<PAGE>
[Front cover page]
Galaxy Equity Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Asset Allocation Fund
Galaxy Equity Income Fund
Galaxy Growth and Income Fund
Galaxy Strategic Equity Fund
Galaxy Equity Value Fund
Galaxy Equity Growth Fund
Galaxy International Equity Fund
Galaxy Small Cap Value Fund
Galaxy Small Company Equity Fund
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
1 Risk/Return Summary
1 Introduction
3 Galaxy Asset Allocation Fund
8 Galaxy Equity Income Fund
12 Galaxy Growth and Income Fund
16 Galaxy Strategic Equity Fund
20 Galaxy Equity Value Fund
25 Galaxy Equity Growth Fund
30 Galaxy International Equity Fund
35 Galaxy Small Cap Value Fund
40 Galaxy Small Company Equity Fund
44 Additional information about risk
45 Investor guidelines
46 Fund management
48 How to invest in the Funds
48 How sales charges work
51 Buying, selling and exchanging shares
52 How to buy shares
54 How to sell shares
55 How to exchange shares
56 Other transaction policies
58 Dividends, distributions and taxes
60 Galaxy investor programs
60 Retirement plans
60 Other programs
62 How to reach Galaxy
63 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Equity Funds. Each Fund invests primarily
or to a significant degree in equity securities, such as common stock, preferred
stock and securities that are convertible into common stock.
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 Fund's past performance 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.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance for
risk will determine which fund is right for you.
Equity funds are generally best suited to investors seeking growth of their
investment over time and who are prepared to accept the risks associated with
equity securities. Equity funds have the potential for higher returns than other
funds, such as bond funds or money market funds, but also carry more risk.
Different equity funds have different levels of risk. They have varying
objectives and investment styles, and some are considered more aggressive than
others. Generally, a fund's objective and the types of investments it makes can
help you gauge its level of risk. On page 47, you'll find a table that gives a
general overview of the risk spectrum of the Galaxy Equity Funds.
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 Financial 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 $68 billion in assets.
-1-
<PAGE>
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUNDS.
-2-
<PAGE>
Galaxy Asset Allocation Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high total return by providing both a current level of income
that is greater than that provided by the popular stock market averages, as well
as long-term growth in the value of the Fund's assets.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund aims to provide income that is higher than the average income
provided by stocks included in the popular stock market averages. The Adviser
interprets this to mean the Dow Jones Industrial Average of 30 major
companies and the Standard & Poor's 500 Composite Stock Price Index (commonly
referred to as the S&P 500). Due to the Fund's expenses, however, net income
paid to you may be less than that. The Fund also seeks long-term growth in
the value of its assets. The Adviser attempts to achieve these goals and
reduce risk by allocating the Fund's assets among short-term debt securities,
common stocks, preferred stocks and bonds.
The Fund seeks a mix of stocks and bonds that will produce both income and
long-term capital growth. This mix will change from time to time as a result of
economic and market conditions. However, the Fund keeps at least 25% of its
total assets in fixed income investments, including debt securities and
preferred stocks, at all times.
Debt securities purchased by the Fund will be of investment grade quality,
which means that they will 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 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.
In selecting portfolio securities for the Fund, the Adviser's investment
policy committee develops an economic outlook and sets guidelines for the
industries and sectors in which the Fund should invest. In selecting equity
securities, the Adviser favors stocks with long-term growth potential that
are expected to outperform their peers over time. The Adviser also forecasts
the direction and degree of change in long-term interest rates to help in the
selection of fixed income securities.
-3-
<PAGE>
The Fund will sell a security when, as a result of changes in the economy, the
Adviser determines it appropriate to revise the allocation of the Fund's assets
between stocks and bonds. A security may also be sold as a result of a
deterioration in the performance of the security or in the financial condition
of the issuer of the security.
The Fund may trade its investments frequently in trying to achieve its
investment goal.
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 carries the following main risks:
- - INTEREST RATE RISK - The value of fixed income investments such as bonds
are affected by movements in interest rates. Bond prices tend to fall when
interest rates rise and to rise when interest rates fall.
- - CREDIT RISK - The value of fixed income investments also depends on the
ability of an issuer 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 securities will decline. 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 the issuers of these securities to make payments of principal
and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
fixed income investments 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.
- - PORTFOLIO COMPOSITION - The level of risk could increase if a larger
percentage of the Fund is invested in one particular asset class, such as
stocks or bonds. However, asset allocation funds are generally less
volatile than portfolios that contain only stocks.
- - 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.
-4-
<PAGE>
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be
lower.
[Sidenote:]
Best quarter: 11.74% for the quarter ending December 31, 1998
Worst quarter: -3.80% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
6.58% 8.08% -2.47% 30.29% 15.11% 19.76% 17.73% 7.24%
---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to broad-based market indices. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 3.22% 16.89% 11.86% (12/30/91)
- -------------------------------------------------------------------------------------------------------------
-5-
<PAGE>
Retail B Shares 1.47% __ 13.48% (3/4/96)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 19.69% (since 12/31/91)
26.22% (since 2/29/96)
- -------------------------------------------------------------------------------------------------------------
DJIA 27.29% 27.10% 20.26% (since 12/31/91)
23.52% (since 2/29/96)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
[Sidenote:]
The Dow Jones Industrial Average (DJIA) is an unmanaged price-weighted average
based on the "price only" performance of 30 blue chip stocks.
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 SALES CHARGE MAXIMUM DEFERRED SALES CHARGE
(LOAD) ON PURCHASES SHOWN (LOAD) SHOWN AS A % OF THE
AS A % OF THE OFFERING OFFERING PRICE OR SALE PRICE,
PRICE WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.55% 1.30%
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95% 0.29% 1.99%
- ------------------------------------------------------------------------------------------
</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) 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."
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 $502 $772 $1,061 $1,884
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $702 $924 $1,273 $1,976
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $202 $624 $1,073 $1,976
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Donald Jones, a Vice President of the Adviser
since 1991, and David Lindsay, CFA, a Senior Vice President of the Adviser since
1992. They are primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Jones has managed the equity portion of the Fund's
portfolio, including determining the allocation of the Fund's assets between
equities and fixed income investments, since May of 1995. He has been with the
Adviser and its predecessors since 1977. Mr. Lindsay has managed the fixed
income portion of the Fund since January of 1997. He has been with the Adviser
and its predecessors since 1986.
-7-
<PAGE>
Galaxy Equity Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income and capital appreciation.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a diversified
portfolio of income-producing (dividend-paying) equity securities, primarily
common stocks. The Adviser looks for investments that offer dividends,
prospects for dividend growth and capital appreciation. However, the Fund's
portfolio may include securities that offer only growth potential or only
income potential.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
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 carries the following main risk:
- - 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.
-8-
<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.
Retail A Shares of the Fund were first issued during the fiscal year ending
October 31, 1992. The returns for Retail A Shares of the Fund for prior
periods represent the returns for Trust Shares of the Fund which are offered
in a separate prospectus. Prior to November 1, 1993, Retail A Shares and
Trust Shares of the Fund had the same returns because each class of shares
had the same expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be
lower.
[Sidenote:]
Best quarter: 13.31% for the quarter ending June 30, 1997
Worst quarter: -8.41% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.37% 7.43% 8.05% 0.75% 32.96% 16.53% 25.51% 15.63% 4.36%
---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been
-9-
<PAGE>
restated to include the effect of the maximum 3.75% front-end sales charge which
went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 0.45% 17.71% 13.84% (12/14/90)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares -0.68% ___ 5.96% (11/1/98)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.00%(since 11/30/90)
29.86%(since 10/31/98)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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 %
ON PURCHASES SHOWN AS A % OF OF THE OFFERING PRICE OR
OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.58% 1.33%
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95% 0.36% 2.06%
- ------------------------------------------------------------------------------------------
</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."
-10-
<PAGE>
(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."
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 $505 $781 $1,076 $1,916
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $709 $946 $1,308 $2,031
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $209 $646 $1,108 $2,031
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is J. Edward Klisiewicz, a Senior Vice President of
the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Klisiewicz has been the Fund's portfolio
manager since it began operations in 1990. He has been with the Adviser and its
predecessors since 1970.
-11-
<PAGE>
Galaxy Growth and Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide a relatively high total return through long-term
capital appreciation and current income.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the common
stocks of U.S. companies with large market capitalizations (generally over $2
billion) that the Adviser believes offer above-average growth and dividends.
The Adviser focuses on stocks which are believed to be attractively priced
relative to expectations for the future performance of the issuing company.
The Adviser also seeks a current yield greater than that of the S&P 500,
although not all Fund investments will pay dividends.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
-12-
<PAGE>
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 carries the following main risk:
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be lower.
The Fund began operations on December 14, 1992 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold two classes of shares, Investment Shares
(which were first offered on February 12, 1993) and Trust Shares (which were
first offered on December 14, 1992), that were similar to the Fund's Retail A
Shares and Trust Shares. In connection with the reorganization, shareholders of
the Predecessor Fund exchanged their Investment Shares and Trust Shares for
Retail A Shares and Trust Shares of the Fund. The returns for periods prior to
December 4, 1995 are for Investment Shares of the Predecessor Fund.
[Sidenote:]
Best quarter: 20.66% for the quarter ending December 31, 1998
Worst quarter -13.50% for the quarter ending September 30, 1998
-13-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4.83% 29.34% 19.85% 29.19% 15.71% 6.86%
- -------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 2.83% 18.98% 15.90% (2/12/93)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares 1.02% __ 15.76% (3/4/96)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.65% (since 1/31/93)
26.22% (since 2/29/96)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
FEES AND EXPENSES OF THE FUND
The following tables 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 SALES CHARGE MAXIMUM DEFERRED SALES
(LOAD) ON PURCHASES SHOWN CHARGE (LOAD) SHOWN AS A %
AS A % OF THE OF THE OFFERING PRICE OR
OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.64%(4) 1.39%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95% 0.36% 2.06%
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) Affiliates of the Adviser are waiving a portion of the shareholder
servicing fees (that are included in Other expenses) for Retail A Shares so
that Other expenses for Retail A Shares are expected to be 0.53%. Total
Fund operating expenses for Retail A Shares after these fee waivers are
expected to be 1.28%. These fee waivers 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
- - 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 $511 $799 $1,107 $1,981
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $709 $946 $1,308 $2,061
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $209 $646 $1,108 $2,061
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Gregory M. Miller, a Vice President of the
Adviser since 1996. He's been primarily responsible for the day-to-day
management of the Fund's investment portfolio since July 1998. Before that, Mr.
Miller assisted his predecessor in managing the Fund for seven years. He joined
the Adviser in 1985.
-16-
<PAGE>
Galaxy Strategic Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests at least 65% of its total assets in U.S. equity securities,
primarily common stock and securities that can be converted into common
stock. The Fund's "Value Driven Growth" investment process emphasizes
securities believed to have the potential for the best one- to two-year
returns. These securities are generally selected from a universe of large and
medium size companies representative of the S&P 500, although the universe of
stocks monitored by the Adviser is not limited to stocks of companies
included in the S&P 500. The Fund may invest up to 20% of its total assets in
foreign equity securities.
In selecting individual stocks, the Adviser looks at the current price,
projected earnings growth, and historical valuations to derive an estimate of
return potential. The Fund may give emphasis to growth stocks, value stocks
or particular industries, depending upon the Adviser's assessment of a
stock's return potential relative to its price in the broader market.
The Fund will sell a portfolio security when, as a result of a decline in the
security's return potential relative to that of other securities, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[Sidenote:]
VALUE STOCKS AND GROWTH STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios. Growth stocks offer strong revenue and earnings potential, and
accompanying capital growth, with generally less dividend income than value
stocks.
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.
-17-
<PAGE>
In addition, the Fund carries the following main risks:
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of Retail A Shares during the last
calendar year. The return for Retail B Shares was different than the figure
shown because each class of shares has different expenses. The figure doesn't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the return would be lower.
[Sidenote:]
Best quarter: 11.49% for the quarter ending June 30, 1999
Worst quarter: -13.65% for the quarter ending September 30, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
1999
- -----------------
<S><C>
0.05%
- -----------------
</TABLE>
-18-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index.
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares -3.72% -0.65% (3/4/98)
- ----------------------------------------------------------------------------------------
Retail B Shares -5.03% -1.64% (3/4/98)
- ----------------------------------------------------------------------------------------
S&P 500 21.03% 21.73% (since 2/28/98)
- ----------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(4) None 0.82%(4) 1.57%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75%(4) 0.95%(4) 0.63% 2.33%(4)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
-19-
<PAGE>
(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."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Affiliates of the Adviser are waiving a
portion of the shareholder servicing fees (that are included in Other
expenses) for Retail A Shares so that Other expenses for Retail A Shares
are expected to be 0.65%. Affiliates of the Adviser are also waiving a
portion of the Distribution and service (12b-1) fees for Retail B
Shares so that such fees are expected to be 0.82%, respectively. Total
Fund operating expenses after these waivers are expected to be 1.20% for
Retail A Shares and 2.00% for Retail B Shares. These fee waivers 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
- - 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 $529 $852 $1,198 $2,172
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $736 $1,027 $1,445 $2,302
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $236 $727 $1,245 $2,302
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter B. Hathaway, CFA, a Senior Vice President
of the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Hathaway has been the Fund's portfolio manager
since it began operations in March 1998. He has been in the investment
management business with the Adviser and its predecessors since 1964 and has
been responsible for the Adviser's "Value Driven Growth" investment process
since 1991.
-20-
<PAGE>
Galaxy Equity Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Income is secondary to the
objective of capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in equity securities,
mainly common stocks, that the Adviser believes are undervalued. The Fund
invests most of its assets in companies that have a market capitalization of
more than $1.5 billion.
The Adviser uses proprietary computer models to compare share price and company
value, both compared to the market and over time. This helps the Adviser to
identify out-of-favor, undervalued securities (often called value stocks) which
may subsequently increase in value. These models focus on fundamental aspects
such as earnings and dividend growth, reinvestment of returns and the ability of
companies to finance their own growth. The models also take into account factors
such as how easily the stocks may be traded. The Adviser then reviews the
results and looks for risks that may account for a stock's low price. It
evaluates factors the computer models can't measure, such as the quality of a
company's management and the impact of technological change. Stocks which pass
all tests are eligible to be included in the Fund's portfolio. Fund holdings are
frequently reviewed and are sold automatically when the computer models show
they are overvalued.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios.
