agents shall not have by reason of this Agreement
or any other Credit Document a fiduciary relationship in respect of any Bank;
and nothing in this Agreement or any other Credit Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agents
any obligations in respect of this Agreement or any other Credit Document except
as expressly set forth herein or therein.
11.03 LACK OF RELIANCE ON THE AGENTS. Independently and
without reliance upon the Agents, each Bank, to the extent it deems appropriate,
has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Borrowers in connection with the making
and the continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of the
Borrowers and, except as expressly provided in this Agreement, the Agents shall
not have any duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect thereto,
whether coming into its possession before the making of any Loan or at any time
or times thereafter. The Agents shall not be responsible to any Bank for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of this Agreement or any
other Credit Document or the financial condition of any Borrower, or be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of any Borrower, or the existence or
possible existence of any Default or Event of Default.
11.04 CERTAIN RIGHTS OF THE AGENTS. If any Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Banks; and the Agents shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank shall have any right
of action whatsoever against the Agents as a result of the Agents acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
11.05 RELIANCE. The Agents shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person and, with respect to
all legal matters pertaining to this Agreement and any other Credit Document and
its duties hereunder and thereunder, upon advice of counsel selected by the
Agents.
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11.06 INDEMNIFICATION. To the extent the Agents are not
reimbursed and indemnified by the Borrowers, the Banks will reimburse and
indemnify the Agents, in proportion to their respective Percentages, for and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever kind
or nature which may be imposed on, asserted against or incurred by the Agents in
performing their respective duties hereunder or under any other Credit Document,
in any way relating to or arising out of this Agreement or any other Credit
Document; provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
11.07 THE AGENTS IN THEIR INDIVIDUAL CAPACITIES. With respect
to their respective obligations to make Loans under this Agreement, the Agents
shall have the rights and powers specified herein for a "Bank" and may exercise
the same rights and powers as though it were not performing the duties specified
herein; and the term "Banks," "Required Banks" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agents in their
individual capacities. The Agents may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the
Borrowers or any affiliate of a Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any Borrower
or any affiliate of a Borrower for services in connection with this Agreement
and otherwise without having to account for the same to the Banks.
11.08 RESIGNATION BY THE AGENTS. (a) Either Agent may resign
from the performance of all its functions and duties hereunder and/or under the
other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Borrowers and the Banks. Such resignation by the Administrative
Agent shall take effect upon the appointment of a successor Administrative Agent
pursuant to Sections 11.08(b) and (c) below or as otherwise provided in this
Agreement.
(b) Upon any such notice of resignation, the Banks shall
appoint a successor Administrative Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrowers (it
being understood and agreed that any Bank is deemed to be acceptable to the
Borrowers).
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrowers (such consent not to be unreasonably withheld), shall
then appoint a successor Administrative Agent who shall serve as Administrative
Agent hereunder or thereunder until such time, if any, as the Banks appoint a
successor Administrative Agent as provided in Section 11.08(b).
(d) Upon the resignation of the Administrative Agent pursuant
to clause (a) above, the successor Administrative Agent at such time shall
assume all of the duties and functions of the Administrative Agent.
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SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, INDEMNIFICATION, ETC. The Borrowers
shall: (i) whether or not the transactions herein contemplated are consummated,
pay all out-of-pocket costs and expenses of the Agents (including, without
limitation, the reasonable fees, costs and disbursements of White & Case LLP) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments referred to herein
and therein and any amendment, waiver or consent relating hereto or thereto, of
the Agents in connection with their syndication efforts with respect to this
Agreement and of the Agents and each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of counsel for the Agents and for each of
the Banks); (ii) pay and hold each of the Banks harmless from and against any
and all present and future stamp, excise and other similar taxes with respect to
the foregoing matters and save each of the Banks harmless from and against any
and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to such Bank) to pay such taxes; and
(iii) indemnify the Agents and each Bank, and each of their respective officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all liabilities, obligations (including removal or
remedial actions or any other environmental claims), losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses and disbursements (including
reasonable attorneys' and consultants' fees and disbursements) incurred by,
imposed on or assessed against any of them as a result of, or arising out of, or
in any way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not such Agent or any Bank is a party thereto) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of any of the proceeds of any Loans hereunder or the
consummation of any transactions contemplated herein or in any other Credit
Document or the exercise of any of their rights or remedies provided herein or
in the other Credit Documents (but excluding any losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified). To the extent that the
undertaking to indemnify, pay or hold harmless any Person set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrowers shall make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities which is permissible
under applicable law. Each Borrower's obligations under this Section 12.01 are
several and not joint or joint and several, with such obligations to be
allocated to each Borrower PRO RATA based on the relative asset size of the
Borrowers or, upon prior written notice to the Agents, based on such other
method acceptable to the Agents as the Investment Advisor shall determine in
compliance with the Investment Company Act.
12.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default each
Bank is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the defaulting Borrower, the
Investment Adviser or any other Person, any such notice being hereby expressly
waived, to setoff and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness
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at any time held or owing by such Bank (including, without limitation, by
branches and agencies of such Bank wherever located) to or for the credit or the
account of such defaulting Borrower against and on account of the Obligations
and liabilities of such defaulting Borrower to such Bank under this Agreement or
under any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 12.06(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or not
such Bank shall have made any demand hereunder and although such Obligations,
liabilities and claims, or any of them, shall be contingent or unmatured.
12.03 NOTICES. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including facsimile, telegraphic, telex, telecopier or cable communication) and
mailed, faxed, telegraphed, telexed, telecopied, cabled or delivered:
if to the Borrowers, at:
c/o FLEET INVESTMENT ADVISORS INC.
75 State Street
Boston, MA 02109
Attention: Mr. James M. Dolan
Telephone: (617) 346-2325
Facsimile: (617) 346-2387
with copies to:
PFPC Inc.
4400 Computer Drive
Westborough, MA 01581
Attn: Mr. Michael Kardok
Telephone: (508) 871-4308
Facsimile: (508) 366-2388
and
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Sts.
Philadelphia, PA 19103
Attn: Ms. Mary Jo Reilly, Esq.
Telephone: (215) 988-1137
Facsimile: (215) 988-2757
if to a Bank or the Administrative Agent, at such party's address specified
opposite its name on Schedule III; if to the Administrative Agent, at its Notice
Office; or, as to the Borrowers or the
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Administrative Agents, at such other address as shall be designated by such
party in a written notice to the other parties hereto and, as to any Bank or the
Administrative Agent, at such other address as shall be designated by such party
in a written notice to the Borrowers and the Administrative Agent. All such
notices and communications shall, when mailed, telegraphed, telexed, telecopied,
or cabled or sent by overnight courier, be effective when deposited in the
mails, delivered to the telegraph company, cable company or overnight courier,
as the case may be, or sent by facsimile, telex or telecopier, except that
notices and communications to the Administrative Agent shall not be effective
until received by the Administrative Agent.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, that no
Borrower may assign or transfer any of its rights, obligations or interest
hereunder or under any other Credit Document (it being understood that any
merger, consolidation, sale or purchase permitted by Section 8.02 shall not be
considered an assignment) without the prior written consent of each of the Banks
and, provided further, that although any Bank may transfer, assign or grant
participations in its rights as provided hereunder, such Bank shall remain a
"Bank" for all purposes hereunder (and may not transfer or assign all or any
portion of its Commitment hereunder except as provided in Section 12.04(b)) and
the transferee, assignee or participant, as the case may be, shall not
constitute a "Bank" hereunder and, provided further, that no Bank shall transfer
or grant any participation under which the participant shall have rights to
approve any amendment to or waiver of any terms of this Agreement or any other
Credit Document except to the extent such amendment or waiver would extend the
final scheduled maturity of any Loan in which such participant is participating,
or reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Total Commitment shall not constitute a change
in the terms of such participation, and that an increase in the Total Commitment
or Loan shall be permitted without the consent of any participant if the
participant's participation is not increased as a result thereof). In the case
of any such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrowers hereunder shall be determined as if
such Bank had not sold such participation. Notwithstanding the foregoing, so
long as no Default or Event of Default exists and is continuing, without the
prior written consent of the Borrowers, no Bank may grant a participation in its
rights hereunder to any participant which owns a majority interest in a no-load
mutual fund company with assets under management of greater than
$15,000,000,000.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Commitment and related outstanding Obligations hereunder to its parent company
and/or any affiliate of such Bank or to one or more Banks or (y) assign all or a
portion of such Commitment to one or more Eligible Transferees, acceptable to
the Administrative Agent, each of which assignees shall become party to this
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Agreement as a Bank by execution of an Assignment and Assumption Agreement,
provided that (i) at such time Schedule II shall be deemed modified to reflect
the Commitments of such new Bank and of the existing Banks, (ii) the consent of
the Administrative Agent shall be required in connection with any assignment to
an Eligible Transferee pursuant to clause (y) above, (iii) so long as no Default
or Event of Default exists and is continuing, the written consent of each
Borrower shall be required, which consent shall not be unreasonably withheld or
delayed and provided that no consent shall be required in connection with a
transfer to any Bank's Affiliates so long as such Affiliate is an Eligible
Transferee, (iv) assignments shall be in minimum amounts of $5,000,000 and (v)
the Administrative Agent shall receive, at the time of each such assignment,
from the assigning or assignor Bank, the payment of a non-refundable fee of
$3,500. To the extent of any assignment pursuant to this Section 12.04(b), the
assigning Bank shall be relieved of its obligations hereunder with respect to
its assigned Commitment. At the time of each assignment pursuant to this Section
12.04(b) to a Person which is not already a Bank hereunder and which is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes, the respective assignee Bank shall,
to the extent legally entitled to do so, provide to the Borrowers the forms
described in clause (ii) of Section 3.04(b). To the extent that an assignment of
all or any portion of a Bank's Commitment and related outstanding Obligations
pursuant to this Section 12.04(b) would, at the time of such assignment, result
in increased costs under Section 1.10, 1.11 or 3.04 from those being charged by
the respective assigning Bank prior to such assignment, then the Borrowers shall
not be obligated to pay such increased costs (although the Borrowers shall be
obligated to pay any other increased costs of the type described above resulting
from changes after the date of the respective assignment).
(c) Notwithstanding anything to the contrary contained in this
Section 12.04, in connection with any participation or assignment the respective
Bank granting the assignment or participation shall (i), in the agreement with
respect thereto, obtain a representation from the participant or assignee to the
effect that it is not an Affiliated Person of the Investment Adviser or any
Borrower, or an Affiliated Person of such an Affiliated Person of the Investment
Adviser or any Borrower and (ii) inform such Person in writing that its review
of all non-public information made available to such Person is subject to the
confidentiality provisions contained in Section 12.15 of this Agreement.