-21-
<PAGE>
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 carries the following main risks:
- - 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.
Retail A Shares of the Fund were first issued during the fiscal year ended
October 31, 1991. The returns for Retail A Shares of the Fund for prior
periods represent the returns for Trust Shares of the Fund which are offered
in a separate prospectus. Prior to November 1, 1993, Retail A Shares and
Trust Shares of the Fund had the same returns because each class of shares
had the same expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be lower.
-22-
<PAGE>
[Sidenote:]
Best quarter: 27.15% for the quarter ending December 31, 1998
Worst quarter: -15.28% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-3.20% 23.36% 8.21% 14.75% 3.51% 27.78% 21.09% 27.66% 23.75% 6.67%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to broad-based market indices. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 2.67% 20.21% 14.43% 14.61% (9/1/88)
- -----------------------------------------------------------------------------------------------------------------
Retail B Shares 1.31% __ __ 17.45% (3/4/96)
- -----------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 18.19% 19.50% (since 9/1/88)
26.22% (since 2/29/96)
- -----------------------------------------------------------------------------------------------------------------
Lipper Multi-Cap Value 6.61% 18.08% 12.88% 13.87% (since 8/31/88)
Funds Average 14.33% (since 2/29/96)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
[Sidenote:]
The Lipper Multi-Cap Value Funds Average is an unmanaged index that measures
the performance of a select group of mutual funds with investment objectives
similar to that of the Fund.
-23-
<PAGE>
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
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.61% 1.36%
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95%(4) 0.41% 2.11%(4)
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) Affiliates of the Adviser are waiving a portion of the Distribution and
service (12b-1) fees for Retail B Shares so that such fees are expected
to be 0.93%. Total Fund operating expenses for Retail B Shares after
these fee waivers are expected to be 2.09%. These fee waivers 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
- - 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:
-24-
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares $508 $790 $1,092 $1,949
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $714 $961 $1,334 $2,075
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $214 $661 $1,134 $2,075
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is G. Jay Evans, CFA, a Senior Vice President of
the Adviser since 1991. He's primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Evans has been the Fund's portfolio
manager since 1993. He has been with the Adviser and its predecessors since
1978.
-25-
<PAGE>
Galaxy Equity Growth Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a broadly
diversified portfolio of equity securities, primarily common stocks and
securities that can be converted into common stocks. The Fund invests mainly in
the securities of U.S. issuers, but may invest up to 20% of its total assets in
foreign securities.
The Fund invests mainly in companies which the Adviser believes will have faster
earnings growth than the economy in general. The Adviser looks for
large-capitalization companies (generally over $2 billion) in growing
industries, focusing on technological advances, good product development, strong
management and other factors which support future growth. The Adviser seeks out
companies that have a history of strong earnings growth and are projected to
continue a similar pattern of growth over the next three to five years.
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.
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.
-26-
<PAGE>
In addition, the Fund carries the following main risks:
- - 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.
- - 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.
Retail A Shares of the Fund were first issued during the fiscal year ended
October 31, 1991. The returns for Retail A Shares of the Fund for prior
periods represent the returns for Trust Shares of the Fund which are offered
in a separate prospectus. Prior to November 1, 1993, Retail A Shares and
Trust Shares of the Fund had the same returns because each class of shares
had the same expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be lower.
-27-
<PAGE>
[Sidenote:]
Best quarter: 24.04% for the quarter ending December 31, 1998
Worst quarter: -11.70% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30.40% 6.11% 5.37% 0.60% 33.66% 20.46% 30.43% 25.66% 26.03%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 21.29% 26.20% 18.67% (12/14/90)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares 20.11% __ 23.81% (3/4/96)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.00% (since 11/30/90)
26.22% since (2/29/96)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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.
-28-
<PAGE>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
MAXIMUM DEFERRED SALES
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.57% 1.32%
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95%(4) 0.39% 2.09%(4)
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) Affiliates of the Adviser are waiving a portion of the Distribution and
service (12b-1) fees for Retail B Shares so that such fees are expected
to be 0.93%. Total Fund Operating expenses for Retail B Shares after
these fee waivers are expected to be 2.07%. These fee waivers may be
revised or discontinued at anytime.
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 $504 $778 $1,071 $1,906
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $712 $955 $1,324 $2,043
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $212 $655 $1,124 $2,043
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Robert G. Armknecht, CFA, an Executive Vice
President of the Adviser since 1988. He's primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Armknecht has been
with the Adviser and its predecessors since 1988 and has been the Fund's
portfolio manager since it began operations in 1990.
-30-
<PAGE>
Galaxy International Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in the equity
securities of foreign issuers. At all times, the Fund's assets will be invested
in companies located in at least three different foreign countries. Normally, no
more than 20% of the Fund's total assets will be invested in companies located
in countries with emerging economies or emerging securities markets. The Fund
emphasizes larger established companies, although it may invest in companies of
any size. The Fund may engage in transactions for the purpose of hedging its
portfolio, such as options, futures and foreign currencies.
The Sub-Adviser's investment process begins with a fundamental analysis of
companies, including both bottom-up and top-down factors. Bottom-up analysis
includes a thorough understanding of a company's prospects as reflected in
its operating cash flow, including industry cycle, capital requirements,
growth opportunities and financial structure. Discussions with company
management are an important element of this analysis and give the Sub-Adviser
an opportunity to test its assumptions against management's near-term and
long-term term objectives. Top-down factors are incorporated into the
Sub-Adviser's analysis of a company. For example, the Sub-Adviser considers
how interest rates and currency may impact prospective cash flow and
earnings. Country and market risks, both of which are critically important,
are embodied in interest rates, which are the basis for risk-adjusting the
Sub-Adviser's return expectations for individual companies. In this way, the
Sub-Adviser arrives at a risk-adjusted return potential for each company
analyzed, which then gives the Sub-Adviser the basis for comparing investment
opportunities across developed and emerging markets.
The Fund will sell a security if it has achieved its performance objective,
if fundamentals change performance expectations, or if alternative
investments provide potentially more attractive returns.
[Sidenote:]
SUB-ADVISER
The Adviser has appointed Oechsle International Advisors, LLC as Sub-Adviser to
assist it in the day-to-day management of the Fund's investment portfolio.
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. U.S. and foreign stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
-31-
<PAGE>
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 carries the following main risks:
- - 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.
- - COUNTRY RISK - The Fund may invest 25% or more of its assets in the
securities of companies located in one country. When the Fund invests a
high percentage of its assets in a particular country, the Fund will be
especially susceptible to factors affecting that country.
- - CURRENCY EXCHANGE - Although the Fund usually makes investments that are
sold in foreign currencies, it values its holdings in U.S. dollars. If the
U.S. dollar rises compared to a foreign currency, the Fund loses on the
currency exchange.
- - HEDGING - The Fund may invest in derivatives, such as options, futures and
foreign currencies, to hedge against market risk or 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 and Sub-Adviser evaluate 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.
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.
-32-
<PAGE>
YEAR-BY-YEAR TOTAL RETURNS-CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from year
to year, thereby giving some indication of the risk of investing in the Fund.
The returns for Retail B Shares were different than the figures shown because
each class of shares has different expenses. The figures don't include any
sales charges that investors pay when buying or selling Retail A Shares of
the Fund. If sales charges were included, the returns would be lower.
[Sidenote:]
Best quarter: 24.36% for the quarter ending December 31, 1999
Worst quarter: -14.61% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-2.29% 31.62% -2.54% 11.04% 10.03% 13.59% 21.24% 41.10%
- ---------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 35.80% 17.97% 14.06% (12/30/91)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares 35.21% __ 41.18% (11/1/98)
- -------------------------------------------------------------------------------------------------------------
MSCI EAFE Index 26.96% 12.83% 10.94% (since 12/31/91)
32.29% (since 10/31/98)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Morgan Stanley Capital International Europe, Australasia and Far East (MSCI
EAFE) Index is an unmanaged index which tracks the performance of selected
equity securities in Europe, Australia and the Far East.
-33-
<PAGE>
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
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.89%(4) None 0.75% 1.64%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.89%(4) 0.95%(4) 0.73% 2.57%(4)
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) The Adviser is waiving a portion of the Management fees so that such
fees are expected to be 0.64%. Affiliates of the Adviser are also
waiving a portion of the Distribution and service (12b-1) fees for
Retail B Shares so that such fees are expected to be 0.80%. Total Fund
operating expenses after these waivers are expected to be 1.39% for Retail
A Shares and 2.17% for Retail B Shares. These fee waivers may be revised
or discontinued at any time.
-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
- - 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 $536 $873 $1,233 $2,246
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $760 $1,099 $1,565 $2,469
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $260 $799 $1,365 $2,469
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Singleton Dewey Keesler, Jr. and Kathleen
Harris, CFA. They're primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Keesler is Chief Investment Officer and
portfolio manager/research analyst with the Sub-Adviser. He has been associated
with the Sub-Adviser and its predecessor since 1986. Ms. Harris has been a
portfolio manager at the Sub-Adviser and its predecessor since January of 1995.
She was previously portfolio manager and investment director for the State of
Wisconsin Investment Board. Mr. Keesler and Ms. Harris have co-managed the Fund
since August of 1996.
-35-
<PAGE>
Galaxy Small Cap Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests mainly in the common stocks of small companies that the Adviser
believes are undervalued. Under normal market conditions, the Fund invests at
least 65% of its total assets in the common stocks of companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. issuers, but may invest up to 20% of its total assets in
foreign equity securities.
In selecting portfolio securities for the Fund, the Adviser looks at the
underlying strength of companies, their products, their competitive positions
and the quality of their management. It also does research to attempt to
identify companies likely to benefit from emerging industry trends and potential
market recoveries.
A portfolio security may be sold if the Adviser determines that it is no longer
undervalued or if there has been a deterioration in the performance of the
security or in the financial condition of the company that issued the security.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios.
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.
-36-
<PAGE>
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 carries the following risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be lower.
The Fund began operations on December 14, 1992 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold two classes of shares, Investment Shares
(which were first offered on February 12, 1993) and Trust Shares (which were
first offered on December 14, 1992), that were similar to the Fund's Retail A
Shares and Trust Shares. In connection with the reorganization, shareholders of
the Predecessor Fund exchanged their Investment Shares and Trust Shares for
Retail A Shares and Trust Shares of the Fund. The returns for the periods prior
to December 4, 1995 are for Investment Shares of the Predecessor Fund.
-37-
<PAGE>
[Sidenote:]
Best quarter: 18.67% for the quarter ending September 30, 1997
Worst quarter: -15.93% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0.32% 31.49% 26.74% 31.23% -5.66% 10.45%
- --------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to broad-based market indices. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 6.33% 17.01% 13.98% (2/12/93)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares 4.67% __ 11.18% (11/1/98)
- -------------------------------------------------------------------------------------------------------------
Russell 2000 Index 21.26% 16.69% 13.78% (since 1/31/93)
29.65% since 10/31/98)
- -------------------------------------------------------------------------------------------------------------
S&P 600 12.41% 17.05% 13.62% (since 1/31/93)
22.10% (since 10/31/98)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of
the 2,000 smallest of the 3,000 largest U.S. companies, based on market
capitalization. Companies included in the Russell 2000 Index have market
capitalizations that range between $30 million and $1.4 billion.
[Sidenote:]
The Standard & Poor's SmallCap 600 Composite Index (S&P 600) is an unmanaged
index that tracks the performance of 600 domestic companies traded on the New
York Stock Exchange, the American Stock Exchange and NASDAQ. The S&P 600 is
heavily weighted with the stocks of small companies with market
capitalizations that currently range between $32.9 million and $2.9 billion.
-38-
<PAGE>
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
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.82%(4) 1.57%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95%(4) 0.72% 2.42%(4)
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) Affiliates of the Adviser are waiving a portion of the shareholder
servicing fees (that are included in Other expenses) for Retail A Shares
so that Other expenses for Retail A Shares are expected to be 0.75%.
Affiliates of the Adviser are also waiving a portion of the Distribution
and service (12b-1) fees for Retail B Shares so that such fees are
expected to be 0.80%. Total Fund operating expenses after these fee
waivers are expected to be 1.50% for Retail A Shares and 2.27% for
Retail B Shares. These fee waivers 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
- - your Retail B Shares convert to Retail A Shares after six years
-39-
<PAGE>
- - 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 $529 $852 $1,198 $2,172
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $745 $1,055 $1,491 $2,352
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $245 $755 $1,291 $ 2,352
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter Larson, a Senior Vice President of the
Adviser. He's primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Larson has been with the Adviser and its predecessors
since 1963 and has managed the Fund, including the Predecessor Fund, since it
began operations in 1992.
-40-
<PAGE>
Galaxy Small Company Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the equity
securities, primarily common stocks, of small companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. companies, but may invest up to 20% of its total assets in
foreign equity securities.
In selecting investments for the Fund, the Adviser looks for promising
industries. It then looks within those industries for what are judged to be
reasonably priced companies that have above-average growth potential. The
Adviser consults a wide range of sources, including management, competitors,
other industry sources and regional brokerage analysts.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
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.
-41-
<PAGE>
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 carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be
lower.