(d) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans to a Federal Reserve Bank without the consent of
any Borrower in support of borrowings made by such Bank from such Federal
Reserve Bank, provided that no such pledge shall release the pledgor Bank from
its obligations hereunder.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Agents or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
the Investment Adviser and/or any Borrower and the Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other Credit
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Document, unless expressly provided otherwise, are cumulative and not exclusive
of any rights, powers or remedies which the Agents or any Bank would otherwise
have. No notice to or demand on any Borrower or the Investment Adviser shall in
any case entitle any Borrower or the Investment Adviser to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Agents or any Bank to any other or further action in any
circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) Except as otherwise provided in
this Agreement, the Administrative Agent agrees that promptly after its receipt
of each payment from or on behalf of any Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its PRO RATA share of any such payment)
PRO RATA based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that if it receives any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Commitment Fee, and which is in a greater proportion (vis a vis
the amount then owed all Banks) than the amount received at the time by all
other Banks, then such Bank receiving such excess payment shall purchase for
cash without recourse or warranty from the other Banks an interest in the
Obligations of the respective Borrowers to such Banks in such amount as shall
result in a proportional participation by all the Banks in such amount; provided
that if all or any portion of such excess amount is thereafter recovered from
such Bank, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the relevant Borrower to
the Banks); provided, however, that, except as otherwise specifically provided
herein, all computations determining compliance with Section 8 shall utilize
accounting principles and policies in conformity with those used to prepare the
historical financial statements delivered to the Banks pursuant to Section
6.05(a).
(b) All computations of interest and Commitment Fees hereunder
shall be made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or Commitment Fees are payable.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE
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WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW PROVISIONS THEREOF. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE
BORROWERS HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH COURTS LACK
JURISDICTION OVER SUCH PERSON, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT LACKS JURISDICTION
OVER SUCH BORROWER. EACH OF THE BORROWERS FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, WITH RETURN RECEIPT REQUESTED, TO SUCH PERSON AT ITS ADDRESS
SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS
AFTER RECEIPT. EACH OF THE BORROWERS HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO
SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED UNDER THIS AGREEMENT OR UNDER ANY
OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENTS UNDER THIS
AGREEMENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY TO
THIS AGREEMENT IN ANY OTHER JURISDICTION.
(b) EACH OF THE BORROWERS HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS
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AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
12.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrowers at their office for delivery or notices, the Agents and each of the
Banks.
12.10 EFFECTIVENESS. This Agreement shall become effective on
the date (the "Effective Date") on which (i) each Borrower and each of the Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Administrative Agent at
its Notice Office or, in the case of the Banks, shall have given to the
Administrative Agent telephonic (confirmed in writing), written or telex notice
(actually received) at such office that the same has been signed and mailed to
it and (ii) each of the conditions set forth in Section 4 have been satisfied or
waived. The Administrative Agent will give each Borrower and each Bank prompt
notice of the occurrence of the Effective Date.
12.11 TABLE OF CONTENTS AND HEADINGS DESCRIPTIVE. The table of
contents and the headings of the several sections and subsections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
12.12 AMENDMENT OR WAIVER; ETC. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by each Borrower and the Required Banks, provided that no such
change, waiver, discharge or termination shall, without the consent of each Bank
(with Obligations being directly affected in the case of following clause (i)),
(i) extend the final scheduled maturity of any Loan, or reduce the rate or
extend the time of payment of interest or Fees thereon, or reduce the principal
amount thereof, (ii) amend, modify or waive any provision of Section 1.13,
Section 1.14 or this Section 12.12, (iii) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Commitments are included on the Effective Date) or
(iv) consent to the assignment or transfer by any Borrower of any of its
respective rights or obligations under this Agreement or any Credit Document;
provided further, that no such change, waiver, discharge or termination shall
(x) increase the Total Commitment of any Bank over the amount thereof then in
effect without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of the Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank) (y) without the consent of the Agents, amend, modify or
waive any provision of Section 11 as same applies to the Agents or any other
provision as same relates to the rights or obligations of the Agents or (z)
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without the consent of the Swingline Bank, alter its rights or obligations with
respect to Swingline Loans.
12.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 3.04, 12.01 and 12.06 shall survive
the execution, delivery and termination of this Agreement and the making and
repayment of the Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or affiliate of such
Bank. Notwithstanding anything to the contrary contained herein, to the extent
that a transfer of Loans pursuant to this Section 12.14 would, at the time of
such transfer, result in increased costs under Section 1.10, 1.11 or 3.04 from
those being charged by the respective Bank prior to such transfer, then the
relevant Borrower shall not be obligated to pay such increased costs (although
the Borrowers shall be obligated to pay any other increased costs of the type
above resulting from changes after the date of the respective transfer).
12.15 CONFIDENTIALITY. (a) Subject to the provisions of clause
(b) of this Section 12.15, each Bank agrees that it will use its best efforts
not to disclose without the prior consent of a Borrower (other than to its
employees, auditors, advisors or counsel or to another Bank if the Bank or such
Bank's holding or parent company in its sole discretion determines that any such
party should have access to such information, provided that such Persons shall
be subject to the provisions of this Section 12.15 to the same extent as such
Bank) any information with respect to such Borrower which is now or in the
future furnished pursuant to this Agreement or any other Credit Document and
which is designated by such Borrower to the Banks in writing as confidential,
provided that any Bank may disclose such information (i) as has become generally
available to the public, (ii) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Bank or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(iii) as may be required or appropriate in respect of any summons or subpoena
binding upon it or in connection with any litigation, (iv) in order to comply
with any law, order, regulation or ruling applicable to such Bank, (v) to any of
the Agents and (vi) to any prospective or actual transferee or participant in
connection with any contemplated transfer or participation in any of the
Commitments or any interest therein by such Bank, provided that such prospective
transferee agrees to be bound by the provisions of this Section 12.15; PROVIDED,
that any Bank that is, or in good faith believes that it is, required to divulge
confidential information under legal process or other governmental authority
shall, to the extent reasonably practicable, promptly notify the relevant
Borrower in order to give such Borrower the opportunity to seek appropriate
protection from such disclosure.
(b) Each Borrower hereby acknowledges and agrees that each
Bank may share with any of its affiliates any information related to such
Borrower (including, without limitation, any non-public customer information
regarding the creditworthiness of such Borrower, provided such Persons shall be
subject to the provisions of this Section 12.15 to the same extent as such
Bank).
-48-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
DEUTSCHE BANK AG, NEW YORK
BRANCH, as Administrative Agent
/s/Alan Krouk
By_____________________________________
Name: Alan Krouk
Title: Vice President
/s/ Clinton M. Johnson
By_____________________________________
Name: Clinton M. Johnson
Title: Managing Director
DEUTSCHE BANK SECURITIES INC.
as Arranger and Syndication Agent
/s/ Alan Krouk
By_____________________________________
Name: Alan Krouk
Title: Vice President
/s/ Clinton M. Johnson
By_____________________________________
Name: Clinton M. Johnson
Title: Managing Director
DEUTSCHE BANK AG, NEW YORK
BRANCH
/s/ Alan Krouk
By_____________________________________
Name: Alan Krouk
Title: Vice President
/s/ Clinton M. Johnson
By_____________________________________
Name: Clinton M. Johnson
Title: Managing Director
-49-
<PAGE>
THE GALAXY FUND, on behalf of the
Borrowers listed on Schedule I-A
/s/ William Greilich
By_____________________________________
Name: William Greilich
Title: Vice President
THE GALAXY VIP FUND, on behalf of the
Borrowers listed on Schedule I-B
/s/ William Greilich
By_____________________________________
Name: William Greilich
Title: Vice President
GALAXY FUND II, on behalf of the
Borrowers listed on Schedule I-C
/s/ William Greilich
By_____________________________________
Name: William Greilich
Title: Vice President
-50-
<PAGE>
SCHEDULE I
BORROWERS
THE GALAXY FUND
Asset Allocation Fund
Equity Value Fund
Equity Income Fund
Equity Growth Fund
International Equity Fund
Small Company Equity Fund
Growth and Income Fund
Small Cap Value Fund
Strategic Equity Fund
Intermediate Government Income Fund
High Quality Bond Fund
Short-Term Bond Fund
Corporate Bond Fund
Tax-Exempt Bond Fund
New York Municipal Bond Fund
Connecticut Municipal Bond Fund
Massachusetts Municipal Bond Fund
Rhode Island Municipal Bond Fund
New Jersey Municipal Bond Fund
GALAXY FUND II
Small Company Index Fund
Large Company Index Fund
Utility Index Fund
U.S. Treasury Index Fund
Municipal Bond Fund
<PAGE>
SCHEDULE I
Page 2
THE GALAXY VIP FUND
Asset Allocation Fund
Equity Fund
Growth and Income Fund
High Quality Bond Fund
Small Company Growth Fund
Columbia Real Estate Equity Fund II
Columbia High Yield Fund II
<PAGE>
SCHEDULE II
COMMITMENTS
<TABLE>
<CAPTION>
NAME OF BANK COMMITMENT
<S> <C>
Deutsche Bank AG, New York Branch $150,000,000
------------
TOTAL $150,000,000
------------
------------
</TABLE>
<PAGE>
SCHEDULE III
BANK ADDRESSES
Deutsche Bank AG, 31 West 52nd Street
New York Branch New York, New York 10019
Telephone No.: (212) 474-7436
Telecopier No.: (212) 474-8346
Attention: Mr. Alan Krouk
<PAGE>
SCHEDULE IV
CUSTODY AGREEMENTS
A. THE GALAXY FUND
1. Global Custody Agreement dated November 1, 1991 between The
Galaxy Fund and The Chase Manhattan Bank, N.A.
2. Amendment dated December 2, 1998 to Global Custody Agreement
between The Galaxy Fund and The Chase Manhattan Bank.
B. THE GALAXY VIP FUND
1. Global Custody Agreement dated November 13, 1992 between The
Galaxy VIP Fund and The Chase Manhattan Bank, N.A.
2. Amendment No. 1 dated March 2, 1998 to Global Custody
Agreement between The Galaxy VIP Fund and The Chase Manhattan
Bank.
3. Amendment dated December 17, 1998 to Global Custody Agreement
between The Galaxy Fund and The Chase Manhattan Bank.
C. GALAXY FUND II
1. Mutual Fund Custody Agreement dated as of June 30, 1994 among
Galaxy Fund II, The Chase Manhattan Bank, N.A. and Fleet
National Bank
<PAGE>
SCHEDULE V
INVESTMENT ADVISORY AGREEMENTS
A. THE GALAXY FUND
1. Advisory Agreement dated as of May 19, 1994 between The Galaxy
Fund and Fleet Investment Advisors, Inc.
2. Addendum No. 1 dated as of December 1, 1995 to the Advisory
Agreement between The Galaxy Fund and Fleet Investment
Advisors Inc.
3. Addendum No. 2 dated as of March 3, 1998 to the Advisory
Agreement between The Galaxy Fund and Fleet Investment
Advisors Inc.
4. Addendum No. 3 dated as of September 18, 1998 to the Advisory
Agreement between The Galaxy Fund and Fleet Investment
Advisors Inc.
5. Sub-Advisory Agreement dated as of October 8, 1998 between
Fleet Investment Advisors Inc. and Oechsle International
Advisors, LLC.
B. THE GALAXY VIP FUND
1. Advisory Agreement dated as of September 30, 1992 between The
Galaxy VIP Fund and Fleet Investment Advisors Inc.
2. Advisory Agreement dated as of February 27, 1998 between The
Galaxy VIP Fund and Columbia Management Co.