[Sidenote:]
Best quarter: 44.08% for the quarter ending December 31, 1999
Worst quarter: -24.02% for the quarter ending September 30, 1998
[bar chart goes here]
-42-
<PAGE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.20% 22.75% -0.06% 38.80% 20.84% 14.17% -10.94% 38.93%
- ---------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 33.74% 17.93% 13.89% (12/30/91)
- -------------------------------------------------------------------------------------------------------------
Retail B Shares 33.21% __ 12.96% (3/4/96)
- -------------------------------------------------------------------------------------------------------------
Russell 2000 Index 21.26% 16.69% 14.67% (since 12/31/91)
13.66% (since 2/29/96)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of
the 2,000 smallest of the 3,000 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.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
MAXIMUM DEFERRED SALES
MAXIMUM SALES CHARGE (LOAD) CHARGE (LOAD) SHOWN AS A %
ON PURCHASES SHOWN OF THE OFFERING PRICE OR
AS A % OF THE OFFERING PRICE SALE PRICE, WHICHEVER IS LESS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------
</TABLE>
-43-
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL FUND
MANAGEMENT AND SERVICE OTHER OPERATING
FEES (12b-1) FEES EXPENSES EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75% None 0.82%(4) 1.57%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75% 0.95% 0.61% 2.31%
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) Affiliates of the Adviser are waiving a portion of the shareholder
servicing fees (that are included in Other expenses) for Retail A Shares so
that Other expenses for Retail A Shares are expected to be 0.78%. Total
Fund operating expenses after these fee waivers are expected to be 1.53%
for Retail A Shares. These fee waivers 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
- - 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 $529 $852 $1,198 $2,172
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $734 $1,021 $1,435 $2,291
- -------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $234 $721 $1,235 $2,291
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Stephen D. Barbaro, CFA, a Senior Vice
President of the Adviser since 1996. He's primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Barbaro has
been the Fund's portfolio manager since it began operations in 1991. He has
been with the Adviser and its predecessors since 1976.
-45-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Equity 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), money market instruments, debt securities issued or
guaranteed by the U.S. Government or its agencies and, in the case of the
International Equity Fund, foreign money market instruments, debt securities of
foreign national governments and their agencies, and the securities of U.S.
issuers. This strategy 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.
-46-
<PAGE>
INVESTOR GUIDELINES
The following table gives you a general overview of the risk spectrum for the
Galaxy Equity Funds. This is a guide only. It shows the Adviser's current
assessment of the potential risk of the Funds relative to one another, but this
can change over time. It should not be used to compare the Funds with other
mutual funds or other types of investments. Consult your financial professional
to help you decide which Fund is right for you.
<TABLE>
<CAPTION>
RISK SPECTRUM FUND PRIMARY INVESTMENTS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Common stocks and fixed income
securities of domestic companies
----------------------------------------------------------------------------
Equity Income Common stocks of domestic companies
selected primarily for their income
Conservative potential
----------------------------------------------------------------------------
Growth and Income Common stocks of companies selected for
their growth and income potential
----------------------------------------------------------------------------
Strategic Equity Equity securities of large and medium
sized growth companies that exhibit above-
average return potential relative to their
market price
----------------------------------------------------------------------------
Equity Value Common stocks of large and medium sized
Moderate companies believed to be undervalued
----------------------------------------------------------------------------
Equity Growth Equity securities of growth-oriented
companies
----------------------------------------------------------------------------
International Equity Equity securities of foreign companies
----------------------------------------------------------------------------
Small Cap Value Common stocks of smaller companies
Aggressive believed to be undervalued
----------------------------------------------------------------------------
Small Company Equity Common stocks of smaller
growth-oriented companies
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-47-
<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.
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
MANAGEMENT FEE AS
FUND A % OF AVERAGE NET ASSETS
- ----------------------------------------------
<S> <C>
Asset Allocation 0.75%
- ----------------------------------------------
Equity Income 0.75%
- ----------------------------------------------
Growth and Income 0.75%
- ----------------------------------------------
Strategic Equity 0.55%
- ----------------------------------------------
Equity Value 0.75%
- ----------------------------------------------
Equity Growth 0.75%
- ----------------------------------------------
International Equity 0.64%
- ----------------------------------------------
Small Cap Value 0.75%
- ----------------------------------------------
Small Company Equity 0.75%
- ----------------------------------------------
</TABLE>
SUB-ADVISER
The Adviser has delegated some of its advisory responsibilities with respect to
the International Equity Fund to Oechsle International Advisors, LLC as
Sub-Adviser. The Sub-Adviser determines which securities will be purchased,
retained or sold for the Fund, places orders for the Fund and provides the
Adviser with information on international investment and economic developments.
The Adviser assists and consults with the Sub-Adviser as to the Fund's
investment program, approves the list of foreign countries recommended by the
Sub-Adviser for investment and manages the Fund's daily cash position. The
Sub-Adviser's fees are paid by the Adviser.
The Sub-Adviser has its main office at One International Place, Boston,
Massachusetts 02210. The Sub-Adviser is the successor to Oechsle International
Advisors, L.P., an international investment firm founded in 1986. At December
31, 1999, the Sub-Adviser had discretionary management authority over
approximately $19.1 billion in assets. The Adviser's parent company, FleetBoston
Financial Corporation, owns an interest in the Sub-Adviser.
-48-
<PAGE>
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser and Sub-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 Sub-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 and Sub-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.
-49-
<PAGE>
HOW TO INVEST IN THE FUNDS
HOW SALES CHARGES WORK
You will normally pay a sales charge to invest in the Funds. If you buy Retail A
Shares, 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, 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
----------------------------------------------
AS A % OF AS A % OF
AMOUNT OF THE OFFERING PRICE YOUR
YOUR INVESTMENT 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 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 can 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.
-50-
<PAGE>
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 buy shares for a 401(k) or SIMPLE IRA retirement account.
- - You buy shares for any retirement account provided that you held Retail A
Shares in a retirement account prior to January 1, 1999.
- - 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.
- - 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'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 Galaxy shareholder before December 1, 1995.
- - 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).
[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).
-51-
<PAGE>
RETAIL B SHARES
If you buy Retail B Shares of the Funds, 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.
Retail B Shares of the Funds can pay distribution and shareholder service
(12b-1) fees at an annual rate of up to 1.15% of each Fund's Retail B Share
assets. The Funds do 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 each Fund 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.
-52-
<PAGE>
CONVERTING RETAIL B SHARES TO RETAIL A SHARES
Six years after you buy Retail B Shares of a Fund, 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, 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 form as described below, less
any applicable CDSC. 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 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 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.
-53-
<PAGE>
[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, including Education IRA 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 other than retirement plan
accounts. 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
- - 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.
-54-
<PAGE>
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.
- - 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.
-55-
<PAGE>
- - 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).
Additional documents may be required for certain types of shareholders, such as
corporations, partnerships, executors, trustees, administrators or guardians.
-56-
<PAGE>
[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.
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.
-57-
<PAGE>
You may exchange Retail B Shares of a Fund 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.
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.
-58-
<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 requirement.
-59-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund, except the International Equity Fund, pays any dividends from net
investment income each quarter. The International Equity Fund pays any dividends
from net investment income annually. Each Fund pays any net capital gains at
least once a year. It's expected that the Funds' annual distributions will
normally -- but not always -- consist primarily of capital gains rather than
ordinary income. Dividends and distributions are paid in cash unless you
indicate in the account application or in a letter to Galaxy that you want to
have dividends and distributions reinvested in additional shares.
FEDERAL TAXES
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 federal income tax on these distributions regardless of
whether they are paid in cash or reinvested in additional shares. You will be
notified annually of the tax status of distributions to you.
You should note that if you purchase shares just before a 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.
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.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the Fund receives from U.S. corporations
may be eligible, in the hands of the corporate
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<PAGE>
shareholders, for the corporate dividends-received deduction, subject to certain
holding period requirements and debt financing limitations.
It is expected that the International Equity Fund will be subject to foreign
withholding taxes with respect to dividends or interest received from sources in
foreign countries. The Fund may make an election to treat a proportionate amount
of these taxes as constituting a distribution to each shareholder, which would
allow each shareholder either (1) to credit this proportionate amount of taxes
against U.S. federal income tax liability or (2) to take this amount as an
itemized deduction.
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 each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities or on securities of a particular state, its
agencies or municipalities.
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.
-61-
<PAGE>
GALAXY INVESTOR PROGRAMS
RETIREMENT PLANS
Retail A Shares and Retail B Shares of the Funds 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 a
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.
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
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<PAGE>
for initial and additional investments is $50. You can also save for college by
opening an Education IRA account. 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 is $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 Fund 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 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.
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<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 Web site 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
The financial highlights tables on the following pages will help you
understand the financial performance for the Funds' Retail A Shares and
Retail B Shares for the past five years (or the period since a particular
Fund began operations or a particular class of shares was first offered).
Certain information reflects the financial performance of a single Retail A
Share or Retail B Share. The total returns in the tables represent the rate
that an investor would have earned (or lost) on an investment in Retail A
Shares and Retail B Shares of each Fund, assuming all dividends and
distributions were reinvested. The information for the fiscal year ended
October 31, 1999 has been audited by Ernst & Young LLP, independent auditors,
whose report, along with the Funds' financial statements, are included in the
Funds' Annual Report and are incorporated by reference into the SAI. The
Annual Report and SAI are available free of charge upon request. The
information for the fiscal years ended October 31, 1998, 1997, 1996 and 1995
was audited by Galaxy's former auditors, PricewaterhouseCoopers LLP.
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<PAGE>
Galaxy Asset Allocation Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------
1999 1998
--------------------- ---------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C>
Net asset value,
beginning of period .......................... $ 16.95 $ 16.92 $ 16.46 $ 16.43
------- ------- ------- -------
Income from investment operations:
Net investment income(2) ..................... 0.37 0.25 0.38 0.29
Net realized and unrealized gain
(loss) on investments .................... 1.21 1.21 1.72 1.71
Total from investment operations .................. 1.58 1.46 2.10 2.00
Less dividends:
Dividends from net investment income ......... (0.36) (0.25) (0.40) (0.30)
Dividends from net realized capital gains ... (0.43) (0.43) (1.21) (1.21)
Total dividends ................................... (0.79) (0.68) (1.61) (1.51)
Net increase (decrease) in net asset value ........ 0.79 0.78 0.49 0.49
Net asset value, end of period .................... $ 17.74 $ 17.70 $ 16.95 $ 16.92
------- ------- ------- -------
Total return(5) ................................... 9.53% 8.76% 13.85% 13.14%
Ratios/supplemental data:
Net assets, end of period (000's) ............ $389,077 $91,199 $323,498 $57,876
Ratios to average net assets:
Net investment income including
reimbursement/waiver ..................... 2.11% 1.43% 2.43% 1.77%
Operating expenses including
reimbursement/waiver ..................... 1.32% 2.00% 1.33% 1.99%
Operating expenses excluding
reimbursement/waiver ..................... 1.32% 2.00% 1.33% 1.99%
Portfolio turnover rate ........................... 135% 135% 108% 108%
<CAPTION>
For the year ending October 31,
--------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- -------------
Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(1) A Shares
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .......................... $ 14.52 $ 14.51 $ 12.82 $ 13.59 $ 10.67
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(2) ..................... 0.40 0.29 0.30 0.13 0.30
Net realized and unrealized gain
(loss) on investments .................... 2.43 2.42 1.83 0.91 2.16
Total from investment operations .................. 2.83 2.71 2.13 1.04 2.46
Less dividends:
Dividends from net investment income ......... (0.38) (0.28) (0.30) (0.12) (0.31)
Dividends from net realized capital gains .... (0.51) (0.51) (0.13) -- --
Total dividends ................................... (0.89) (0.79) (0.43) (0.12) (0.31)
Net increase (decrease) in net asset value ........ 1.94 1.92 1.70 0.92 2.15
Net asset value, end of period .................... $ 16.46 $ 16.43 $ 14.52 $14.51 $ 12.82
------- ------- ------- ------- -------
Total return(5) ................................... 20.23% 19.34% 16.92% 7.71%(3) 23.42%
Ratios/supplemental data:
Net assets, end of period (000's) ............ $177,239 $30,688 $116,852 $3,557 $76,368
Ratios to average net assets:
Net investment income including
reimbursement/waiver ..................... 2.66% 1.95% 2.29% 1.73%(4) 2.52%
Operating expenses including
reimbursement/waiver ..................... 1.37% 2.10% 1.42% 1.95%(4) 1.48%
Operating expenses excluding
reimbursement/waiver ..................... 1.37% 2.19% 1.42% 2.15%(4) 1.50%
Portfolio turnover rate ........................... 58% 58% 48% 48% 41%
</TABLE>
- ------------------------------
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.37, $0.38, $0.40,
$0.30 and $0.30, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the years ended October 31, 1999, 1998 and 1997 and
for the period ended October 31, 1996 was $0.25, $0.29, $0.28 and $0.12,
respectively.
(3) Not Annualized.
(4) Annualized.
(5) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
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<PAGE>
Galaxy Equity Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------
1999 1999 1998
------ ------- ------
Retail Retail Retail
A Shares B Shares(1) A Shares
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 19.67 $ 19.48 $ 18.82
-------- -------- --------
Income from investment operations:
Net investment income(2)......................... 0.19 0.11 0.25
Net realized and unrealized gain
on investments............................... 1.69 1.62 2.43
Total from investment operations...................... 1.88 1.73 2.68
Less dividends:
Dividends from net investment income............. (0.20) (0.11) (0.25)
Dividends from net realized capital gains (1.85) (1.85) (1.58)
Total dividends....................................... (2.05) (1.96) (1.83)
Net increase (decrease) in net asset value............ (0.17) (0.23) 0.85
Net asset value, end of period........................ $ 19.50 $ 19.25 $ 19.67
-------- -------- --------
Total return(3)....................................... 10.14% 9.38% 15.23%
Ratios/supplemental data:
Net assets, end of period (000's)................ $213,041 $ 3,213 $207,850
Ratios to average net assets:
Net investment income including
reimbursement/waiver......................... 0.97% 0.33% 1.30%
Operating expenses including
reimbursement/waiver......................... 1.33% 1.97% 1.34%
Operating expenses excluding
reimbursement/waiver......................... 1.33% 2.23% 1.34%
Portfolio turnover rate............................... 38% 38% 46%
<CAPTION>
For the year ending October 31,
------------------------------------------------
1997 1996 1995
------ ------ ------
Retail Retail Retail
A Shares A Shares A Shares
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 16.91 $ 14.98 $ 12.74
-------- -------- --------
Income from investment operations:
Net investment income(2)......................... 0.30 0.30 0.28
Net realized and unrealized gain
on investments............................... 3.35 2.47 2.47
Total from investment operations...................... 3.65 2.77 2.75
Less dividends:
Dividends from net investment income............. (0.30) (0.30) (0.30)
Dividends from net realized capital gains (1.44) (0.54) (0.21)
Total dividends....................................... (1.74) (0.84) (0.51)
Net increase (decrease) in net asset value............ 1.91 1.93 2.24
Net asset value, end of period........................ $ 18.82 $ 16.91 $ 14.98
-------- -------- --------
Total return(3)....................................... 23.28% 19.01% 22.23%
Ratios/supplemental data:
Net assets, end of period (000's)................ $169,276 $126,952 $81,802
Ratios to average net assets:
Net investment income including
reimbursement/waiver......................... 1.70% 1.86% 2.08%
Operating expenses including
reimbursement/waiver......................... 1.39% 1.40% 1.49%
Operating expenses excluding
reimbursement/waiver......................... 1.41% 1.40% 1.51%
Portfolio turnover rate............................... 37% 45% 21%
</TABLE>
- -----------------------------
(1) The Fund began issuing Retail B Shares on November 1, 1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.19, $0.25, $0.30,
$0.30 and $0.28, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the year ended October 31, 1999 was $0.08.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
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<PAGE>
Galaxy Growth and Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
--------------------------------------------------
1999 1998
---------------------- ----------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C>
Net asset value,
beginning of period .................................... $14.87 $14.83 $16.24 $16.23
------- ------ ------ -------
Income from investment operations:
Net investment income(3) ............................... 0.08(8) (0.04)(8) 0.12 --(7)
Net realized gain on investments ....................... 2.02 2.02 1.32 1.31
Total from investment operations ............................ 2.10 1.98 1.44 1.31
Less dividends:
Dividends from net investment income ................... (0.08) -- (0.13) (0.03)
Dividends from net realized gains ...................... (0.91) (0.91) (2.68) (2.68)
Total dividends ............................................. (0.99) (0.91) (2.81) (2.71)
Net increase (decrease) in net asset value .................. 1.11 1.07 (1.37) (1.40)
Net asset value, end of period .............................. $15.98 $15.90 $14.87 $14.83
------- ------ ------ -------
Total return(4) ............................................. 14.56% 13.72% 9.93% 9.09%
Ratios/supplemental data:
Net assets, end of period (000's) ...................... $232,110 $62,366 $214,110 $53,216
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................... 0.53% (0.22)% 0.75% 0.01%
Operating expenses including
reimbursement/waiver ............................... 1.28% 2.03% 1.28% 2.02%
Operating expenses excluding
reimbursement/waiver ............................... 1.38% 2.04% 1.35% 2.02%
Portfolio turnover rate ..................................... 20% 20% 38% 38%
<CAPTION>
For the year ending October 31,
--------------------------------------------------
1997 1996(1)
---------------------- ----------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(2)
<S> <C> <C> <C> <C>
Net asset value,
beginning of period .................................... $13.78 $13.77 $12.35 $12.97
------ ------ ------ ------
Income from investment operations:
Net investment income(3) ............................... 0.18 0.10 0.21 0.07
Net realized gain on investments ....................... 3.67 3.65 2.16 0.81
Total from investment operations ............................ 3.85 3.75 2.37 0.88
Less dividends:
Dividends from net investment income ................... (0.20) (0.10) (0.21) (0.08)
Dividends from net realized gains ...................... (1.19) (0.19) (0.73) --
Total dividends ............................................. (1.39) (1.29) (0.94) (0.08)
Net increase (decrease) in net asset value .................. 2.46 2.46 1.43 0.80
Net asset value, end of period .............................. $16.24 $16.23 $13.78 $13.77
------ ------ ------ ------
Total return(4) ............................................. 30.10% 29.11% 20.25% 6.83%(5)
Ratios/supplemental data:
Net assets, end of period (000's) ...................... $141,884 $35,178 $77,776 $4,562
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................... 1.18% 0.31% 1.65% 0.79%(6)
Operating expenses including
reimbursement/waiver ............................... 1.27% 2.05% 1.34% 1.96%(6)
Operating expenses excluding
reimbursement/waiver ............................... 1.45% 2.28% 1.45% 2.11%(6)
Portfolio turnover rate ..................................... 93% 93% 59% 59%
<CAPTION>
For the year ending October 31,
--------------------------------------------------
1995
------------
Retail
A Shares
<S> <C>
Net asset value,
beginning of period .................................... $11.15
------
Income from investment operations:
Net investment income(3) ............................... 0.24
Net realized gain on investments ....................... 1.70
Total from investment operations ............................ 1.94
Less dividends:
Dividends from net investment income ................... (0.25)
Dividends from net realized gains ...................... (0.49)
Total dividends ............................................. (0.74)
Net increase (decrease) in net asset value .................. 1.20
Net asset value, end of period .............................. $12.35
------
Total return(4) ............................................. 18.52%
Ratios/supplemental data:
Net assets, end of period (000's) ...................... $51,078
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................... 2.10%
Operating expenses including
reimbursement/waiver ............................... 1.32%
Operating expenses excluding
reimbursement/waiver ............................... 1.77%
Portfolio turnover rate ..................................... 51%
</TABLE>
- ------------------------------
(1) The Fund commenced operations on December 14, 1992 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds. The Predecessor
Fund began offering Investment Shares on February 12, 1993. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold two
series of shares, Investment Shares and Trust Shares, that were similar to
the Fund's Retail A Shares and Trust Shares, respectively. In connection
with the reorganization, shareholders of the Predecessor Fund exchanged
Investment Shares and Trust Shares for Retail A Shares and Trust Shares,
respectively, in the Fund.
(2) The Fund began issuing Retail B Shares on March 4, 1996.
(3) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.07, $0.10, $0.18,
$0.19 and $0.22, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the years ended October 31, 1999, 1998 and 1997 and
for the period ended October 31, 1996 was $(0.04), $0.00, $0.08 and $0.05,
respectively.
(4) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(5) Not annualized.
(6) Annualized.
(7) Net investment income per share is less than $0.005.
(8) The selected per share data was calculated using the weighted average
shares outstanding method for the period.
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<PAGE>
Galaxy Strategic Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
------------------------------------------------
For the year For the period
ending October 31, ending October 31,
1999 1998(1)
---- ----
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 9.62 $ 9.61 $10.00 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income (loss)(2).................. 0.04(7) (0.02)(7) --(3) (0.02)
Net realized and unrealized (loss) on investments 0.27 0.26 (0.38) (0.37)
Total from investment operations...................... 0.31 0.24 (0.38) (0.39)
Less dividends:
Dividends from net investment income............. (0.03) -- -- --
Dividends from net realized capital gains........ (0.01) (0.01) -- --
Total dividends....................................... (0.04) (0.01) -- --
Net (decrease) in net asset value..................... 0.27 0.23 (0.38) (0.39)
Net asset value, end of period........................ $ 9.89 $ 9.84 $9.62 $9.61
------ ------ ------ ------
Total return(4)....................................... 3.25% 2.50% (3.75)%(5) 4.76%(5)
Ratios/supplemental data:
Net assets, end of period (000's)................ $8,229 $1,348 $4,051 $583
Ratios to average net assets:
Net investment income including
reimbursement/waiver............................. 0.41% (0.24)% 0.06%(6) (0.55)%(6)
Operating expenses including reimbursement/waiver 1.19% 1.84% 1.40%(6) 2.01%(6)
Operating expenses excluding reimbursement/waiver 1.63% 2.40% 2.41%(6) 3.05%(6)
Portfolio turnover rate............................... 79% 79% 30%(5) 30%(5)
</TABLE>
- ------------------------------
1 The Fund commenced operations on March 4, 1998.
2 Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
year ended October 31, 1999 and the period ended October 31, 1998 was
$0.00 and $0.00, respectively. Net investment income (loss) per share
before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the year ended October 31, 1999 and
the period ended October 31, 1998 was $(0.08) and $(0.06), respectively.
3 Net investment income per share is less than $0.00.
4 Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
5 Not annualized.
6 Annualized.
7 The selected per share data was calculated using the weighted average
shares outstanding method for the year.
-69-
<PAGE>
Galaxy Equity Value Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
--------------------------------------------------
1999 1998
----------------------- ------------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $ 16.50 $ 16.44 $ 18.21 $ 18.24
-------- -------- -------- --------
Income from investment operations:
Net investment income (loss)(2)...... (0.03) (0.15) 0.03 (0.08)
Net realized and unrealized gain
on investments................... 2.42 2.40 1.50 1.48
Total from investment operations.......... 2.39 2.25 1.53 1.40
Less dividends:
Dividends from net investment income. -- -- (0.04) --
Dividends from net realized capital gains (0.61) (0.61) (3.20) (3.20)
Total dividends........................... (0.61) (0.61) (3.24) (3.20)
Net increase (decrease) in net asset value 1.78 1.64 (1.71) (1.80)
Net asset value, end of period............ $ 18.28 $ 18.08 $ 16.50 $ 16.44
-------- -------- -------- --------
Total return(3)........................... 14.63% 13.81% 9.88% 9.07%
Ratios/supplemental data:
Net assets, end of period (000's).... $258,332 $ 30,988 $234,730 $23,103
Ratios to average net assets:
Net investment income including
reimbursement/waiver............. (0.16)% (0.87)% 0.15% (0.54)%
Operating expenses including
reimbursement/waiver............. 1.37% 2.08% 1.37% 2.06%
Operating expenses excluding
reimbursement/waiver............. 1.37% 2.08% 1.37% 2.06%
Portfolio turnover rate................ 75% 75% 82% 82%
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------
1997 1996 1995
-------------------- ---------------------- ----------
Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(1) A Shares
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $ 15.96 $ 15.99 $ 14.33 $ 14.74 $ 13.31
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)(2)...... 0.11 -- 0.14 0.04 0.22
Net realized and unrealized gain
on investments................... 4.16 4.17 2.74 1.25 2.24
Total from investment operations.......... 4.27 4.17 2.88 1.29 2.46
Less dividends:
Dividends from net investment income. (0.12) (0.02) (0.14) (0.04) (0.23)
Dividends from net realized capital gains (1.90) (1.90) (1.11) -- (1.21)
Total dividends........................... (2.02) (1.92) (1.25) (0.04) (1.44)
Net increase (decrease) in net asset value 2.25 2.25 1.63 1.25 1.02
Net asset value, end of period............ $ 18.21 $ 18.24 $ 15.96 $ 15.99 $ 14.33
-------- -------- -------- -------- --------
Total return(3)........................... 29.48% 28.60% 21.49% 8.80%(4) 20.81%
Ratios/supplemental data:
Net assets, end of period (000's).... $182,641 $14,958 $131,998 $ 1,916 $96,555
Ratios to average net assets:
Net investment income including
reimbursement/waiver............. 0.63% (0.13)% 1.00% 0.43%(5) 1.62%
Operating expenses including
reimbursement/waiver............. 1.38% 2.07% 1.45% 1.94%(5) 1.49%
Operating expenses excluding
reimbursement/waiver............. 1.38% 2.38% 1.45% 2.24%(5) 1.50%
Portfolio turnover rate................ 111% 111% 116% 116% 76%
</TABLE>
- ------------------------------
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.03), $0.03,
$0.11, $0.14 and $0.22 , respectively. Net investment income (loss) per
share before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the years ended October 31, 1999,
1998 and 1997 and for the period ended October 31, 1996 was $(0.15),
$(0.08), $(0.03) and $0.01, respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) Not annualized.
(5) Annualized.
-70-
<PAGE>
Galaxy Equity Growth Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
---------------------------------------------------------
1999 1998
----------------------- ------------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C>
Net asset value,
beginning of period ........................ $24.47 $24.07 $25.14 $24.91
------ ------ ------ ------
Income from investment operations:
Net investment income (loss)(2) ............ (0.06) (0.20) 0.01 (0.16)(2)
Net realized and unrealized gain
on investments ......................... 6.48 6.30 3.19 3.16
Total from investment operations ................ 6.42 6.10 3.20 3.00
Less dividends:
Dividends from net investment income ....... -- -- (0.03) --
Dividends in excess of net investment income -- -- --(5) --(5)
Dividends from net realized capital gains .. (1.90) (1.90) (3.84) (3.84)
Total dividends ................................. (1.90) (1.90) (3.87) (3.84)
Net increase (decrease) in net asset value ...... 4.52 4.20 (0.67) (0.84)
Net asset value, end of period .................. $28.99 $28.27 $24.47 $24.07
------ ------
Total return(3) ................................. 27.55% 26.63% 14.73% 13.98%
Ratios/supplemental data:
Net assets, end of period (000's) .......... $443,639 $71,525 $312,951 $34,693
Ratios to average net assets:
Net investment income including
reimbursement/waiver ................... (0.25)% (0.96)% 0.02% (0.68)%
Operating expenses including
reimbursement/waiver ................... 1.34% 2.05% 1.34% 2.04%
Operating expenses excluding
reimbursement/waiver ................... 1.34% 2.08% 1.34% 2.04%
Portfolio turnover rate ......................... 53% 53% 60% 60%
<CAPTION>
For the year ending October 31,
--------------------------------------------------------------
1997 1996 1995
-------------------- ---------------------- ----------
Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(1) A Shares
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........................ $20.37 $20.26 $17.29 $18.77 $14.18
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss)(2) ............ 0.07 (0.09)(4) 0.10 (0.01) 0.14
Net realized and unrealized gain
on investments ......................... 6.05 6.02 3.39 1.50 3.28
Total from investment operations ................ 6.12 5.93 3.49 1.49 3.42
Less dividends:
Dividends from net investment income ....... (0.07) -- (0.11) -- (0.14)
Dividends in excess of net investment income -- -- -- -- --
Dividends from net realized capital gains .. (1.28) (1.28) (0.30) -- (0.17)
Total dividends ................................. (1.35) (1.28) (0.41) -- (0.31)
Net increase (decrease) in net asset value ...... 4.77 4.65 3.08 1.49 3.11
Net asset value, end of period .................. $25.14 $24.91 $20.37 $20.26 $17.29
------ ------ ------ ------ ------
Total return(3) ................................. 31.61% 30.78% 20.51% 7.95%(6) 24.54%
Ratios/supplemental data:
Net assets, end of period (000's) .......... $226,330 $20,363 $160,800 $3,995 $98,911
Ratios to average net assets:
Net investment income including
reimbursement/waiver ................... 0.30% (0.40)% 0.50% (0.16)%(7) 0.85%
Operating expenses including
reimbursement/waiver ................... 1.37% 2.07% 1.40% 1.92%(7) 1.45%
Operating expenses excluding
reimbursement/waiver ................... 1.37% 2.30% 1.40% 2.29%(7) 1.47%
Portfolio turnover rate ......................... 66% 66% 36% 36% 14%
</TABLE>
- ------------------------------------
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.06), $0.01,
$0.07, $0.10 and $0.13 , respectively. Net investment income (loss) per
share before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the years ended October 31, 1999,
1998 and 1997 and for the period ended October 31, 1996 was $(0.21),
$(0.16)(4), $(0.14)(4) and $(0.03), respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) The selected per share data was calculated using the weighted average
shares outstanding method for the year.