C. GALAXY FUND II
1. Advisory Agreement dated as of June 30, 1994 between Galaxy
Fund II and Fleet Investment Advisors Inc.
<PAGE>
EXHIBITS NOT INCLUDED
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. Amount and Terms of Credit.......................................1
1.01 The Commitments..............................................1
1.02 Minimum Amount of Each Borrowing.............................3
1.03 Notice of Borrowing..........................................3
1.04 Disbursement of Funds........................................4
1.05 Ledger.......................................................4
1.06 Conversions..................................................4
1.07 Pro Rata Borrowings..........................................5
1.08 Interest.....................................................5
1.09 Interest Periods.............................................6
1.10 Increased Costs; Illegality; Etc.............................7
1.11 Compensation.................................................9
1.12 Replacement of Banks.........................................9
1.13 Extension of Expiry Date....................................10
1.14 Addition of New Borrowers...................................11
1.15 Removal of Borrowers........................................11
SECTION 2. Fees; Reductions of Commitment..................................12
2.01 Fees........................................................12
2.02 Voluntary Termination of Unutilized Commitments;
Termination of Commitments..................................12
SECTION 3. Prepayments; Payments; Taxes....................................12
3.01 Voluntary Prepayments.......................................12
3.02 Mandatory Repayments........................................13
3.03 Method and Place of Payment.................................13
3.04 Net Payments................................................13
SECTION 4. Conditions Precedent to the Effective Date......................16
4.01 Execution of Agreement......................................16
4.02 Officers'Certificates.......................................16
4.03 Opinion of Counsel..........................................16
4.04 Proceedings; Etc............................................16
4.05 Material Agreements.........................................17
4.06 Adverse Change; Etc.........................................17
4.07 Litigation..................................................17
4.08 Fees, Etc...................................................17
4.09 Form FR U-1.................................................17
<PAGE>
SECTION 5. Conditions Precedent to All Loans...............................18
5.01 No Default; Representations and Warranties..................18
5.02 Notice of Borrowing.........................................18
SECTION 6. Representations, Warranties and Agreements......................18
6.01 Corporate Status............................................18
6.02 Power and Authority.........................................18
6.03 No Violation................................................19
6.04 Governmental Approvals......................................19
6.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; etc................................19
6.06 Litigation..................................................20
6.07 True and Complete Disclosure................................20
6.08 Use of Proceeds; Margin Regulations.........................20
6.09 ERISA.......................................................20
6.10 Compliance with Statutes, Etc...............................21
6.11 Investment Company..........................................21
6.12 Investment Adviser..........................................21
6.13 Affiliation with the Banks..................................21
6.14 Senior Status...............................................21
6.15 Tax Returns and Payments....................................21
SECTION 7. Affirmative Covenants...........................................22
7.01 Information Covenants.......................................22
7.02 Books, Records and Inspections..............................23
7.03 Compliance with Statutes; Etc...............................23
7.04 Investment Company..........................................23
7.05 Compliance with Investment Practices........................23
7.06 Compliance with Regulation U................................23
7.07 Use of Proceeds.............................................24
7.08 Payment of Taxes............................................24
SECTION 8. Negative Covenants..............................................24
8.01 Liens.......................................................24
8.02 Consolidation, Merger, Sale or Purchase of
Assets, Etc.................................................25
8.03 Indebtedness................................................25
8.04 Restrictions on Issuance of Capital Stock...................26
8.05 Modifications of Investment Practices,
Governing Documents, and Certain Other Agreements...........26
8.06 Business....................................................26
8.07 ERISA.......................................................26
8.08 Affiliated Person...........................................26
8.09 Asset Coverage Ratio........................................27
<PAGE>
SECTION 9. Events of Default...............................................27
9.01 Payments....................................................27
9.02 Representations; Etc........................................27
9.03 Covenants...................................................27
9.04 Default Under Other Agreements..............................27
9.05 Bankruptcy; Etc.............................................27
9.06 Judgments...................................................28
9.07 Investment Adviser..........................................28
9.08 Custody Agreement...........................................28
SECTION 10. Definitions and Accounting Terms...............................29
10.01 Defined Terms..............................................29
10.02 Assumptions Regarding Structure;
Massachusetts Business Trusts..............................38
SECTION 11. The Agents.....................................................38
11.01 Appointment................................................38
11.02 Nature of Duties...........................................39
11.03 Lack of Reliance on the Agents.............................39
11.04 Certain Rights of the Agents...............................39
11.05 Reliance...................................................39
11.06 Indemnification............................................40
11.07 The Agents in their Individual Capacities..................40
11.08 Resignation by the Agents..................................40
SECTION 12. Miscellaneous..................................................41
12.01 Payment of Expenses, Indemnification, Etc..................41
12.02 Right of Setoff............................................41
12.03 Notices....................................................42
12.04 Benefit of Agreement.......................................43
12.05 No Waiver; Remedies Cumulative.............................44
12.06 Payments Pro Rata..........................................45
12.07 Calculations; Computations.................................45
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL................................45
12.09 Counterparts...............................................47
12.10 Effectiveness..............................................47
12.11 Table of Contents and Headings Descriptive.................47
12.12 Amendment or Waiver; Etc...................................47
12.13 Survival...................................................48
12.14 Domicile of Loans..........................................48
12.15 Confidentiality............................................48
<PAGE>
SCHEDULES
Schedule I Borrowers
Schedule II Commitments
Schedule III Bank Addresses
Schedule IV Custody Agreements
Schedule V Investment Advisory Agreements
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Officers' Certificate
Exhibit C Form of Opinion of Drinker Biddle & Reath LLP
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E Form FR U-1 certificate
Exhibit F Form of Section 3.04(b)(ii) Certificate
<PAGE>
Exhibit (j)(1)
CONSENT OF COUNSEL
We hereby consent to (i) the use of our name and the
references to our firm under the caption "Counsel" in the Statement of
Additional Information that is included in Post-Effective Amendment No. 43 to
the Registration Statement on Form N-1A under the Investment Company Act of
1940, as amended, of The Galaxy Fund, and (ii) the use and incorporation by
reference in said Post-Effective Amendment No. 43 of our firm's opinion of
counsel filed as Exhibit (i) to Post-Effective Amendment No. 38 to the
Registration Statement on Form N-1A under the Investment Company Act of 1940, as
amended, of The Galaxy Fund, and (iii) the use and incorporation by reference in
said Post-Effective Amendment No. 43 of our firm's opinion of counsel filed as
Exhibit (i)(2) to Post-Effective Amendment No. 40 to the Registration Statement
on Form N-1A under the Investment Company Act of 1940, as amended, of The Galaxy
Fund.
/s/ Drinker Biddle & Reath LLP
------------------------------
Philadelphia, Pennsylvania Drinker Biddle & Reath LLP
February 23, 2000
<PAGE>
Exhibit (j)(2)
February 23, 2000
The Galaxy Fund
4400 Computer Drive
Westborough, Massachusetts 01581-5108
Ladies and Gentlemen:
We hereby consent to the reference to us under the caption "Counsel" in
the Statement of Additional Information that relates to your Massachusetts
Intermediate Municipal Bond Fund that is included in Post-Effective Amendment
No. 43 to your Registration Statement on Form N-1A (No. 33-4806), which you have
informed us is to be filed with the Securities and Exchange Commission.
Very truly yours,
/s/Ropes & Gray
----------------
Ropes & Gray
<PAGE>
Exhibit (j)(3)
February 23, 2000
The Galaxy Fund
4400 Computer Drive
Westborough, Massachusetts 01581-5108
Re: Connecticut Intermediate Municipal Bond Fund
Gentlemen:
We hereby consent, without admitting that we are in the category of persons
whose consent is required, to the reference to us under the caption"Counsel" in
the Statement of Additional Information included in Post-Effective Amendment
No. 43 to your Registration Statement on Form N-1A (No. 33-4806) as filed with
the Securities and Exchange Commission.
Very truly yours,
/s/ Day, Berry & Howard LLP
---------------------------
Day, Berry & Howard LLP
<PAGE>
Exhibit l (11)
PURCHASE AGREEMENT
The Galaxy Fund, a Massachusetts business trust (the "Trust"), and
Provident Distributors, Inc., a Delaware corporation ("PDI"), hereby agree with
each other as follows:
1. The Trust hereby offers PDI and PDI hereby purchases ten
(10) Class EE - Series 1 Shares and ten (10) Class EE - Series 2 Shares
(collectively "Shares"), each such share representing an interest in the New
York Municipal Money Market Fund, at a purchase price of $1.00 per share. PDI
hereby acknowledges purchase of the Shares and the Trust hereby acknowledges
receipt from PDI of funds in the amount of $20 in full payment for the Shares.
2. PDI represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of ____________, 2000.
THE GALAXY FUND
By:___________________
William Greilich
Vice President
PROVIDENT DISTRIBUTORS, INC.
By: ___________________
Philip H. Rinnander
President
<PAGE>
Exhibit 1(12)
PURCHASE AGREEMENT
The Galaxy Fund, a Massachusetts business trust (the "Trust"), and
Provident Distributors, Inc., a Delaware corporation ("PDI"), hereby agree with
each other as follows:
1. The Trust hereby offers PDI and PDI hereby purchases (a)
(i) ten (10) Class FF shares, each such share representing an interest in the
Trust's Institutional Money Market and (ii) ten (10) Class GG shares, each such
share representing an interest in the Trust's Institutional Treasury Money
Market, at a purchase price of $1.00 per Share, and (b) (i) one (1) Class II
share, such share representing an interest in the Trust's Florida Municipal Bond
Fund, (ii) one (1) Class JJ - Series I share, one (1) Class JJ - Series 2 shares
and one (1) Class JJ - Series 3 share, each such shares representing an interest
in the Trust's Intermediate Tax-Exempt Bond Fund, (iii) one (1) Class KK -
Series 1 share, one (1) Class KK - Series 2 share and one (1) Class KK - Series
3 share, each such share representing an interest in the Trust's Connecticut
Intermediate Municipal Bond Fund, (iv) one (1) Class LL - Series 1 share, one
(1) Class LL - Series 2 share and one (1) Class LL - Series 3 share, each such
share representing an interest in the Trust's Massachusetts Intermediate
Municipal Bond Fund; and (v) one (1) Class MM - Series 1 share, one (1) Class MM
- - Series 2 share, one (1) Class MM - Series 3 share, and one (1) Class MM -
Series 4 share, each such share representing an interest in the Trust's Growth
Fund II, at a purchase price of $10.00 per share, aggregating to one-hundred
sixty (160) shares of beneficial interest in the Trust (such shares of
beneficial interest in the Trust being hereinafter collectively known as
"Shares"). PDI hereby acknowledges purchase of the Shares and the Trust hereby
acknowledges receipt from PDI of funds in the amount of $160 in full payment for
the Shares.
2. PDI represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "The Galaxy Fund" and "Trustees of The Galaxy
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the ______ day of __________, 2000.
THE GALAXY FUND
By: ___________________
William Greilich
Vice President
PROVIDENT DISTRIBUTORS, INC.