(5) Dividends in excess of net investment income per share were less than
$0.005.
(6) Not annualized.
(7) Annualized.
-71-
<PAGE>
Galaxy International Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
--------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
--------- ---------- ----------- ----------- ------------ ----------
Retail Retail Retail Retail Retail Retail
A Shares B Shares(1) A Shares A Shares A Shares A Shares
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 16.75 $ 16.85 $ 15.18 $ 13.94 $ 12.92 $ 13.20
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(3)..................... 0.01(2) (0.09)(2) 0.07 0.01 0.11 0.11
Net realized and unrealized gain (loss)
on investments........................... 4.72 4.74 1.93 2.09 1.27 (0.21)
Total from investment operations................ 4.73 4.65 2.00 2.10 1.38 (0.10)
Less dividends:
Dividends from net investment income......... (0.05) (0.13) (0.07) (0.18) (0.12) (0.02)
Dividends from net realized capital gains.... (0.57) (0.57) (0.36) (0.68) (0.24) (0.16)
Total dividends................................. (0.62) (0.70) (0.43) (0.86) (0.36) (0.18)
Net increase (decrease) in net asset value...... 4.11 3.95 1.57 1.24 1.02 (0.28)
Net asset value, end of period.................. $ 20.86 $ 20.80 $ 16.75 $ 15.18 $ 13.94 $ 12.92
-------- -------- -------- -------- -------- --------
Total return(4)................................. 29.04% 28.41% 13.64% 15.88% 10.86% (0.64)%
Ratios/supplemental data:
Net assets, end of period (000's)............ $ 89,327 $ 2,189 $ 66,541 $ 56,592 $ 35,144 $ 30,104
Ratios to average net assets:
Net investment income including
reimbursement/waiver..................... 0.03% (0.45)% 0.39% 0.03% 0.78% 0.84%
Operating expenses including
reimbursement/waiver..................... 1.48% 1.96% 1.48% 1.60% 1.70% 1.76%
Operating expenses excluding
reimbursement/waiver..................... 1.73% 2.70% 1.73% 1.85% 1.98% 2.03%
Portfolio turnover rate......................... 45% 45% 49% 45% 146% 48%
</TABLE>
- -----------------------------
(1) The Fund began issuing Retail B Shares on November 1, 1998.
(2) The selected per share data was calculated using the weighted average
shares outstanding method for the year.
(3) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.04),
$0.03, $(0.01), $0.07 and $0.08, respectively. Net investment (loss) per
share before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the year ended October 31, 1999 was
$(0.25).
(4) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
-72-
<PAGE>
Galaxy Small Cap Value Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------------------------------
1999 1999 1998 1997 1996(1) 1995
--------- ---------- ----------- ----------- ------------ ----------
Retail Retail Retail Retail Retail Retail
A Shares B Shares(2) A Shares A Shares A Shares A Shares
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 13.53 $ 13.59 $ 18.29 $ 14.75 $ 12.68 $ 11.06
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)(3)............. 0.02 (0.04) 0.08 (0.04)(5) 0.01 (0.02)
Net realized gain (loss) on investments..... 0.73 0.68 (2.08) 5.72 2.95 2.21
Total from investment operations............... 0.75 0.64 (2.00) 5.68 2.96 2.19
Less dividends:
Dividends from net investment income........ (0.03) -- (0.08) -- (0.02) --
Dividends in excess of net investment
income.................................. -- -- -- -- -- --
Dividends from net realized gains........... (1.27) (1.27) (2.68) (2.14) (0.87) (0.57)
Total dividends................................ (1.30) (1.27) (2.76) (2.14) (0.89) (0.57)
Net increase (decrease) in net asset value..... (0.55) (0.63) (4.76) 3.54 2.07 1.62
Net asset value, end of period................. $ 12.98 $ 12.96 $ 13.53 $ 18.29 $ 14.75 $ 12.68
-------- -------- -------- -------- -------- --------
Total return(4)................................ 5.68% 4.80% (12.52)% 43.58% 24.77% 21.27%
Ratios/supplemental data:
Net assets, end of period (000's)............ $ 80,870 $ 1,637 $ 87,781 $ 63,658 $ 34,402 $ 27,546
Ratios to average net assets:
Net investment income including
reimbursement/waiver..................... 0.13% (0.66)% 0.38% (0.25)% 0.08% (0.19)%
Operating expenses including
reimbursement/waiver..................... 1.31% 2.10% 1.31% 1.30% 1.40% 1.35%
Operating expenses excluding
reimbursement/waiver..................... 1.59% 2.88% 1.45% 1.52% 1.55% 1.85%
Portfolio turnover rate........................ 42% 42% 33% 52% 39% 32%
</TABLE>
- -----------------------------
(1) The Fund commenced operations on December 14, 1992 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds. The Predecessor
Fund began offering Investment Shares on February 12, 1993. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold two
series of shares, Investment Shares and Trust Shares, that were similar to
the Fund's Retail A and Trust Shares, respectively. In connection with the
reorganization, shareholders of the Predecessor Fund exchanged Investment
Shares and Trust Shares for Retail A Shares and Trust Shares, respectively,
in the Fund.
(2) The Fund began issuing Retail B Shares on November 1, 1998.
(3) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.02), $0.05,
$(0.02), $0.01 and $(0.08) respectively. Net investment income (loss) per
share before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the year ended October 31, 1999 was
$(0.09).
(4) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(5) The selected per share data was calculated using the weighted average
shares outstanding method for the year.
-73-
<PAGE>
Galaxy Small Company Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------
1999 1998 1997
--------------------- --------------------- --------------------
Retail Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares A Shares B Shares
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.............. $ 13.63 $ 13.39 $ 20.94 $ 20.73 $ 19.96 $ 19.91
------- ------- ------- ------- -------- --------
Income from investment operations:
Net investment income (loss)(2) (0.23) (0.34) (0.19) (0.30) (0.18) (0.21)
Net realized and unrealized gain
(loss) on investments........ 2.26 2.26 (4.86) (4.78) 3.54 3.41
Total from investment operations...... 2.03 1.92 (5.05) (5.08) 3.36 3.20
Less dividends:
Dividends from net investment income -- -- -- -- -- --
Dividends from net realized capital gains... -- -- (2.26) (2.26) (2.38) (2.38)
Total dividends..................... -- -- (2.26) (2.26) (2.38) (2.38)
Net increase (decrease) in net asset value.... 2.03 1.92 (7.31) (7.34) 0.98 0.82
Net asset value, end of period........ $ 15.66 $ 15.31 $ 13.63 $ 13.39 $ 20.94 $ 20.73
------- ------- ------- ------- -------- --------
Total return(4)...................... 14.89% 14.34% (26.26)% (26.72)% 19.08% 18.23%
Ratios/supplemental data:
Net assets, end of period (000's) $87,921 $12,212 $95,831 $12,565 $135,593 $14,731
Ratios to average net assets:
Net investment income including
reimbursement/waiver......... (1.41)% (2.04)% (1.13)% (1.78)% (1.02)% (1.76)%
Operating expenses including
reimbursement/waiver......... 1.53% 2.16% 1.46% 2.11% 1.46% 2.20%
Operating expenses excluding
reimbursement/waiver......... 1.54% 2.32% 1.47% 2.16% 1.48% 2.44%
Portfolio turnover rate............ 105% 105% 78% 78% 69% 69%
<CAPTION>
For the year ending October 31,
------------------------------------------
1996 1995
-------------------------- ----------
Retail Retail Retail
A Shares B Shares(1) A Shares
<S> <C> <C> <C>
Net asset value,
beginning of period.............. $ 16.28 $ 17.27 $ 12.35
-------- -------- --------
Income from investment operations:
Net investment income (loss)2 (0.14) (0.19)(3) (0.09)
Net realized and unrealized gain
(loss) on investments........ 3.99 2.83 4.21
Total from investment operations...... 3.85 2.64 4.12
Less dividends:
Dividends from net investment income -- -- --
Dividends from net realized capital gains... (0.17) -- (0.19)
Total dividends..................... (0.17) -- (0.19)
Net increase (decrease) in net asset value.... 3.68 2.64 3.93
Net asset value, end of period........ $ 19.96 $ 19.91 $ 16.28
-------- -------- --------
Total return(4)...................... 23.97% 15.34%(5) 34.01%
Ratios/supplemental data:
Net assets, end of period (000's) $111,101 $3,659 $ 45,668
Ratios to average net assets:
Net investment income including
reimbursement/waiver......... (1.03)% (1.50)%(6) (0.85)%
Operating expenses including
reimbursement/waiver......... 1.57% 2.04%(6) 1.60%
Operating expenses excluding
reimbursement/waiver......... 1.57% 2.44%(6) 1.64%
Portfolio turnover rate............ 82% 82% 54%
</TABLE>
- -----------------------------
(1) The Fund began issuing Retail B Shares on March 4, 1996.
(2) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 were $(0.23),
$(0.19), $(0.18), $(0.14) and $(0.09), respectively. Net investment income
(loss) per share before reimbursement/waiver of fees by the Adviser and/or
the Fund's administrator for Retail B Shares for the years ended
October 31, 1999, 1998 and 1997 and for the period ended October 31, 1996
were $(0.37), $(0.30), $ (0.24) and $(0.24), respectively.
(3) The selected per share data was calculated using the weighted average
shares outstanding method for the period.
(4) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(5) Not annualized.
(6) Annualized.
-74-
<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 Web site 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]
QRGALE 3/1/00
<PAGE>
[Front cover page]
Galaxy Equity Funds
The Galaxy Fund
Prospectus
February 29, 2000
- ----------------------
Galaxy Asset Allocation Fund
Galaxy Equity Income Fund
Galaxy Growth and Income Fund
Galaxy Strategic Equity Fund
Galaxy Equity Value Fund
Galaxy Equity Growth Fund
Galaxy International Equity Fund
Galaxy Small Cap Value Fund
Galaxy Small Company Equity Fund
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
3 Galaxy Asset Allocation Fund
8 Galaxy Equity Income Fund
11 Galaxy Growth and Income Fund
15 Galaxy Strategic Equity Fund
19 Galaxy Equity Value Fund
23 Galaxy Equity Growth Fund
27 Galaxy International Equity Fund
31 Galaxy Small Cap Value Fund
35 Galaxy Small Company Equity Fund
39 Additional information about risk
40 Investor guidelines
41 Fund management
43 How to invest in the Funds
43 Buying and selling shares
44 How to buy shares
44 How to sell shares
44 Other transaction policies
46 Dividends, distributions and taxes
48 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Equity Funds. Each Fund invests primarily
or to a significant degree in equity securities, such as common stock, preferred
stock and securities that are convertible into common stock.
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 Fund's past performance 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.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance for
risk will determine which fund is right for you.
Equity funds are generally best suited to investors seeking growth of their
investment over time and who are prepared to accept the risks associated with
equity securities. Equity funds have the potential for higher returns than other
funds, such as bond funds or money market funds, but also carry more risk.
Different equity funds have different levels of risk. They have varying
objectives and investment styles, and some are considered more aggressive than
others. Generally, a fund's objective and the types of investments it makes can
help you gauge its level of risk. On page 34, you'll find a table that gives a
general overview of the risk spectrum of the Galaxy Equity Funds.
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 Financial 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
$68 billion in assets.
-1-
<PAGE>
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. YOU COULD LOSE MONEY BY INVESTING IN THE FUNDS.
-2-
<PAGE>
Galaxy Asset Allocation Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high total return by providing both a current level of income
that is greater than that provided by the popular stock market averages, as well
as long-term growth in the value of the Fund's assets.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund aims to provide income that is higher than the average income provided
by stocks included in the popular stock market averages. The Adviser interprets
this to mean the Dow Jones Industrial Average of 30 major companies and the
Standard & Poor's 500 Composite Stock Price Index (commonly referred to as the
S&P 500). Due to the Fund's expenses, however, net income paid to you may be
less than that. The Fund also seeks long-term growth in the value of its
assets. The Adviser attempts to achieve these goals and reduce risk by
allocating the Fund's assets among short-term debt securities, common stocks,
preferred stocks and bonds.
The Fund seeks a mix of stocks and bonds that will produce both income and
long-term capital growth. This mix will change from time to time as a result of
economic and market conditions. However, the Fund keeps at least 25% of its
total assets in fixed income investments, including debt securities and
preferred stocks, at all times.
Debt securities purchased by the Fund will be of investment grade quality, which
means that they will 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 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.
In selecting portfolio securities for the Fund, the Adviser's investment policy
committee develops an economic outlook and sets guidelines for the industries
and sectors in which the
-3-
<PAGE>
Fund should invest. In selecting equity securities, the Adviser favors stocks
with long-term growth potential that are expected to outperform their peers
over time. The Adviser also forecasts the direction and degree of change in
long-term interest rates to help in the selection of fixed income securities.
The Fund will sell a security when, as a result of changes in the economy, the
Adviser determines it appropriate to revise the allocation of the Fund's assets
between stocks and bonds. A security may also be sold as a result of a
deterioration in the performance of the security or in the financial condition
of the issuer of the security.
The Fund may trade its investments frequently in trying to achieve its
investment goal.