By: ___________________
Philip H. Rinnander
President
<PAGE>
Exhibit m(l)
THE GALAXY FUND
DISTRIBUTION AND SERVICES PLAN
FOR RETAIL B SHARES
------------------------------
This Distribution and Services Plan (the "Plan") has been
adopted by the Board of Trustees of The Galaxy Fund (the "Trust") in connection
with the Retail B series of shares (the "B Shares") in each of the following
investment portfolios of the Trust: Small Company Equity Fund, Small Cap Value
Fund, MidCap Equity Fund, Equity Growth Fund, Growth Fund II, Equity Income
Fund, International Equity Fund, Asset Allocation Fund, Equity Value Fund,
Growth and Income Fund, Strategic Equity Fund, Short-Term Bond Fund,
Intermediate Government Income Fund, High Quality Bond Fund, Tax-Exempt Bond
Fund and Money Market Fund (collectively, the "Funds"). The Plan has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Section 1. EXPENSES. The Trust may incur expenses under the
Plan in an amount not to exceed 1.15% annually of the average daily net assets
attributable to the outstanding B Shares of each of the Funds.
Section 2. DISTRIBUTION PAYMENTS. (a) The Trust may pay the
distributor of the Trust (the "Distributor") (or any other person) a fee (a
"Distribution Fee") of up to 0.65% annually of the average daily net assets
attributable to the outstanding B Shares of each of the Funds. The Distribution
Fee shall be calculated and accrued daily, paid monthly and shall be in
consideration for distribution services and the assumption of related expenses
(including the payment of commissions and transaction fees) in conjunction with
the offering and sale of B Shares of the Funds. In determining the amounts
payable on behalf of a Fund under the Plan, the net asset value of the B Shares
shall be computed in the manner specified in the Trust's then current
Prospectuses and Statements of Additional Information describing such B Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to cover expenses and activities primarily
intended to result in the sale of B Shares. Such expenses and activities may
include but are not limited to: (i) direct out-of-pocket promotional expenses
incurred by the Distributor in advertising and marketing B Shares; (ii) expenses
incurred in connection with preparing, printing, mailing, and distributing or
publishing advertisements and sales literature; (iii) expenses incurred in
connection with printing and mailing Prospectuses and Statements of Additional
Information to other than current shareholders; (iv) periodic payments or
commissions to one or more securities dealers, brokers, financial institutions
or other industry professionals, such as investment advisors, accountants, and
estate planning firms (each a "Distribution Organization") with respect to a
Fund's B Shares beneficially owned by customers for whom the Distribution
Organization is the Distribution Organization of record or shareholder of
record; (v) the direct or indirect cost of financing the payments or expenses
included in (i) and (iv) above; or (vi) such other services as may be construed
by any court or governmental agency or commission, including the Securities and
Exchange Commission (the "Commission"), to constitute distribution services
under the 1940 Act or rules and regulations thereunder.
<PAGE>
Section 3. PAYMENTS FOR SHAREHOLDER LIAISON SERVICES COVERED
BY PLAN. (a) The Trust may also pay securities dealers, brokers, financial
institutions or other industry professionals, such as investment advisors,
accountants, and estate planning firms (each a "Service Organization") for
Shareholder Liaison Services (as herein defined) provided with respect to their
customers' B Shares. Shareholder Liaison Services shall be provided pursuant to
an agreement in substantially the form attached hereto ("Servicing Agreement").
Any organization providing distribution assistance may also become a Service
Organization and receive fees for Shareholder Liaison Services pursuant to a
Servicing Agreement under this Plan.
(b) Fees paid to a Service Organization under subsection (a)
above may be paid at an annual rate of up to 0.25% of the average daily net
assets attributable to the outstanding B Shares of each of the Funds, which B
Shares are owned of record or beneficially by that Service Organization's
customers for whom such Service Organization is the dealer of record or
shareholder of record or with whom it has a servicing relationship. Such fees
shall be calculated and accrued daily, paid monthly and computed in the manner
set forth in the Servicing Agreement.
(c) "Shareholder Liaison Services" means "personal service
and/or the maintenance of shareholder accounts" within the meaning of the Rules
of Fair Practice of the National Association of Securities Dealers, Inc., such
as responding to customers' inquiries and providing information on their
investments.
Section 4. PAYMENTS FOR ADMINISTRATIVE SUPPORT SERVICES
COVERED BY PLAN. (a) The Trust may also pay Service Organizations for
Administrative Support Services (as hereinafter defined) provided with respect
to its Customers' B Shares. Administrative Support Services shall be provided
pursuant to a Servicing Agreement. Any organization that receives fees under
Section 2 or Section 3 of this Plan may also receive fees pursuant to this
Section 4.
(b) Fees paid to a Service Organization under subsection (a)
above may be paid at an annual rate of up to 0.25% of the average daily net
assets attributable to the outstanding B Shares of each of the Funds, which B
Shares are owned of record or beneficially by that Service Organization's
customers for whom such Service Organization is the dealer of record or
shareholder of record or with whom it has a servicing relationship. Such fees
shall be calculated and accrued daily, paid monthly and computed in the manner
set forth in the Servicing Agreement.
(c) "Administrative Support Services" include but are not
limited to: (i) transfer agent and subtransfer agent services for beneficial
owners of B Shares; (ii) aggregating and processing purchase and redemption
orders; (iii) providing beneficial owners with statements showing their
positions in B Shares; (iv) processing dividend payments; (v) providing
subaccounting services for B Shares held beneficially; (vi) forwarding
shareholder communications, such as proxies, shareholder reports, dividend
and tax notices, and updating prospectuses to beneficial owners; and (vii)
receiving, tabulating, and transmitting proxies executed by beneficial
owners; PROVIDED, however, that such term does not include Shareholder
Liaison Services.
-2-
<PAGE>
Section 5. EXPENSES ALLOCATED; COMPLIANCE. Amounts paid by a
Fund under the Plan must be for services rendered for or on behalf of the
holders of such Fund's B Shares. However, joint distribution financing or other
services rendered with respect to such B Shares (which may involve other
investment funds or companies that are affiliated persons of the Trust or
affiliated persons of the Distributor) is authorized to the extent permitted by
law.
Section 6. REPORTS TO TRUST. So long as this Plan is in
effect, the Distributor shall provide the Trust's Board of Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
Section 7. APPROVAL OF PLAN. This Plan will become effective
with respect to a particular Fund's B Shares on the date the public offering of
B Shares commences upon the approval by a majority of the Board of Trustees,
including a majority of those trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan (the "Disinterested Trustees"), pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
Section 8. CONTINUANCE OF PLAN. Unless sooner terminated in
accordance with the terms hereof, this Plan shall continue until September 30,
2000, and thereafter for so long as its continuance is specifically approved at
least annually by the Trust's Board of Trustees in the manner described in
Section 7 hereof.
Section 9. AMENDMENTS. This Plan may be amended at any time by
the Board of Trustees provided that (a) any amendment to increase materially the
costs which the B Shares of a Fund may bear for distribution pursuant to the
Plan shall be effective only upon approval by a vote of a majority of the
outstanding B Shares affected by such matter, and (b) any material amendments of
the terms of the Plan shall become effective only upon approval in the manner
described in Section 7 hereof.
Section 10. TERMINATION. This Plan, as to any Fund, is
terminable without penalty at any time by (a) a vote of a majority of the
Disinterested Trustees, or (b) a vote of a majority of the outstanding B Shares
of such Fund.
Section 11. SELECTION/NOMINATION OF TRUSTEES. While this Plan
is in effect, the selection and nomination of those Disinterested Trustees shall
be committed to the discretion of such Disinterested Trustees.
-3-
<PAGE>
Section 12. MISCELLANEOUS. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Adopted: September 7, 1995
Revised: December 5, 1996, December 4, 1997, May 28, 1998, September 3, 1998,
March 2, 2000
Reapproved: September 5, 1996, September 4, 1997, September 10, 1998,
September 9, 1999
-4-
<PAGE>
THE GALAXY FUND
SERVICING AGREEMENT
to
DISTRIBUTION AND SERVICES PLAN
FOR RETAIL B SHARES
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the provision
of shareholder liaison and/or administrative support services to your customers
who may from time to time be the record or beneficial owners of Retail B Shares
(such shares referred to herein as the "B Shares") of one or more of our
investment portfolios (individually, a "Fund" and collectively, the "Funds"),
which are listed on Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide Shareholder Liaison Services to your
customers ("Clients") who may from time to time own of record or beneficially a
Fund's B Shares. "Shareholder Liaison Services" means "personal service and/or
the maintenance of shareholder accounts" within the meaning of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., such as
responding to customers' inquiries and providing information on their
investments.
Section 2. You agree to provide Administrative Support Services to Clients
who may from time to time own of record or beneficially a Fund's B Shares.
"Administrative Support Services" include but are not limited to: (i) transfer
agent and subtransfer agent services for beneficial owners of B Shares; (ii)
aggregating and processing purchase and redemption orders; (iii) providing
beneficial owners with statements showing their positions in B Shares; (iv)
processing dividend payments; (v) providing subaccounting services for B Shares
held beneficially; (vi) forwarding shareholder communications, such as proxies,
shareholder reports, dividend and tax notices, and updating prospectuses to
beneficial owners; and (vii) receiving, tabulating, and transmitting proxies
executed by beneficial owners; PROVIDED, however, that such term does not
include Shareholder Liaison Services.
Section 3. You will provide such office space and equipment, telephone and
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services to Clients.
Section 4. Neither you nor any of your officers, employees or agents is
authorized to make any representations concerning us, a Fund, or its B Shares
except those contained in our then current prospectuses for such B Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing.
Section 5. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter or in any respect. You will not engage in activities pursuant to this
Agreement which constitute acting as a broker or dealer under state law unless
you have obtained the licenses required by law. You and your employees will,
upon request, be available during normal business hours to consult with us or
our designees concerning the performance of your responsibilities under this
Agreement.
Section 6. In consideration of the services and facilities provided by you
pursuant to Section 1 hereof, we will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of (a) .25% of the average daily net
asset value of B Shares of the Small Company Equity Fund, Small Cap Value, Fund,
MidCap Equity Fund, Equity Growth Fund, Growth Fund II, Equity Income Fund,
International Equity Fund, Asset Allocation Fund, Equity Value Fund, Growth and
Income Fund and Strategic Equity Fund (collectively, the "Equity Funds") owned
of record or beneficially by Clients from time to time for whom you are the
dealer of record or holder of record or with whom you have a servicing
relationship, (b) .15% of the average daily net asset value of B Shares of the
Short-Term
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Bond Fund, Intermediate Government Income Fund, High Quality Bond Fund and
Tax-Exempt Bond Fund (collectively, the "Bond Funds") owned of record or
beneficially by Clients from time to time for whom you are the dealer of record
or holder of record or with whom you have a servicing relationship, and (c) .05%
of the average daily net asset value of B Shares of the Money Market Fund owned
of record or beneficially by Clients from time to time for whom you are the
dealer of record or holder of record and with whom you have a servicing
relationship. In consideration of the services provided by you pursuant to
Section 2 hereof, we will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of (a) .25% of the average daily net asset
value of B Shares of the Equity Funds, (b) .15% of the average daily net asset
value of B Shares of the Bond Funds, and (c) .05% of the average daily net asset
value of B Shares of the Money Market Fund. Said fee will be computed daily and
payable monthly. For purposes of determining the fees payable under this Section
6, the average daily net asset value of Clients' B Shares will be computed in
the manner specified in our then current Registration Statement in connection
with the computation of the net asset value of the particular Fund's B Shares
for purposes of purchases and redemptions. The fee rates stated above may be
prospectively increased or decreased by us, in our sole discretion, at any time
upon notice to you. Further, we may, in our discretion and without notice,
suspend or withdraw the sale of B Shares, including the sale of such Shares to
you for the account of any Clients.
Section 7. You acknowledge that you will provide to our Board of Trustees,
at least quarterly, separate written reports of the amounts expended pursuant to
this Agreement for Shareholder Liaison Services and for Administrative Support
Services, respectively, and the purposes for which such expenditures were made.
In connection with such reports, you will furnish us or our designees with such
information as we or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to Clients of some or all of
the services described herein), and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to our Board of Trustees concerning
this Agreement and the monies paid or payable by us pursuant hereto, as well as
any other reports or filings that may be required by law.
Section 8. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
Section 9. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of B Shares; (ii) the
compensation payable to you hereunder, together with any other compensation you
receive from Clients in connection with the investment of their assets in B
Shares of the Funds, will be disclosed to Clients, will be authorized by Clients
and will not be excessive or unreasonable.
Section 10. This Agreement will become effective on the date a fully executed
copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until [September 30, 2000], and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by us in the manner
described in Section 13 hereof. This Agreement is terminable with respect to any
Fund, without penalty, at any time by us (which termination may be by vote of a
majority of our Disinterested Trustees as defined in Section 13 hereof or by
vote of the holders of a majority of the outstanding B Shares of such Fund) or
by you upon notice to us. This Agreement will terminate in the event of its
assignment, as defined in the Investment Company Act of 1940 (the "Act").
Section 11. All notices and other communications to either you or us will be
duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown above.
Section 12. This Agreement will be construed in accordance with the laws of
the Commonwealth of Massachusetts without giving effect to principles of
conflict of laws.
Section 13. This Agreement has been approved by vote of a majority of (i) our
Board of Trustees and (ii) those Trustees who are not "interested persons" (as
defined in the Act) of us and have no direct or indirect financial interest in
the operation of the Distribution and Services Plan adopted by us regarding the
provision of shareholder liaison and/or administrative support services to the
record or beneficial owners of B Shares or in any agreements
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related thereto ("Disinterested Trustees"), cast in person at a meeting called
for the purpose of voting on such approval.
Section 14. The names "The Galaxy Fund" and "Trustees of The Galaxy Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated March 31, 1986 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Galaxy Fund"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders, or representatives of
the Trust personally, but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o PFPC, Inc., 4400 Computer Drive, Westboro, Massachusetts 01581-5108.
Very truly yours,
THE GALAXY FUND
By:
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Authorized Officer
Accepted and Agreed to:
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Name of Organization
By:
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Authorized Officer
Date:
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Taxpayer Identification Number
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Account Number
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Dealer Code
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APPENDIX A
Please check the appropriate boxes to indicate the Funds for which you
wish to act as a Service Organization with respect to B Shares:
SHAREHOLDER LIAISON SERVICES ADMINISTRATIVE SUPPORT SERVICES
/ / Small Company Equity Fund / / Small Company Equity Fund
/ / Small Cap Value Fund / / Small Cap Value Fund
/ / MidCap Equity Fund / / MidCap Equity Fund
/ / Equity Growth Fund / / Equity Growth Fund
/ / Growth Fund II / / Growth Fund II
/ / Equity Income Fund / / Equity Income Fund
/ / International Equity Fund / / International Equity Fund
/ / Asset Allocation Fund / / Asset Allocation Fund
/ / Equity Value Fund / / Equity Value Fund
/ / Growth and Income Fund / / Growth and Income Fund
/ / Strategic Equity Fund / / Strategic Equity Fund
/ / Short-Term Bond Fund / / Short-Term Bond Fund
/ / Intermediate Government Income / / Intermediate Government Income
Fund Fund
/ / High Quality Bond Fund / / High Quality Bond Fund
/ / Tax-Exempt Bond Fund / / Tax-Exempt Bond Fund
/ / Money Market Fund / / Money Market Fund
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(Service Organization Name)
By:
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Authorized Officer
Dated:
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Exhibit (o)
THE GALAXY FUND
("GALAXY")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM
I. INTRODUCTION
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") promulgated Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure without the need to obtain an exemptive order
under Section 18 of the 1940 Act. Rule 18f-3, which became effective on April 3,
1995, requires an investment company to file with the Commission a written plan
specifying all of the differences among the classes, including the various
services offered to shareholders, the different distribution arrangements for
each class, the methods for allocating expenses relating to those differences
and any conversion features or exchange privileges. On May 25, 1995, the Board
of Trustees of Galaxy authorized Galaxy to operate its multi-class distribution
structure in compliance with Rule 18f-3. On October 10, 1995, Galaxy filed a
Plan pursuant to Rule 18f-3 for operation of a multi-class system (the "Prior
Plan"), which had been approved by the Board of Trustees of Galaxy on September
7, 1995, with the Commission. Prior to the filing of the Prior Plan, Galaxy
operated a multi-class distribution structure pursuant to an exemptive order
granted by the Commission on February 19, 1992. The Amended and Restated Plan
pursuant to Rule 18f-3 for operation of a multi-class system presented herewith,
which was approved by the Board of Trustees of Galaxy on January 25, 2000,
supersedes the Prior Plan and any subsequent Plans pursuant to Rule 18f-3
approved by the Board of Trustees of Galaxy prior to March 2, 2000.
II. ATTRIBUTES OF CLASSES
A. GENERALLY
EQUITY FUNDS
Galaxy shall offer (a) six classes of shares -- Retail A Shares, Retail
B Shares, Prime A Shares, Prime B Shares, BKB Shares and Trust Shares -- in the
Asset Allocation Fund, Growth and Income Fund and International Equity Fund, (b)
five classes of shares -- Retail A Shares, Retail B Shares, Prime A Shares,
Prime B Shares and Trust Shares -- in the Equity Value Fund, Equity Growth Fund,
Equity Income Fund, Small Company Equity Fund, Small Cap Value Fund and
Strategic Equity Fund, (c) four classes of shares -- Retail A Shares, Retail B
Shares, BKB Shares and Trust Shares -- in the Growth Fund II, and (d) three
classes of shares --
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Retail A Shares, Retail B Shares and Trust Shares -- in the MidCap Equity Fund
(each a "Fund" and collectively, the "Equity Funds").
BOND FUNDS
Galaxy shall offer (a) six classes of shares -- Retail A Shares, Retail
B Shares, Prime A Shares, Prime B Shares, BKB Shares and Trust Shares -- in the
Short-Term Bond Fund, Intermediate Government Income Fund and High Quality Bond
Fund, (b) five classes of shares -- Retail A Shares, Retail B Shares, Prime A
Shares, Prime B Shares and Trust Shares -- in the Tax-Exempt Bond Fund, (c)
three classes of shares -- Retail A Shares, BKB Shares and Trust Shares -- in
the Intermediate Tax-Exempt Bond Fund, Connecticut Intermediate Municipal Bond
Fund, Massachusetts Intermediate Municipal Bond Fund and Rhode Island Municipal
Bond Fund, and (d) two classes of shares -- Retail A Shares and Trust Shares --
in the Corporate Bond Fund, New Jersey Municipal Bond Fund, New York Municipal
Bond Fund, Connecticut Municipal Bond Fund and Massachusetts Municipal Bond Fund
(each a "Fund" and collectively, the "Bond Funds").
MONEY MARKET FUNDS
Galaxy shall offer (a) four classes of shares -- Retail A Shares,
Retail B Shares, BKB Shares and Trust Shares -- in the Money Market Fund, (b)
three classes of shares -- Retail A Shares, BKB Shares and Trust Shares -- in
the Tax-Exempt Fund and U.S. Treasury Fund, (c) two classes of shares -- Retail
A Shares and Trust Shares -- in the Government Fund, and (d) two classes of
shares -- Retail A Shares and Prime Shares -- in the Connecticut Municipal Money
Market Fund, Massachusetts Municipal Money Market Fund and New York Municipal
Money Market Fund (each a "Fund" and collectively, the "Money Market Funds").
In general, shares of each class shall be identical except for
different expense variables (which will result in different returns for each
class), certain related rights and certain shareholder services. More
particularly, the Retail A Shares, the Retail B Shares, the Prime A Shares,
the Prime B Shares, the BKB Shares, the Prime Shares and/or the Trust Shares
of each Fund shall represent interests in the same portfolio of investments
of the particular Fund, and shall be identical in all respects, except for:
(a) the impact of (i) expenses assessed to a class pursuant to the
Shareholder Services Plan, Distribution and Services Plan or Distribution
Plan adopted for that class, (ii) transfer agency expenses, and (iii) any
other incremental expenses identified from time to time that should be
properly allocated to one class so long as any changes in expense allocations
are reviewed and approved by a vote of the Board of Trustees, including a
majority of the independent Trustees; (b) the fact that (i) the Retail A
Shares shall vote separately on any matter submitted to holders of Retail A
Shares that pertains to the Shareholder Services Plan adopted for that class;
(ii) the Retail B Shares shall vote separately on any matter submitted to
holders of Retail B Shares that pertains to the Distribution and Services
Plan adopted for that class; (iii) the Prime A Shares shall vote separately
on any matter submitted to holders of Prime A Shares that pertains to the
Distribution Plan adopted for that class; (iv) the Prime B Shares shall vote
separately on any matter submitted to holders of B Prime Shares that pertains
to the Distribution and Services Plan adopted for that class; (v) the Prime
Shares shall vote separately on any matter submitted to holders of Prime
Shares that pertains to the Distribution
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and Services Plan adopted for that class; (vi) the BKB Shares shall vote
separately on any matter submitted to holders of BKB Shares that pertains to
the Shareholder Services Plan adopted for that class; (vii) the Trust Shares
shall vote separately on any matter submitted to holders of Trust Shares that
pertains to the Shareholder Services Plan adopted for that class; and (viii)
each class shall vote separately on any matter submitted to shareholders that
pertains to the class expenses borne by that class; (c) the exchange
privileges of each class of shares; (d) the designation of each class of
shares; and (e) the different shareholder services relating to a class of
shares.
B. DISTRIBUTION ARRANGEMENTS, EXPENSES AND SALES CHARGES
1. EQUITY FUNDS
RETAIL A SHARES
Retail A Shares of the Equity Funds shall be offered to individuals or
corporations who submit a purchase application to Galaxy, purchasing directly
either for their own accounts or for the accounts of others ("Direct Investors")
and shall be offered to FIS Securities, Inc., Fleet Brokerage Securities, Inc.,
Fleet Securities, Inc., Fleet Enterprises, Inc., FleetBoston Financial
Corporation, its affiliates, their correspondent banks and other qualified
banks, savings and loan associations and broker-dealers ("Institutions") who
purchase the shares on behalf of their customers ("Customers") who are the
beneficial owners of the shares.