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 carries the following main risks:
- - INTEREST RATE RISK - The value of fixed income investments such as bonds
are affected by movements in interest rates. Bond prices tend to fall when
interest rates rise and to rise when interest rates fall.
- - CREDIT RISK - The value of fixed income investments also depends on the
ability of an issuer 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 securities will decline. 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 the issuers of these securities to make payments of principal
and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
fixed income investments 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.
- - PORTFOLIO COMPOSITION - The level of risk could increase if a larger
percentage of the Fund is invested in one particular asset class, such as
stocks or bonds. However, asset allocation funds are generally less
volatile than portfolios that contain only stocks.
-4-
<PAGE>
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other
transaction costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 11.74% for the quarter ending December 31, 1998
Worst quarter: -3.75% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.58% 8.08% -2.29% 30.54% 15.36% 19.86% 17.89% 7.41%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999, as compared to a broad-based market index.
-5-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares 7.41% 17.98% 12.53% (12/30/91)
- ---------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 19.69% (since 12/31/91)
- ---------------------------------------------------------------------------------------------------------
DJIA 27.29% 27.10% 20.26% (since 12/31/91)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
[Sidenote:]
The Dow Jones Industrial Average (DJIA) is an unmanaged price-weighted average
based on the "price only" performance of 30 blue chip stocks.
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>
- ------------------------------------------------------------------------------------------
TOTAL
FUND
Management Distribution Other OPERATING
fees (12b-1) fees expenses EXPENSES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.36% 1.11%
- ------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares $113 $353 $612 $1,352
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Donald Jones, a Vice President of the Adviser
since 1991, and David Lindsay, CFA, a Senior Vice President of the Adviser since
1992. They are primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Jones has managed the equity portion of the Fund's
portfolio, including determining the allocation of the Fund's assets between
equities and fixed income investments, since May of 1995. He has been with the
Adviser and its predecessors since 1977. Mr. Lindsay has managed the fixed
income portion of the Fund since January of 1997. He has been with the Adviser
and its predecessors since 1986.
-7-
<PAGE>
Galaxy Equity Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income and capital appreciation.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a diversified
portfolio of income-producing (dividend-paying) equity securities, primarily
common stocks. The Adviser looks for investments that offer dividends,
prospects for dividend growth and capital appreciation. However, the Fund's
portfolio may include securities that offer only growth potential or only
income potential.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
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 carries the following main risk:
- - 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.
-8-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 13.37% for the quarter ending June 30, 1997
Worst quarter: -8.31% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.37% 7.43% 8.05% 0.88% 33.73% 17.06% 26.01% 16.10% 4.84%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 4.84% 19.15% 14.62% (12/14/90)
- ------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.00% (since 12/1/90)
- ------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
-9-
<PAGE>
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <S> <S> <S>
Trust Shares 0.75% None 0.16% 0.91%
- ------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares $93 $290 $504 $1,120
- -----------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is J. Edward Klisiewicz, a Senior Vice President of
the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Klisiewicz has been the Fund's portfolio
manager since it began operations in 1990. He has been with the Adviser and its
predecessors since 1970.
-10-
<PAGE>
Galaxy Growth and Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide a relatively high total return through long-term
capital appreciation and current income.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the common stocks
of U.S. companies with large market capitalizations (generally over $2 billion)
that the Adviser believes offer above-average growth and dividends. The
Adviser focuses on stocks which are believed to be attractively priced
relative to expectations for the future performance of the issuing company.
The Adviser also seeks a current yield greater than that of the S&P 500,
although not all Fund investments will pay dividends.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
-11-
<PAGE>
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 carries the following main risk:
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
The Fund began operations on December 14, 1992 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold two classes of shares, Investment Shares
(which were first offered on February 12, 1993) and Trust Shares (which were
first offered on December 14, 1992), that were similar to the Fund's Retail A
Shares and Trust Shares. In connection with the reorganization, shareholders of
the Predecessor Fund exchanged their Investment Shares and Trust Shares for
Retail A Shares and Trust Shares of the Fund. The returns for periods prior to
December 4, 1995 are for Trust Shares of the Predecessor Fund.
[Sidenote:]
Best quarter: 20.76% for the quarter ending December 31, 1998
Worst quarter: -13.49% for the quarter ending September 30, 1998
[bar chart goes here]
-12-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9.56% 5.12% 29.67% 20.20% 29.66% 15.96% 7.09%
- -------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 7.09% 20.20% 16.43% (12/14/92)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.46% (since 12/1/92)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.31% 1.06%
- ------------------------------------------------------------------------------------------
</TABLE>
-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
- - 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 $108 $337 $585 $1,294
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Gregory M. Miller, a Vice President of the
Adviser since 1996. He's been primarily responsible for the day-to-day
management of the Fund's investment portfolio since July 1998. Before that, Mr.
Miller assisted his predecessor in managing the Fund for seven years. He joined
the Adviser in 1985.
-14-
<PAGE>
Galaxy Strategic Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests at least 65% of its total assets in U.S. equity securities,
primarily common stock and securities that can be converted into common stock.
The Fund's "Value Driven Growth" investment process emphasizes securities
believed to have the potential for the best one- to two-year returns. These
securities are generally selected from a universe of large and medium size
companies representative of the S&P 500, although the universe of stocks
monitored by the Adviser is not limited to stocks of companies included in the
S&P 500. The Fund may invest up to 20% of its total assets in foreign equity
securities.
In selecting individual stocks, the Adviser looks at the current price,
projected earnings growth, and historical valuations to derive an estimate of
return potential. The Fund may give emphasis to growth stocks, value stocks or
particular industries, depending upon the Adviser's assessment of a stock's
return potential relative to its price in the broader market.
The Fund will sell a portfolio security when, as a result of a decline in the
security's return potential relative to that of other securities, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[Sidenote:]
VALUE STOCKS AND GROWTH STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios. Growth stocks offer strong revenue and earnings potential, and
accompanying capital growth, with generally less dividend income than value
stocks.
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.
-15-
<PAGE>
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 carries the following main risks:
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of Trust Shares during the last calendar
year.
[Sidenote:]
Best quarter: 11.69% for the quarter ending June 30, 1999
Worst quarter: -13.56% for the quarter ending September 30, 1999
[bar chart goes here]
- ---------------
1999
- ---------------
0.42%
- ---------------
-16-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 0.42% 1.91% (3/4/98)
- ----------------------------------------------------------------------------------------
S&P 500 21.03% 21.73% (since 2/28/98)
- ----------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <S> <S> <S>
Trust Shares 0.75%(1) None 0.24% 0.99%(1)
- ------------------------------------------------------------------------------------------
</TABLE>
(1)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.55%. Total Fund operating expenses after this waiver are
expected to be 0.79%. This fee waiver may be revised or discontinued at any
time.
-17-
<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 $101 $315 $547 $1,213
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter B. Hathaway, CFA, a Senior Vice President
of the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Hathaway has been the Fund's portfolio manager
since it began operations in March 1998. He has been in the investment
management business with the Adviser and its predecessors since 1964 and has
been responsible for the Adviser's "Value Driven Growth" investment process
since 1991.
-18-
<PAGE>
Galaxy Equity Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Income is secondary to the
objective of capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in equity securities,
mainly common stocks, that the Adviser believes are undervalued. The Fund
invests most of its assets in companies that have a market capitalization of
more than $1.5 billion.
The Adviser uses proprietary computer models to compare share price and company
value, both compared to the market and over time. This helps the Adviser to
identify out-of-favor, undervalued securities (often called value stocks) which
may subsequently increase in value. These models focus on fundamental aspects
such as earnings and dividend growth, reinvestment of returns and the ability of
companies to finance their own growth. The models also take into account factors
such as how easily the stocks may be traded. The Adviser then reviews the
results and looks for risks that may account for a stock's low price. It
evaluates factors the computer models can't measure, such as the quality of a
company's management and the impact of technological change. Stocks which pass
all tests are eligible to be included in the Fund's portfolio. Fund holdings are
frequently reviewed and are sold automatically when the computer models show
they are overvalued.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios.
-19-
<PAGE>
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 carries the following main risks:
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 27.21% for the quarter ending December 31, 1998
Worst quarter: -15.22% for the quarter ending September 30, 1998
[bar chart goes here]
-20-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
- -3.20% 23.36% 8.21% 14.75% 3.56% 28.45% 21.61% 28.08% 24.15% 7.08%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999, as compared to broad-based market indices.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1 year 5 years 10 years Since inception
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 7.08% 21.61% 15.11% 15.20% (9/1/88)
- ---------------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 18.19% 14.50% (since 9/1/88)
- ---------------------------------------------------------------------------------------------------------------------
Lipper Multi-Cap Value
Funds Average 6.61% 18.08% 12.88% 13.87% (since 8/31/88)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely
held common stocks listed on the New York Stock Exchange, the American Stock
Exchange and NASDAQ. The S&P 500 is heavily weighted with the stocks of large
companies.
[Sidenote:]
The Lipper Multi-Cap Value Funds Average is an unmanaged index that measures
the performance of a select group of mutual funds with investment objectives
similar to that of the Fund.
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.28% 1.03%
- ------------------------------------------------------------------------------------------
</TABLE>
-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
- - 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 $105 $328 $569 $1,259
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is G. Jay Evans, CFA, a Senior Vice President of
the Adviser since 1991. He's primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Evans has been the Fund's portfolio
manager since 1993. He has been with the Adviser and its predecessors since
1978.
-22-
<PAGE>
Galaxy Equity Growth Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a broadly
diversified portfolio of equity securities, primarily common stocks and
securities that can be converted into common stocks. The Fund invests mainly in
the securities of U.S. issuers, but may invest up to 20% of its total assets in
foreign securities.
The Fund invests mainly in companies which the Adviser believes will have faster
earnings growth than the economy in general. The Adviser looks for
large-capitalization companies (generally over $2 billion) in growing
industries, focusing on technological advances, good product development, strong
management and other factors which support future growth. The Adviser seeks out
companies that have a history of strong earnings growth and are projected to
continue a similar pattern of growth over the next three to five years.
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.
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.
-23-
<PAGE>
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 carries the following main risks:
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 24.20% for the quarter ending December 31, 1998
Worst quarter: -11.64% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------------
30.40% 6.11% 5.37% 0.72% 34.29% 20.95% 30.97% 26.15% 26.55%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 26.55% 27.70% 19.46% (12/14/90)
- -------------------------------------------------------------------------------------------------------------
S&P 500 21.03% 28.54% 21.00% (since 12/1/90)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.18% 0.93%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares $95 $296 $515 $1,143
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Robert G. Armknecht, CFA, an Executive Vice
President of the Adviser since 1988. He's primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Armknecht has been
with the Adviser and its predecessors since 1988 and has been the Fund's
portfolio manager since it began operations in 1990.
-26-
<PAGE>
Galaxy International Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in the equity
securities of foreign issuers. At all times, the Fund's assets will be invested
in companies located in at least three different foreign countries. Normally, no
more than 20% of the Fund's total assets will be invested in companies located
in countries with emerging economies or emerging securities markets. The Fund
emphasizes larger established companies, although it may invest in companies of
any size. The Fund may engage in transactions for the purpose of hedging its
portfolio, such as options, futures and foreign currencies.
The Sub-Adviser's investment process begins with a fundamental analysis of
companies, including both bottom-up and top-down factors. Bottom-up analysis
includes a thorough understanding of a company's prospects as reflected in
its operating cash flow, including industry cycle, capital requirements,
growth opportunities and financial structure. Discussions with company
management are an important element of this analysis and give the Sub-Adviser
an opportunity to test its assumptions against management's near-term and
long-term objectives. Top-down factors are incorporated into the
Sub-Adviser's analysis of a company. For example, the Sub-Adviser considers
how interest rates and currency may impact prospective cash flow and
earnings. Country and market risks, both of which are critically important,
are embodied in interest rates, which are the basis for risk-adjusting the
Sub-Adviser's return expectations for individual companies. In this way, the
Sub-Adviser arrives at a risk-adjusted return potential for each company
analyzed, which then gives the Sub-Adviser the basis for comparing investment
opportunities across developed and emerging markets.
The Fund will sell a security if it has achieved its performance objective, if
fundamentals change performance expectations, if alternative investments
provide potentially more attractive returns.
[Sidenote:]
SUB-ADVISER
The Adviser has appointed Oechsle International Advisors, LLC as Sub-Adviser to
assist it in the day-to-day management of the Fund's investment portfolio.
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. U.S. and
-27-
<PAGE>
foreign 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 carries the following main risks:
- - 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.
- - COUNTRY RISK - The Fund may invest 25% or more of its assets in the
securities of companies located in one country. When the Fund invests a
high percentage of its assets in a particular country, the Fund will be
especially susceptible to factors affecting that country.
- - CURRENCY EXCHANGE - Although the Fund usually makes investments that are
sold in foreign currencies, it values its holdings in U.S. dollars. If the
U.S. dollar rises compared to a foreign currency, the Fund loses on the
currency exchange.
- - HEDGING - The Fund may invest in derivatives, such as options, futures and
foreign currencies, to hedge against market risk or 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 and Sub-Adviser evaluate 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.
-28-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 24.53% for the quarter ending December 31, 1999
Worst quarter: -14.53% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -2.29% 31.62% -2.39% 11.74% 10.74% 14.09% 21.99% 41.89%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 41.89% 19.56% 15.04% (12/30/91)
- ---------------------------------------------------------------------------------------------------------
MSCI EAFE Index 26.96% 12.83% 10.94% (since 12/31/91)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Morgan Stanley Capital International Europe, Australasia and Far East
(MSCI EAFE) Index is an unmanaged index which tracks the performance of selected
equity securities in Europe, Australia, Asia and the Far East.
-29-
<PAGE>
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.89%(1) None 0.27% 1.16%(1)
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.64%. Total Fund operating expenses after this waiver
are expected to be 0.91%. 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>
Trust Shares $118 $368 $638 $1,409
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Singleton Dewey Keesler, Jr. and Kathleen
Harris, CFA. They're primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Keesler is Chief Investment Officer and
portfolio manager/research analyst with the Sub-Adviser. He has been associated
with the Sub-Adviser and its predecessor since 1986. Ms. Harris has been a
portfolio manager at the Sub-Adviser and its predecessor since January 1995. She
was previously portfolio manager and investment director for the State of
Wisconsin Investment Board. Mr. Keesler and Ms. Harris have co-managed the Fund
since August 1996.