Retail A Shares of the Equity Funds shall be subject to a front-end
sales charge which shall not initially exceed 3.75% of the offering price of
Retail A Shares of those Funds (subject to the reductions and exemptions
described in the prospectus and Statement of Additional Information ("SAI") for
such Shares). When the aggregate offering price of Retail A Shares of the Equity
and Bond Funds purchased by an investor qualifies the investor to purchase such
Retail A Shares without payment of a front-end sales charge, a contingent
deferred sales charge of 1% may be imposed if such Retail A Shares are redeemed
within one year of purchase.
Retail A Shares of the Equity Funds shall further be subject to a fee
payable pursuant to the Shareholder Services Plan adopted for that class of up
to .25% (on an annualized basis) of the average daily net asset value of Retail
A Shares beneficially owned by Customers of Institutions. Services provided by
Institutions for such fee may include: (a) aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with the
distributor; (b) processing dividend payments from an Equity Fund; (c) providing
sub-accounting with respect to Retail A Shares or the information necessary for
sub-accounting; and (d) providing periodic mailings to Customers.
Retail A Shares of the Equity Funds shall further be subject to a
separate fee payable pursuant to the same Shareholder Services Plan adopted for
that class of up to .25% (on an annualized basis) of the average daily net asset
value of Retail A Shares beneficially owned by Customers of Institutions.
Services provided by Institutions for such separate fee may include: (a)
providing Customers with information as to their positions in Retail A Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in Retail A Shares.
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Galaxy shall initially limit the total fees payable by Retail A Shares
of the Equity Funds pursuant to the Shareholder Services Plan adopted for that
class to an amount which shall not initially exceed .30% (on an annualized
basis) of the average daily net asset value of Retail A Shares beneficially
owned by Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Equity Funds shall be offered to Direct
Investors and to Institutions who purchase the shares on behalf of Customers who
are the beneficial owners of the shares.
Retail B Shares of the Equity Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Retail B Shares of the Equity Funds shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .65% (on an
annualized basis) of the average daily net asset value of the Equity Funds'
respective outstanding Retail B Shares, (b) for shareholder liaison services,
which shall not initially exceed .25% (on an annualized basis) of the average
daily net assets attributable to Retail B Shares of the respective Equity Funds
that are owned of record or beneficially by customers of securities dealers,
brokers, financial institutions or other industry professionals ("Service
Organizations") that provide shareholder liaison services with respect to such
customers' Retail B Shares, and (c) for administrative support services, which
shall not initially exceed .25% (on an annualized basis) of the average daily
net assets attributable to Retail B Shares of the respective Equity Funds that
are owned of record or beneficially by customers of Service Organizations that
provide administrative support services with respect to such customers' Retail B
Shares.
Galaxy shall initially limit the total fees payable by Retail B Shares
of the Equity Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .30% (on an annualized basis) of the average daily
net asset value of Retail B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and
Services Plan means "personal service and/or the maintenance of shareholder
accounts" within the meaning of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD"), such as responding to customer
inquiries and providing information on their investments.
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) transfer agent and
subtransfer agent services for beneficial owners of Retail B Shares; (b)
aggregating and processing purchase and
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redemption orders; (c) providing beneficial owners with statements
showing their positions in Retail B Shares; (d) processing dividend payments;
(e) providing sub-accounting services for Retail B Shares held beneficially; (f)
forwarding shareholder communications, such as proxies, shareholder reports,
dividend and tax notices, and updating prospectuses to beneficial owners; and
(g) reviewing, tabulating and transmitting proxies executed by beneficial
owners.
PRIME A SHARES
Prime A Shares of the Equity Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime A Shares of the Equity Funds shall be subject to a front-end
sales charge which shall not initially exceed 5.50% of the offering price of
Prime A Shares of those Funds (subject to the reductions and exemptions
described in the prospectus and SAI for such Shares). When the aggregate
offering price of Prime A Shares of the Equity and Bond Funds purchased by an
investor qualifies the investor to purchase such Prime A Shares without payment
of a front-end sales charge, a contingent deferred sales charge of 1% may be
imposed if such Prime A Shares are redeemed within one year of purchase.
Prime A Shares of the Equity Funds shall further be subject to a fee
payable pursuant to the Distribution Plan adopted for that class for
distribution expenses, which shall not initially exceed .30% (on an annualized
basis) of the average daily net asset value of the Equity Funds' respective
outstanding Prime A Shares.
PRIME B SHARES
Prime B Shares of the Equity Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime B Shares of the Equity Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Prime B Shares of the Equity Funds shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .75% (on an
annualized basis) of the average daily net asset value of the Equity Funds'
respective outstanding Prime B Shares, (b) for shareholder liaison services,
which shall not initially exceed .25% (on an annualized basis) of the average
daily net assets attributable to Prime B Shares of the respective Equity Funds
that are owned of record or beneficially by customers of securities dealers,
brokers, financial institutions or other industry professionals ("Service
Organizations") that provide shareholder liaison services with respect to such
customers' Prime B Shares, and (c) for administrative support services, which
shall not initially exceed .25% (on an annualized basis) of the average daily
net assets attributable to Prime B Shares of the respective Equity Funds that
are owned of record or
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beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Prime B Shares.
Galaxy shall initially limit the total fees payable by Prime B Shares
of the Equity Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .25% (on an annualized basis) of the average daily
net asset value of Prime B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and
Services Plan means "personal service and/or the maintenance of shareholder
accounts" within the meaning of the Rules of Fair Practice of the NASD, such as
responding to customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) transfer agent and
subtransfer agent services for beneficial owners of Prime B Shares; (b)
aggregating and processing purchase and redemption orders; (c) providing
beneficial owners with statements showing their positions in Prime B Shares; (d)
processing dividend payments; (e) providing subaccounting services for Prime B
Shares held beneficially; (f) forwarding shareholder communications, such as
proxies, shareholder reports, dividend and tax notices, and updating
prospectuses to beneficial owners; and (g) reviewing, tabulating and
transmitting proxies executed by beneficial owners.
BKB SHARES
BKB Shares of the Equity Funds shall be issued to retail shareholders
of corresponding portfolios of the Boston 1784 Funds (the "1784 Funds") in
connection with the reorganization of the 1784 Funds into Galaxy (the
"Galaxy/1784 Reorganization"). Following the Galaxy/1784 Reorganization, BKB
Shares of the Equity Funds shall be available for purchase only by those
shareholders who received BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Equity Funds shall not be subject to a sales charge.
BKB Shares of the Equity Funds shall be subject to a fee payable
pursuant to the Shareholder Services Plan adopted for that class for shareholder
liaison services, which shall not initially exceed .25% (on an annualized basis)
of the average daily net asset value of BKB Shares beneficially owned by
Customers of Institutions. Services provided by Institutions for such fee may
include: (a) providing Customers with information as to their positions in BKB
Shares; (b) responding to Customer inquiries; and (c) providing a service to
invest the assets of Customers in BKB Shares.
BKB Shares of the Equity Funds shall be subject to a separate fee
payable pursuant to the same Shareholder Services Plan adopted for that class
for administrative support for services, which shall not initially exceed .25%
(on an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions. Services provided by
Institutions for such separate fee may include: (a) aggregating and processing
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purchase and redemption requests and placing net purchase and redemption orders
with the distributor; (b) processing dividend payments from an Equity Fund; (c)
providing sub-accounting with respect to BKB Shares or the information necessary
for sub-accounting; and (d) providing periodic mailings to Customers.
Galaxy shall initially limit the total fees payable by BKB Shares of
the Equity Funds pursuant to the Shareholder Services Plan adopted for that
class to an amount which shall not initially exceed .30% (on an annualized
basis) of the average daily net asset value of BKB Shares beneficially owned by
Customers of Institutions.
TRUST SHARES
Trust Shares of the Equity Funds shall be offered to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of FleetBoston Financial Corporation and to participants in
employer-sponsored defined contribution plans. Trust Shares of the International
Equity Fund also shall be offered to clients, members and employees of Oechsle
International Advisors, LLC, the sub-adviser to that Fund.
Trust Shares of the Equity Funds shall not be subject to a sales charge
and shall not initially be subject to the shareholder servicing fee payable
pursuant to the Shareholder Services Plan adopted but not yet implemented with
respect to that class.
2. BOND FUNDS
RETAIL A SHARES
Retail A Shares of the Bond Funds shall be offered to Direct Investors
and shall be offered to Institutions who purchase shares on behalf of Customers.
As of the date of filing of this Plan with the Commission, Retail A Shares of
the Corporate Bond Fund shall not initially be offered to investors.
Retail A Shares of the Bond Funds shall be subject to a front-end sales
charge which shall not initially exceed 3.75% of the offering price of Retail A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares). When the aggregate offering price of Retail
A Shares of the Equity and Bond Funds purchased by an investor qualifies the
investor to purchase such Retail A Shares without payment of a front-end sales
charge, a contingent deferred sales charge of 1% may be imposed if such Retail A
Shares are redeemed within one year of purchase.
Retail A Shares of the Bond Funds shall further be subject to a fee
payable pursuant to the Shareholder Services Plan adopted for that class of up
to .15% (on an annualized basis) of the average daily net asset value of Retail
A Shares beneficially owned by Customers of Institutions. Services provided by
Institutions for such fee may include: (a) aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with the
distributor; (b) processing dividend payments from a Bond Fund; (c) providing
sub-
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accounting with respect to Retail A Shares or the information necessary for
sub-accounting; and (d) providing periodic mailings to Customers.
Retail A Shares of the Bond Funds shall further be subject to a
separate fee payable pursuant to the same Shareholder Services Plan adopted for
that class of up to .15% (on an annualized basis) of the average daily net asset
value of Retail A Shares beneficially owned by Customers of Institutions.
Services provided by Institutions for such separate fee may include: (a)
providing Customers with information as to their positions in Retail A Shares;
(b) responding to Customer inquiries; and (c) providing a service to invest the
assets of Customers in Retail A Shares.
Galaxy shall initially limit the total fees payable by Retail A Shares
of the Bond Funds pursuant to the Shareholder Services Plan adopted for that
class to an amount which shall not initially exceed .15% (on an annualized
basis) of the average daily net asset value of Retail A Shares beneficially
owned by Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Bond Funds shall be offered to Direct Investors
and to Institutions who purchase the shares on behalf of Customers who are the
beneficial owners of the shares.
Retail B Shares of the Bond Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Retail B Shares of the Bond Funds shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .65% (on an
annualized basis) of the average daily net asset value of the Bond Funds'
respective outstanding Retail B Shares, (b) for shareholder liaison services,
which shall not initially exceed .25% (on an annualized basis) of the average
daily net assets attributable to Retail B Shares of the respective Bond Funds
that are owned of record or beneficially by customers of securities dealers,
brokers, financial institutions or other industry professionals ("Service
Organizations") that provide shareholder liaison services with respect to such
customers' Retail B Shares, and (c) for administrative support services, which
shall not initially exceed .25% (on an annualized basis) of the average daily
net assets attributable to Retail B Shares of the respective Bond Funds that are
owned of record or beneficially by customers of Service Organizations that
provide administrative support services with respect to such customers' Retail B
Shares.
Galaxy shall initially limit the total fees payable by Retail B Shares
of the Bond Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .15% (on an annualized basis) of the average daily
net asset value of Retail B Shares owned of record or beneficially by customers
of Service Organizations.
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<PAGE>
Shareholder liaison services provided under the Distribution and
Services Plan means "personal service and/or the maintenance of shareholder
accounts" within the meaning of the Rules of Fair Practice of the NASD, such as
responding to customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) transfer agent and
subtransfer agent services for beneficial owners of Retail B Shares; (b)
aggregating and processing purchase and redemption orders; (c) providing
beneficial owners with statements showing their positions in Retail B Shares;
(d) processing dividend payments; (e) providing subaccounting services for
Retail B Shares held beneficially; (f) forwarding shareholder communications,
such as proxies, shareholder reports, dividend and tax notices, and updating
prospectuses to beneficial owners; and (g) reviewing, tabulating and
transmitting proxies executed by beneficial owners.
PRIME A SHARES
Prime A Shares of the Bond Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime A Shares of the Bond Funds shall be subject to a front-end sales
charge which shall not initially exceed 4.75% of the offering price of Prime A
Shares of those Funds (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares). When the aggregate offering price of Prime
A Shares of the Equity and Bond Funds purchased by an investor qualifies the
investor to purchase such Prime A Shares without payment of a front-end sales
charge, a contingent deferred sales charge of 1% may be imposed if such Prime A
Shares are redeemed within one year of purchase.
Prime A Shares of the Bond Funds shall further be subject to a fee
payable pursuant to the Distribution Plan adopted for that class for
distribution expenses, which shall not initially exceed .30% (on an annualized
basis) of the average daily net asset value of the Bond Funds' respective
outstanding Prime A Shares.
PRIME B SHARES
Prime B Shares of the Bond Funds shall be offered through selected
broker-dealers to individual or institutional customers.
Prime B Shares of the Bond Funds, if redeemed within six years of
purchase, shall be subject to a contingent deferred sales charge which shall not
initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Prime B Shares of the Bond Funds shall be further subject to a fee
payable pursuant to the Distribution and Services Plan adopted for that class
(a) for distribution expenses, which shall not initially exceed .75% (on an
annualized basis) of the average daily net asset value
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of the Bond Funds' respective outstanding Prime B Shares, (b) for
shareholder liaison services, which shall not initially exceed .25% (on an
annualized basis) of the average daily net assets attributable to Prime B Shares
of the respective Bond Funds that are owned of record or beneficially by
customers of securities dealers, brokers, financial institutions or other
industry professionals ("Service Organizations") that provide shareholder
liaison services with respect to such customers' Prime B Shares, and (c) for
administrative support services, which shall not initially exceed .25% (on an
annualized basis) of the average daily net assets attributable to Prime B Shares
of the respective Bond Funds that are owned of record or beneficially by
customers of Service Organizations that provide administrative support services
with respect to such customers' Prime B Shares.
Galaxy shall initially limit the total fees payable by Prime B Shares
of the Bond Funds for shareholder liaison services and administrative support
services pursuant to the Distribution and Services Plan adopted for that class
to an amount not to exceed .25% (on an annualized basis) of the average daily
net asset value of Prime B Shares owned of record or beneficially by customers
of Service Organizations.
Shareholder liaison services provided under the Distribution and
Services Plan means "personal service and/or the maintenance of shareholder
accounts" within the meaning of the Rules of Fair Practice of the NASD, such as
responding to customer inquiries and providing information on their investments.
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) transfer agent and
subtransfer agent services for beneficial owners of Prime B Shares; (b)
aggregating and processing purchase and redemption orders; (c) providing
beneficial owners with statements showing their positions in Prime B Shares; (d)
processing dividend payments; (e) providing subaccounting services for Prime B
Shares held beneficially; (f) forwarding shareholder communications, such as
proxies, shareholder reports, dividend and tax notices, and updating
prospectuses to beneficial owners; and (g) reviewing, tabulating and
transmitting proxies executed by beneficial owners.
BKB SHARES
BKB Shares of the Bond Funds shall be issued to retail shareholders of
corresponding portfolios of the 1784 Funds in connection with the Galaxy/1784
Reorganization. Following the Galaxy/1784 Reorganization, BKB Shares of the Bond
Funds shall be available for purchase only by those shareholders who received
BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Bond Funds shall not be subject to a sales charge.
BKB Shares of the Bond Funds shall be subject to a fee payable pursuant
to the Shareholder Services Plan adopted for that class for shareholder liaison
services, which shall not initially exceed .15% (on an annualized basis) of the
average daily net asset value of BKB Shares beneficially owned by Customers of
Institutions. Services provided by Institutions
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<PAGE>
for such fee may include: (a) providing Customers with information as
to their positions in BKB Shares; (b) responding to Customer inquiries; and (c)
providing a service to invest the assets of Customers in BKB Shares.
BKB Shares of the Bond Funds shall further be subject to a separate fee
payable pursuant to the same Shareholder Services Plan adopted for that class
for administrative support services, which shall not initially exceed .15% (on
an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions. Services provided by
Institutions for such separate fee may include: (a) aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with the distributor; (b) processing dividend payments from a Bond Fund; (c)
providing sub-accounting with respect to BKB Shares or the information necessary
for sub-accounting; and (d) providing periodic mailings to Customers.
Galaxy shall initially limit the total fees payable by BKB Shares of
the Bond Funds pursuant to the Shareholder Services Plan adopted for that class
to an amount which shall not initially exceed .15% (on an annualized basis) of
the average daily net asset value of BKB Shares beneficially owned by Customers
of Institutions.
TRUST SHARES
Trust Shares of the Bond Funds shall be offered to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of FleetBoston Corporation and, with respect to each Bond Fund
other than the tax-exempt Bond Funds, to participants in employer-sponsored
defined contribution plans. Trust Shares of the Corporate Bond Fund shall also
be offered to Direct Investors and to Institutions who purchase shares on behalf
of Customers. As of the date of filing of this Plan with the Commission, Trust
Shares of the Rhode Island Municipal Bond Fund shall not initially be offered to
investors.
Trust Shares of the Bond Funds shall not be subject to a sales charge
and shall not initially be subject to the shareholder servicing fee payable
pursuant to the Shareholder Services Plan adopted but not yet implemented with
respect to that class.
3. MONEY MARKET FUNDS
RETAIL A SHARES
Retail A Shares of the Money Market Funds shall be offered to Direct
Investors and shall be offered to Institutions who purchase shares on behalf of
Customers.
Retail A Shares of the Money Market Funds shall not be subject to a
sales charge.
Retail A Shares of the Money Market Funds shall be subject to a
shareholder servicing fee payable pursuant to the Shareholder Services Plan
adopted for that
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<PAGE>
class of up to .25% (on an annualized basis) of the average daily net asset
value of the Retail A Shares beneficially owned by Customers of Institutions.
Services provided by Institutions for such fee may include: (a)
aggregating and processing purchase and redemption requests and placing net
purchase and redemption orders with Galaxy's distributor; (b) processing
dividend payments from a Money Market Fund; (c) providing Customers with
information as to their position in BKB Shares; (d) providing sub-accounting
with respect to Retail A Shares or the information necessary for sub-accounting;
and (e) providing periodic mailings to Customers.
Galaxy shall initially limit the shareholder servicing fee payable by
Retail A Shares of the Money Market Funds pursuant to the Shareholder Services
Plan adopted for that class to an amount which shall not initially exceed .10%
(on an annualized basis) of the average daily net asset value of Retail A Shares
beneficially owned by Customers of Institutions.
RETAIL B SHARES
Retail B Shares of the Money Market Fund shall be offered to Direct
Investors and to Institutions who purchase the shares on behalf of Customers who
are the beneficial owners of the shares.
Retail B Shares of the Money Market Fund, if redeemed within six years
of purchase, shall be subject to a contingent deferred sales charge which shall
not initially exceed 5.0% of the original purchase price or redemption proceeds,
whichever is lower (subject to the reductions and exemptions described in the
prospectus and SAI for such Shares).
Retail B Shares of the Money Market Fund shall be further subject to a
fee payable pursuant to the Distribution and Services Plan adopted for that
class (a) for distribution expenses, which shall not initially exceed .65% (on
an annualized basis) of the average daily net asset value of the Money Market
Fund's outstanding Retail B Shares, (b) for shareholder liaison services, which
shall not initially exceed .05% (on an annualized basis) of the average daily
net assets attributable to Retail B Shares of the Money Market Fund that are
owned of record or beneficially by customers of securities dealers, brokers,
financial institutions or other industry professionals ("Service Organizations")
that provide shareholder liaison services with respect to such customers' Retail
B Shares, and (c) for administrative support services, which shall not initially
exceed .05% (on an annualized basis) of the average daily net assets
attributable to Retail B Shares of the Money Market Fund that are owned of
record or beneficially by customers of Service Organizations that provide
administrative support services with respect to such customers' Retail B Shares.
Shareholder liaison services provided under the Distribution and
Services Plan means "personal service and/or the maintenance of shareholder
accounts" within the meaning of the Rules of Fair Practice of the NASD, such as
responding to customer inquiries and providing information on their investments.
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<PAGE>
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) transfer agent and
subtransfer agent services for beneficial owners of Retail B Shares; (b)
aggregating and processing purchase and redemption orders; (c) providing
beneficial owners with statements showing their positions in Retail B Shares;
(d) processing dividend payments; (e) providing sub-accounting services for
Retail B Shares held beneficially; (f) forwarding shareholder communications,
such as proxies, shareholder reports, dividend and tax notices, and updating
prospectuses to beneficial owners; and (g) reviewing, tabulating and
transmitting proxies executed by beneficial owners.
PRIME SHARES
Prime Shares of the Money Market Funds shall be offered through
selected broker-dealers to individual or institutional customers.
Prime Shares of the Money Market Funds shall not be subject to a sales
charge.
Prime Shares of the Money Market Funds will be subject to a fee payable
pursuant to the Distribution and Services Plan adopted for that class (a) for
distribution expenses, which shall not initially exceed .75% (on an annualized
basis) of the average daily net asset value of the Money Market Funds'
respective outstanding Prime Shares, and (b) for administrative support
services, which shall not initially exceed .25% (on an annualized basis) of the
average daily net assets attributable to Prime Shares of the respective Money
Market Funds that are owned of record or beneficially by customers of Service
Organizations that provide administrative support services with respect to such
customers' Prime Shares.
Administrative support services provided under the Distribution and
Services Plan may include, but are not limited to, (a) processing dividend and
distribution payments; (b) providing beneficial owners with statements showing
their positions in Prime Shares; (c) arranging for bank wires; (d) responding to
routine inquiries from beneficial owners concerning their investments in Prime
Shares; (e) providing subaccounting services for Prime Shares; (f) forwarding
shareholder communications, such as proxies, shareholder reports, dividends and
tax notices, and updating prospectuses to beneficial owners; and (g) aggregating
and processing purchase and redemption orders and placing net purchase and
redemption orders for beneficial owners.