-30-
<PAGE>
Galaxy Small Cap Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests mainly in the common stocks of small companies that the Adviser
believes are undervalued. Under normal market conditions, the Fund invests at
least 65% of its total assets in the common stocks of companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. issuers, but may invest up to 20% of its total assets in
foreign equity securities.
In selecting portfolio securities for the Fund, the Adviser looks at the
underlying strength of companies, their products, their competitive positions
and the quality of their management. It also does research to attempt to
identify companies likely to benefit from emerging industry trends and potential
market recoveries.
A portfolio security may be sold if the Adviser determines that it is no longer
undervalued or if there has been a deterioration in the performance of the
security or in the financial condition of the company that issued the security.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios.
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.
-31-
<PAGE>
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 carries the following risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
The Fund began operations on December 14, 1992 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold two classes of shares, Investment Shares
(which were first offered on February 12, 1993) and Trust Shares (which were
first offered on December 14, 1992), that were similar to the Fund's Retail A
Shares and Trust Shares. In connection with the reorganization, shareholders of
the Predecessor Fund exchanged their Investment Shares and Trust Shares for
Retail A Shares and Trust Shares of the Fund. The returns for the periods prior
to December 4, 1995 are for Trust Shares of the Predecessor Fund.
-32-
<PAGE>
[Sidenote:]
Best quarter: 18.80% for the quarter ending September 30, 1997
Worst quarter: -15.84% for the quarter ending September 30, 1998
[bar chart goes here]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7.83% 0.53% 31.78% 27.19% 31.67% -5.22% 10.82%
- -----------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999 as compared to broad-based market indices.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Shares 10.82% 18.31% 14.58% (12/14/92)
- -----------------------------------------------------------------------------------------------------
Russell 2000 Index 21.26% 16.69% 14.53% (since 12/1/92)
- -----------------------------------------------------------------------------------------------------
S&P 600 12.41% 17.05% 14.28% (since 12/1/92)
- -----------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of the
2,000 smallest of the 3,000 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.
[Sidenote:]
The Standard & Poor's SmallCap 600 Composite Index (S&P 600) is an unmanaged
index that tracks the performance of 600 domestic companies traded on the New
York Stock Exchange, the American Stock Exchange and NASDAQ. The S&P 600 is
heavily weighted with the stocks of small companies with market
capitalizations that currently range between $32.9 million and $2.9 billion.
-33-
<PAGE>
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.20% 0.95%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares $97 $303 $525 $1,166
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter Larson, a Senior Vice President of the
Adviser. He's primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Larson has been with the Adviser and its predecessors
since 1963 and has managed the Fund, including the Predecessor Fund, since it
began operations in 1992.
-34-
<PAGE>
Galaxy Small Company Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the equity
securities, primarily common stocks, of small companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. companies, but may invest up to 20% of its total assets in
foreign equity securities.
In selecting investments for the Fund, the Adviser looks for promising
industries. It then looks within those industries for what are judged to be
reasonably priced companies that have above-average growth potential. The
Adviser consults a wide range of sources, including management, competitors,
other industry sources and regional brokerage analysts.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
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.
-35-
<PAGE>
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 carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[Sidenote:]
Best quarter: 44.22% for the quarter ending December 31, 1999
Worst quarter: -23.91% for the quarter ending September 30, 1998
[bar chart goes here]
-36-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.20% 22.75% 0.02% 39.67% 21.59% 14.64% -10.66% 39.63%
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 39.63% 19.42% 14.80% (12/30/91)
- ------------------------------------------------------------------------------------------------------------
Russell 2000 Index 21.26% 16.69% 14.67% (since 12/31/91)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of the
2,000 smallest of the 3,000 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 may buy and
hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S ASSETS)
<TABLE>
<CAPTION>
Management Distribution Other Total Fund operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75% None 0.36% 1.11%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
-37-
<PAGE>
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 $113 $353 $612 $1,352
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Stephen D. Barbaro, CFA, a Senior Vice President
of the Adviser since 1996. He's primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Barbaro has been the Fund's
portfolio manager since it began operations in 1991. He has been with the
Adviser and its predecessors since 1976.
-38-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Equity 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), money market instruments, debt securities issued or
guaranteed by the U.S. Government or its agencies and, in the case of the
International Equity Fund, foreign money market instruments, debt securities of
foreign national governments and their agencies, and the securities of U.S.
issuers. This strategy 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 Fund 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.
-39-
<PAGE>
INVESTOR GUIDELINES
The following table gives you a general overview of the risk spectrum for the
Galaxy Equity Funds. This is a guide only. It shows the Adviser's current
assessment of the potential risk of the Funds relative to one another, but this
can change over time. It should not be used to compare the Funds with other
mutual funds or other types of investments. Consult your financial professional
to help you decide which Fund is right for you.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Risk spectrum Fund Primary investments
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Common stocks and fixed income securities
of domestic companies
------------------------------------------------------------------------------
Conservative Equity Income Common stocks of domestic companies
selected primarily for their income
potential
------------------------------------------------------------------------------
Growth and Income Common stocks of companies selected for
their growth and income potential
------------------------------------------------------------------------------
Strategic Equity Equity securities of large and medium sized
growth companies that exhibit above-average
return potential relative to their market
price
------------------------------------------------------------------------------
Moderate Equity Value Common stock of large and medium sized
companies believed to be undervalued
------------------------------------------------------------------------------
Equity Growth Equity securities of growth-oriented
companies
------------------------------------------------------------------------------
International Equity Equity securities of foreign companies
------------------------------------------------------------------------------
Aggressive Small Cap Value Common stock of smaller companies believed
to be undervalued
------------------------------------------------------------------------------
Small Company Equity Common stock of smaller growth-oriented
companies
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-40-
<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.
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Fund Management fee as a % of average net assets
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Asset Allocation 0.75%
- --------------------------------------------------------------------------------------------------------------
Equity Income 0.75%
- --------------------------------------------------------------------------------------------------------------
Growth and Income 0.75%
- --------------------------------------------------------------------------------------------------------------
Strategic Equity 0.55%
- --------------------------------------------------------------------------------------------------------------
Equity Value 0.75%
- --------------------------------------------------------------------------------------------------------------
Equity Growth 0.75%
- --------------------------------------------------------------------------------------------------------------
International Equity 0.64%
- --------------------------------------------------------------------------------------------------------------
Small Cap Value 0.75%
- --------------------------------------------------------------------------------------------------------------
Small Company Equity 0.75%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SUB-ADVISER
The Adviser has delegated some of its advisory responsibilities with respect to
the International Equity Fund to Oechsle International Advisors, LLC as
Sub-Adviser. The Sub-Adviser determines which securities will be purchased,
retained or sold for the Fund, places orders for the Fund and provides the
Adviser with information on international investment and economic developments.
The Adviser assists and consults with the Sub-Adviser as to the Fund's
investment program, approves the list of foreign countries recommended by the
Sub-Adviser for investment and manages the Fund's daily cash position. The
Sub-Adviser's fees are paid by the Adviser.
The Sub-Adviser has its main office at One International Place, Boston,
Massachusetts 02210. The Sub-Adviser is the successor to Oechsle International
Advisors, L.P., an international investment firm founded in 1986. At December
31, 1999, the Sub-Adviser had discretionary management authority over
approximately $19.1 billion in assets. The Adviser's parent company,
FleetBoston Financial Corporation, owns an interest in the Sub-Adviser.
-41-
<PAGE>
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser and Sub-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 Sub-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 and Sub-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
held by defined 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.
-42-
<PAGE>
HOW TO INVEST IN THE FUNDS
BUYING AND SELLING SHARES
Trust Shares of the Funds 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 Financial 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 financial institution can provide more information about which
types of accounts are eligible.
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
institution or employer-sponsored plan are open for business.
The price at which you buy shares is the net asset value (NAV) per share next
determined after your order is accepted. The price at which you sell shares 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 at the close of
regular trading that day (usually 4:00 p.m. Eastern time). The New York Stock
Exchange is generally open for trading every Monday through Friday, except for
national holidays.
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 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.
-43-
<PAGE>
[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.
Clients, members and employees of the Sub-Adviser also may buy Trust Shares of
the International Equity Fund by contacting Galaxy's distributor at
1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
INVESTMENT MINIMUMS
Galaxy does not have any minimum investment requirements for initial or
additional investments in Trust Shares but financial institutions and
employer-sponsored plans may. They may also require you to maintain a minimum
account balance.
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
If Galaxy doesn't receive full payment for your order to buy shares by 4:00 p.m.
on the next business day, Galaxy won't accept your order. Galaxy will advise
your financial institution or plan administrator if this happens.
-44-
<PAGE>
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.
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.
-45-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund, except the International Equity Fund, pays any dividends from net
investment income each quarter. The International Equity Fund pays any dividends
from net investment income annually. Each Fund pays any net capital gains at
least once a year. It's expected that the Funds' annual distributions will
normally -- but not always -- consist primarily of capital gains rather than
ordinary income. Dividends and distributions are paid in cash unless you tell
your financial institution or plan administrator in writing that you want to
have dividends and distributions reinvested in additional shares.
FEDERAL TAXES
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 federal income
tax on these distributions regardless of whether they are paid in cash or
reinvested in additional shares. You will be notified annually of the tax status
of distributions to you.
You should note that if you purchase shares just before a 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 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.
The one major exception to these tax principles is that distribution on, and
sales, exchanges and redemptions of shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the Fund receives from U.S. corporations
may be eligible, in the hands of the corporate
-46-
<PAGE>
shareholders, for the corporate dividends-received deduction, subject to certain
holding period requirements and debt financing limitations.
It is expected that the International Equity Fund will be subject to foreign
withholding taxes with respect to dividends or interest received from sources in
foreign countries. The Fund may make an election to treat a proportionate amount
of these taxes as constituting a distribution to each shareholder, which would
allow each shareholder either (1) to credit this proportionate amount of taxes
against U.S. federal income tax liability or (2) to take this amount as an
itemized deduction.
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 each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities, or on securities of the particular state, its
agencies or municipalities.
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
The financial highlights tables on the following pages will help you
understand the financial performance for the Funds' Trust Shares for the past
five years (or the period since a particular Fund began operations). Certain
information reflects the financial performance of a single Trust Share. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in Trust Shares of each Fund, assuming all
dividends and distributions were reinvested. The information for the fiscal
year ended October 31, 1999 has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report and are incorporated by
reference into the SAI. The Annual Report and SAI are available free of
charge upon request. The information for the fiscal years ended October 31,
1998, 1997, 1996 and 1995 was audited by Galaxy's former auditors,
PricewaterhouseCooper LLP.
-48-
<PAGE>
Galaxy Asset Allocation Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------
Trust Shares
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 16.96 $ 16.47 $ 14.53 $ 12.83 $ 10.68
Income from investment operations:
Net investment income(1) ................................ 0.40 0.42 0.43 0.33 0.32
Net realized and unrealized gain (loss) on investments .. 1.20 1.71 2.42 1.83 2.16
Total from investment operations .......................... 1.60 2.13 2.85 2.16 2.48
Less dividends:
Dividends from net investment income .................... (0.40) (0.43) (0.40) (0.33) (0.33)
Dividends from net realized capital gains ............. (0.43) (1.21) (0.51) (0.13) --
Total dividends ......................................... (0.83) (1.64) (0.91) (0.46) (0.33)
Net increase (decrease) in net asset value .............. 0.77 0.49 1.94 1.70 2.15
Net asset value, end of period ............................ $ 17.73 $ 16.96 $ 16.47 $ 14.53 $ 12.83
-------- --------- -------- -------- --------
Total return ........................................... 9.63% 14.05% 20.42% 17.19% 23.68%
Ratios/supplemental data:
Net assets, end of period (000's) ....................... $269,851 $ 218,666 $171,741 $123,603 $76,771
Ratios to average net assets:
Net investment income including reimbursement/waiver .... 2.31% 2.63% 2.82% 2.52% 2.74%
Operating expenses including reimbursement/waiver .. 1.12% 1.13% 1.21% 1.19% 1.26%
Operating expenses excluding reimbursement/waiver .. 1.12% 1.13% 1.22% 1.21% 1.30%
Portfolio turnover rate ................................... 135% 108% 58% 48% 41%
</TABLE>
(1) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Trust Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.40, $0.42,
$0.43, $0.33, and $0.32, respectively.
-49-
<PAGE>
Galaxy Equity Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------
Trust Shares
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 19.69 $ 18.84 $ 16.93 $ 14.99 $ 12.75
Income from investment operations:
Net investment income(1) ......................... 0.28 0.34 0.38 0.37 0.36
Net realized and unrealized gain on investments .. 1.69 2.42 3.35 2.48 2.45
Total from investment operations ................... 1.97 2.76 3.73 2.85 2.81
Less dividends
Dividends from net investment income ............. (0.29) (0.33) (0.38) (0.37) (0.36)
Dividends from net realized capital gains ...... (1.85) (1.58) (1.44) (0.54) (0.21)
Total dividends .................................. (2.14) (1.91) (1.82) (0.91) (0.57)
Net increase (decrease) in net asset value ......... (0.17) 0.85 1.91 1.94 2.24
Net asset value, end of period ..................... $ 19.52 $ 19.69 $ 18.84 $ 16.93 $ 14.99
-------- --------- --------- --------- -------
Total return .................................... 10.60% 15.67% 23.80% 19.65% 22.81%
Ratios/supplemental data:
Net assets, end of period (000's) ................ $120,179 $ 127,367 $ 119,505 $ 106,094 $87,819
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................ 1.39% 1.72% 2.14% 2.32% 2.60%
Operating expenses including
reimbursement/ waiver ........................... 0.91% 0.92% 0.95% 0.94% 0.98%
Operating expenses excluding
reimbursement/waiver ............................ 0.91% 0.92% 0.97% 0.94% 1.00%
Portfolio turnover rate .......................... 38% 46% 37% 45% 21%
</TABLE>
(1) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for Trust Shares for the
years ended October 31, 1999, 1998, 1997, 1996, and 1995 was $0.28,
$0.34, $0.38, $0.37, and $0.36, respectively.