BKB SHARES
BKB Shares of the Money Market Funds shall be issued to retail
shareholders of corresponding portfolios of the 1784 Funds in connection with
the Galaxy/1784 Reorganization. Following the Galaxy/1784 Reorganization, BKB
Shares of the Money Market Funds shall be available for purchase only by those
shareholders who received BKB Shares in the Galaxy/1784 Reorganization.
BKB Shares of the Money Market Funds shall not be subject to a sales
charge.
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<PAGE>
BKB Shares of the Money Market Funds shall be subject to a fee payable
pursuant to the Shareholder Services Plan adopted for that class for shareholder
liaison and/or administrative support services, which shall not initially exceed
.25% (on an annualized basis) of the average daily net asset value of BKB Shares
beneficially owned by Customers of Institutions.
Services provided by Institutions for such fee may include: (a)
aggregating and processing purchase and redemption requests and placing net
purchase and redemption orders with the distributor; (b) processing dividend
payments from a Money Market Fund; (c) providing Customers with information as
to their position in BKB Shares; (d) providing sub-accounting with respect to
BKB Shares or the information necessary for sub-accounting; and (e) providing
periodic mailings to Customers.
Galaxy shall initially limit the fees payable by BKB Shares of the
Money Market Funds pursuant to the Shareholder Services Plan adopted for that
class to an amount which shall not initially exceed .10% (on an annualized
basis) of the average daily net asset value of BKB Shares beneficially owned by
Customers of Institutions.
TRUST SHARES
Trust Shares of the Money Market Funds shall be offered to investors
maintaining qualified accounts at bank and trust institutions, including
subsidiaries of FleetBoston Corporation, and with respect to each Money Market
Fund other than the Tax-Exempt Fund, to participants in employer-sponsored
defined contribution plans.
Trust Shares of the Money Market Funds shall not be subject to a sales
charge and shall not initially be subject to the shareholder servicing fee
payable pursuant to the Shareholder Services Plan adopted but not yet
implemented with respect to that class.
C. EXCHANGE PRIVILEGES
RETAIL A SHARES
Holders of Retail A Shares generally shall be permitted to exchange
their Retail A Shares in a Fund for Retail A Shares of other Funds of Galaxy or
shares of other funds advised by Fleet Investment Advisors Inc. or its
affiliates in which the shareholders maintain an existing account. No additional
sales charge will be incurred when exchanging Retail A Shares of a Fund for
Retail A Shares of another Fund that imposes a sales charge. Galaxy shall not
initially charge any exchange fee.
RETAIL B SHARES
Holders of Retail B Shares generally shall be permitted to exchange
their Retail B Shares in a Fund for Retail B Shares of other Funds of Galaxy
without paying any exchange fee or contingent deferred sales charge at the time
the exchange is made.
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<PAGE>
PRIME A SHARES
Holders of Prime A Shares generally shall be permitted to exchange
their Prime A Shares in a Fund for Prime A Shares of other Funds of Galaxy. No
additional sales charge will be incurred when exchanging Prime A Shares of a
Fund for Prime A Shares of another Fund. Galaxy shall not initially charge any
exchange fee.
PRIME B SHARES
Holders of Prime B Shares generally shall be permitted to exchange
their Prime B Shares in a Fund for Prime B Shares of other Funds of Galaxy
without paying any exchange fee or contingent deferred sales charge at the time
the exchange is made.
BKB SHARES
Holders of BKB Shares generally shall be permitted to exchange their
BKB Shares in a Fund for BKB Shares of other Funds of Galaxy. Galaxy shall not
initially charge any exchange fee.
PRIME SHARES
Galaxy shall not initially offer an exchange privilege to holders of
Prime Shares.
TRUST SHARES
Galaxy shall not initially offer an exchange privilege to holders of
Trust Shares.
D. CONVERSION FEATURES
RETAIL A SHARES
Galaxy shall not initially offer a conversion feature to holders of
Retail A Shares.
RETAIL B SHARES
Retail B Shares acquired by purchase generally shall convert
automatically to Retail A Shares, based on relative net asset value, six years
after the beginning of the calendar month in which the Shares were purchased.
Retail B Shares acquired through a reinvestment of dividends or
distributions generally shall convert automatically to Retail A Shares, based on
relative net asset value, at the earlier of (a) six years after the beginning of
the calendar month in which the reinvestment occurred or (b) the date of the
most recently purchased Retail B Shares that were not acquired through
reinvestment of dividends or distributions.
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<PAGE>
PRIME A SHARES
Galaxy shall not initially offer a conversion feature to holders of
Prime A Shares.
PRIME B SHARES
Prime B Shares acquired by purchase generally shall convert
automatically to Prime A Shares, based on relative net asset value, eight years
after the beginning of the calendar month in which the Shares were purchased.
Prime B Shares acquired through a reinvestment of dividends or
distributions generally shall convert automatically to Prime A Shares, based on
relative net asset value, at the earlier of (a) eight years after the beginning
of the calendar month in which the reinvestment occurred or (b) the date of the
most recently purchased Prime B Shares that were not acquired through
reinvestment of dividends or distributions.
BKB SHARES
BKB Shares generally shall convert to Retail A Shares, based on
relative net asset value, one year after the date of the Galaxy/1784
Reorganization, provided that Galaxy's Board of Trustees has determined that
such conversion is in the best interest of the holders of BKB Shares.
PRIME SHARES
Galaxy shall not initially offer a conversion feature to holders of
Prime Shares.
TRUST SHARES
Galaxy shall not initially offer a conversion feature to holders of
Trust Shares.
E. SHAREHOLDER SERVICES
1. RETIREMENT PLANS
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Galaxy shall initially make Retail A Shares, Retail B Shares and BKB
Shares of the Funds (other than the tax-exempt Funds) available for purchase in
connection with the following tax-deferred prototype retirement plans:
individual retirement accounts, simplified employee pension plans,
multi-employee retirement plans and Keogh plans.
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<PAGE>
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially make Prime A Shares, Prime B Shares, Prime
Shares or Trust Shares of the Funds available for purchase in connection with
any retirement plans.
2. CHECKWRITING PRIVILEGE
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES - MONEY MARKET FUNDS
Galaxy shall initially offer a checkwriting privilege to holders of
Retail A Shares, Retail B Shares and/or BKB Shares of the Money Market Funds. A
charge for use of the checkwriting privilege may be imposed by Galaxy.
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES - EQUITY FUNDS AND BOND
FUNDS
Galaxy shall not initially offer a checkwriting privilege to holders of
Retail A Shares, Retail B Shares or BKB Shares of the Equity or Bond Funds.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a checkwriting privilege to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
3. AUTOMATIC INVESTMENT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares)
and all investors (with respect to BKB Shares) shall initially be offered an
automatic investment program whereby a Direct Investor (with respect to Retail A
Shares and Retail B Shares) or an investor (with respect to BKB Shares)
generally may purchase Retail A Shares, Retail B Shares and/or BKB Shares, as
the case may be, of a Fund on a monthly or quarterly basis by having a specific
amount of money debited from his/her account at a financial institution.
Galaxy shall not initially offer an automatic investment program to
Customers of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer an automatic investment program to
holders of Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
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<PAGE>
4. SYSTEMATIC WITHDRAWAL PLAN
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares)
and all investors (with respect to BKB Shares) shall initially be offered a
systematic withdrawal plan which, in general, shall permit a Direct Investor
(with respect to Retail A Shares and Retail B Shares) or an investor (with
respect to BKB Shares) to automatically redeem Retail A Shares, Retail B Shares
and/or BKB Shares, as the case may be, on a monthly, quarterly, semi-annual or
annual basis.
Galaxy shall not initially offer a systematic withdrawal plan to
Customers of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a systematic withdrawal plan to
holders of Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
5. COLLEGE INVESTMENT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares)
and all investors (with respect to BKB Shares) shall initially be offered a
college investment program whereby a Direct Investor (with respect to Retail A
Shares and Retail B Shares) or an investor (with respect to BKB Shares) may
purchase Retail A Shares, Retail B Shares and/or BKB Shares of a Fund as a means
to finance a college savings plan.
Galaxy shall not initially offer a college investment program to
Customers of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a college investment program to
holders of Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
6. DIRECT DEPOSIT PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares)
and all investors (with respect to BKB Shares) receiving social security
benefits shall initially be eligible for a direct deposit program whereby a
Direct Investor (with respect to Retail A Shares and Retail B Shares) or an
investor (with respect to BKB Shares) generally may purchase Retail
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<PAGE>
A Shares, Retail B Shares and/or BKB Shares of a Fund by having social
security payments automatically deposited into his or her Fund account.
Galaxy shall not initially offer a direct deposit program to Customers
of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a direct deposit program to holders of
Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
7. INFORMATION SERVICES
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Holders of Retail A Shares, Retail B Shares and BKB Shares shall
initially be able to obtain Fund performance and investment information 24 hours
a day, 7 days a week by telephoning the Galaxy Information Center - 24 Hour
Information Service.
Galaxy shall initially offer Direct Investors (with respect to Retail A
Shares and Retail B Shares) and all investors (with respect to BKB Shares) a
Voice Response System which, in general, will provide a Direct Investor (with
respect to Retail A Shares and Retail B Shares) or an investor (with respect to
BKB Shares) with automated telephone access to Fund and account information and
the ability to make telephone exchanges and redemptions. Galaxy shall not
initially offer Customers of Institutions a voice response system.
Galaxy shall initially offer Direct Investors (with respect to Retail A
Shares and Retail B Shares) and all investors (with respect to BKB Shares) a
Galaxy Shareholder Services telephone number which, in general, will provide a
Direct Investor (with respect to Retail A Shares and Retail B Shares) or an
investor (with respect to BKB Shares) with account information and recent
exchange transaction information. Galaxy shall not initially offer Customers of
Institutions a shareholder services telephone number.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall initially offer holders of Prime A Shares, Prime B Shares,
Prime Shares and Trust Shares a telephone number to call for applications and
information concerning initial purchases and current performance and a telephone
number to call for additional purchases, redemptions, exchanges and other
shareholder services.
Galaxy shall initially offer holders of Trust Shares in the Corporate
Bond Fund the information services described for Retail Shares.
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8. PAYROLL DEDUCTION PROGRAM
RETAIL A SHARES, RETAIL B SHARES AND BKB SHARES
Direct Investors (with respect to Retail A Shares and Retail B Shares)
and all investors (with respect to BKB Shares) shall initially be offered a
payroll deduction program whereby a Direct Investor (with respect to Retail A
Shares and Retail B Shares) or an investor (with respect to BKB Shares) may
purchase Retail A Shares, Retail B Shares and/or BKB Shares of a Fund each pay
period by having a specific amount of money debited from his/her paycheck.
Galaxy shall not initially offer a payroll deduction program to
Customers of Institutions.
PRIME A SHARES, PRIME B SHARES, PRIME SHARES AND TRUST SHARES
Galaxy shall not initially offer a payroll deduction program to holders
of Prime A Shares, Prime B Shares, Prime Shares or Trust Shares.
F. METHODOLOGY FOR ALLOCATING EXPENSES AMONG CLASSES
Class-specific expenses of a Fund shall be allocated to the specific
class of shares of that Fund. Non-class-specific expenses of a Fund shall be
allocated in accordance with Rule 18f-3(c) under the 1940 Act.
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