-50-
<PAGE>
Galaxy Growth and Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
--------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
--------------------------------------------------------------------
Trust Shares
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 14.90 $ 16.28 13.80 $ 12.35 $ 11.15
Income from investment operations:
Net investment income(2) ....................... 0.13 0.15 0.22 0.27 0.28
Net realized and unrealized
gain on investments .......................... 2.02 1.31 3.68 2.16 1.69
Total from investment operations .................... 2.15 1.46 3.90 2.43 1.97
Less dividends:
Dividends from net investment income ...... (0.12) (0.16) (0.23) (0.25) (0.28)
Dividends from net realized capital gains .. (0.91) (2.68) (1.19) (0.73) (0.49)
Total dividends ................................... (1.03) (2.84) (1.42) (0.98) (0.77)
Net increase (decrease) in net asset value .......... 1.12 (1.38) 2.48 1.45 1.20
Net asset value, end of period ...................... $ 16.02 $ 14.90 $ 16.28 $ 13.80 $ 12.35
-------- --------- ---------- --------- ----------
Total return ..................................... 14.85% 10.10% 30.43% 20.77% 18.80%
Ratios/supplemental data:
Net assets, end of period (000's) ............ $309,106 $ 254,060 $ 246,654 $ 186,708 $ 189,011
Ratios to average net assets:
Net investment income including
reimbursement/waiver ...................... 0.76% 1.00% 1.44% 2.01% 2.42%
Operating expenses including
reimbursement/waiver ...................... 1.05% 1.03% 1.03% 1.02% 1.07%
Operating expenses excluding
reimbursement/waiver ...................... 1.05% 1.03% 1.06% 1.03% 1.27%
Portfolio turnover rate .......................... 20% 38% 93% 59% 51%
</TABLE>
(1) The Fund commenced operations on December 14, 1992 as a separate
investment portfolio (the "Predecessor Fund") of The Shawmut Funds. On
December 4, 1995, the Predecessor Fund was reorganized as a new portfolio
of Galaxy. Prior to the reorganization, the Predecessor Fund offered and
sold two series of shares, Investment Shares and Trust Shares, that were
similar to the Fund's Retail A and Trust Shares, respectively. In
connection with the reorganization, shareholders of the Predecessor Fund
exchanged Investment Shares and Trust Shares for Retail A Shares and
Trust Shares, respectively, in the Fund.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for the years ended October
31, 1999, 1998, 1997 and 1996 was $0.13, $0.15, $0.21 and $0.27,
respectively. Net investment income per share before reimbursement/waiver
of fees by other parties for the year ended October 31, 1995 was
$0.25.
-51-
<PAGE>
Galaxy Strategic Equity Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year For the period
ended October 31, ended October 31,
1999 1998(1)
---------------------------------------
Trust Shares
---------------------------------------
<S> <C> <C>
Net asset value, beginning of period................................. $9.63 $ 10.00
Income from investment operations:
Net investment income(2)........................................ 0.09 0.01
Net realized and unrealized (loss) on investments............... 0.27 (0.37)
Total from investment operations.............................. 0.36 (0.36)
Less dividends:
Dividends from net investment income.......................... (0.08) (0.01)
Dividends from net realized capital gains..................... (0.01)
Total dividends...................................................... (0.09) (0.01)
Net increase (decrease) in net asset value........................... (0.27) (0.37)
Net asset value, end of period....................................... $9.90 $9.63
------- -------
Total return......................................................... 3.64% (3.62)%(3)
Ratios/supplemental data:
Net assets, end of period (000's)............................... $71,063 $63,061
Ratios to average net assets:
Net investment income including reimbursement/waiver............ 0.80% 0.19%(4)
Operating expenses including reimbursement/waiver............... 0.80% 1.27%(4)
Operating expenses excluding reimbursement/waiver............... 1.00% 1.47%(4)
Portfolio turnover rate.............................................. 79% 30%(3)
</TABLE>
(1) The Fund commenced operations on March 4, 1998.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and the Fund's administrator for Trust Shares for the
year ended October 31, 1999 and the period ended October 31, 1998 was
$0.06 and $0.00, respectively.
(3) Not annualized.
(4) Annualized.
-52-
<PAGE>
Galaxy Equity Value Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
Trust Shares
---------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 16.51 $ 18.21 $ 15.96 $ 14.33 $ 13.32
Income from investment operations:
Net investment income(1)............ 0.03 0.08 0.17 0.21 0.28
Net realized and unrealized
gain on investments............... 2.42 1.49 4.16 2.74 2.24
Total from investment operations......... 2.45 1.57 4.33 2.95 2.52
Less dividends:
Dividends from net investment
income............................ -- (0.07) (0.18) (0.21) (0.30)
Dividends from net realized
capital gains..................... (0.61) (3.20) (1.90) (1.11) (1.21)
Total dividends.......................... (0.61) (3.27) (2.08) (1.32) (1.51)
Net increase (decrease) in net
asset value......................... 1.84 (1.70) 2.25 1.63 1.01
Net asset value, end of period........... $ 18.35 $ 16.51 $ 18.21 $ 15.96 $ 14.33
-------- -------- -------- ------- --------
Total return.......................... 15.04% 10.27% 29.87% 22.05% 21.31%
Ratios/supplemental data:
Net assets, end of period (000's)... $281,064 $254,432 $241,532 $194,827 $165,330
Ratios to average net assets:
Net investment income
including reimbursement/
waiver............................ 0.19% 0.49% 0.98% 1.42% 2.10%
Operating expenses
including reimbursement/
waiver............................ 1.02% 1.03% 1.04% 1.03% 1.02%
Operating expenses
excluding reimbursement/
waiver............................ 1.03% 1.03% 1.04% 1.03% 1.02%
Portfolio turnover rate.................. 75% 82% 111% 116% 76%
</TABLE>
(1) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for Trust Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.03,
$0.08, $0.17, $0.21 and $0.28, respectively.
-53-
<PAGE>
Galaxy Equity Growth Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------
Trust Shares
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 24.52 $ 25.17 $ 20.39 $ 17.30 $ 14.19
Income from investment operations:
Net investment income(1)............ 0.03 0.09 0.16 0.17 0.20
Net realized and unrealized
gain on investments............... 6.50 3.20 6.06 3.40 3.28
Total from investment operations......... 6.53 3.29 6.22 3.57 3.48
Less dividends:
Dividends from net investment
income............................ -- (0.09) (0.16) (0.18) (0.20)
Dividends in excess of net
investment income................. -- (0.01) -- -- --
Dividends from net realized
capital gains..................... (1.90) (3.84) (1.28) (0.30) (0.17)
Total dividends.......................... (1.90) (3.94) (1.44) (0.48) (0.37)
Net increase (decrease) in net
asset value......................... 4.63 (0.65) 4.78 3.09 3.11
Net asset value, end of period........... $ 29.15 $ 24.52 $ 25.17 $ 20.39 $ 17.30
---------- -------- --------- -------- ---------
Total return.......................... 28.07% 15.17% 32.16% 21.03% 25.08%
Ratios/supplemental data:
Net assets, end of period (000's)... $1,041,378 $815,756 $ 745,537 $562,419 $ 420,016
Ratios to average net assets:
Net investment income
including reimbursement/
waiver............................ 0.15% 0.40% 0.72% 0.92% 1.31%
Operating expenses
including reimbursement/
waiver............................ 0.94% 0.96% 0.95% 0.98% 1.00%
Operating expenses
excluding reimbursement/
waiver............................ 0.94% 0.96% 0.95% 0.98% 1.00%
Portfolio turnover rate.................. 53% 60% 66% 36% 14%
</TABLE>
(1) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for Trust Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.03,
$0.09, $0.16, $0.17 and $0.20, respectively.
-54-
<PAGE>
Galaxy International Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------------
Trust Shares
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 17.00 $ 15.33 $14.01 $12.98 $13.20
Income from investment operations:
Net investment income(1)............... 0.10 0.14 0.08 0.17 0.16
Net realized and unrealized
gain (loss) on investments............ 4.80 1.98 2.12 1.30 (0.18)
Total from investment operations......... 4.90 2.12 2.20 1.47 (0.02)
Less dividends:
Dividends from net investment
income................................ (0.15) (0.09) (0.20) (0.20) (0.04)
Dividends from net realized
capital gains......................... (0.57) (0.36) (0.68) (0.24) (0.16)
Total dividends.......................... (0.72) (0.45) (0.88) (0.44) (0.20)
Net increase (decrease) in net
asset value............................ 4.18 1.67 1.32 1.03 (0.22)
Net asset value, end of period........... $ 21.18 $ 17.00 $ 15.33 $ 14.01 $ 12.98
-------- -------- ------- ------- -------
Total return.......................... 29.71% 14.32% 16.60% 11.51% (0.02)%
Ratios/supplemental data:
Net assets, end of period
(000's)............................... $501,776 $345,692 $265,124 $172,561 $89,614
Ratios to average net assets:
Net investment income
including reimbursement/
waiver................................ 0.54% 0.91% 0.57% 1.40% 1.36%
Operating expenses
including reimbursement/
waiver................................ 0.97% 0.96% 1.06% 1.08% 1.22%
Operating expenses
excluding reimbursement/
waiver................................ 1.22% 1.21% 1.32% 1.36% 1.48%
Portfolio turnover rate.................. 45% 49% 45% 146% 48%
</TABLE>
(1) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for Trust Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.06,
$0.10, $0.04, $0.13 and $0.13, respectively.
-55-
<PAGE>
Galaxy Small Cap Value Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
-------------------------------------------------------------------------
Trust Shares
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 13.61 $ 18.37 $ 14.76 $ 12.71 $ 11.07
Income from investment operations:
Net investment income(2).................. 0.05 0.11 0.01(3) 0.05 0.01
Net realized and unrealized
gain (loss) on investments.............. 0.74 (2.06) 5.74 2.97 2.21
Total from investment operations............... 0.79 (1.95) 5.75 3.02 2.22
Less dividends:
Dividends from net investment income.... (0.06) (0.13) -- (0.05) (0.01)
Dividends in excess of net
investment income....................... -- -- -- (0.01) --
Dividends from net realized
capital gains........................... (1.27) (2.68) (2.14) (0.91) (0.57)
Total dividends............................... (1.33) (2.81) (2.14) (0.97) (0.58)
Net increase (decrease) in net asset value... (0.54) (4.76) 3.61 2.05 1.64
Net asset value, end of period................. $ 13.07 $ 13.61 $ 18.37 $ 14.76 $ 12.71
-------- -------- -------- -------- --------
Total return................................ 6.02% (12.07)% 44.08% 25.22% 21.52%
Ratios/supplemental data:
Net assets, end of period (000's)....... $255,268 $202,385 $189,257 $137,341 $121,364
Ratios to average net assets:
Net investment income
including reimbursement/waiver.......... 0.47% 0.73% 0.09% 0.45% 0.07%
Operating expenses
including reimbursement/waiver.......... 0.97% 0.96% 0.96% 1.05% 1.10%
Operating expenses
excluding reimbursement/waiver.......... 0.97% 0.96% 0.96% 1.06% 1.35%
Portfolio turnover rate........................ 42% 33% 52% 39% 32%
</TABLE>
(1) The Fund commenced operations on December 14, 1992 as a separate
investment portfolio (the "Predecessor Fund") of The Shawmut Funds. On
December 4, 1995, the Predecessor Fund was reorganized as a new portfolio
of Galaxy. Prior to the reorganization, the Predecessor Fund offered and
sold two series of shares, Investment Shares and Trust Shares, that were
similar to the Fund's Retail A and Trust Shares, respectively. In
connection with the reorganization, shareholders of the Predecessor Fund
exchanged Investment Shares and Trust Shares for Retail A Shares and
Trust Shares, respectively, in the Fund.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for the years ended October
31, 1999, 1998, 1997 and 1996 was $0.05, $0.11, $0.05 and $0.05,
respectively. Net investment (loss) per share before reimbursement/waiver
of fees by other parties for the year ended October 31, 1995 was
$(0.03).
(3) The selected per share data was calculated using the weighted average
shares outstanding method for the year.
-56-
<PAGE>
Galaxy Small Company Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
Trust Shares
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period................................. $ 13.96 $21.32 $20.20 $16.38 $12.36
Income from investment operations:
Net investment income (loss)(1)........ (0.16) (0.14) (0.11) (0.09) (0.04)
Net realized and unrealized
gain (loss) on investments............ 2.33 (4.96) 3.61 4.08 4.25
Total from investment operations......... 2.17 (5.10) 3.50 3.99 4.21
Less dividends:
Dividends from net investment
income................................ -- -- -- -- --
Dividends from net realized
capital gains......................... -- (2.26) (2.38) (0.17) (0.19)
Total dividends.......................... -- (2.26) (2.38) (0.17) (0.19)
Net increase (decrease) in net
asset value............................ 2.17 (7.36) 1.12 3.82 4.02
Net asset value, end of period........... $ 16.13 $ 13.96 $ 21.32 $ 20.20 $ 16.38
-------- ------- ------- ------- -------
Total return.......................... 15.54% (26.00)% 19.59% 24.69% 34.73%
Ratios/supplemental data:
Net assets, end of period (000's)...... $233,326 $222,675 $310,751 $174,990 $94,831
Ratios to average net assets:
Net investment income (loss)
including reimbursement/waiver........ (1.00)% (0.76)% (0.65)% (0.60)% (0.37)%
Operating expenses
including reimbursement/waiver........ 1.12% 1.09% 1.09% 1.14% 1.12%
Operating expenses
excluding reimbursement/waiver........ 1.12% 1.09% 1.12% 1.14% 1.12%
Portfolio turnover rate.................. 105% 78% 69% 82% 54%
</TABLE>
(1) Net investment income (loss) per share before reimbursement/waiver of
fees by the Adviser and/or the Fund's administrator for Trust Shares for
the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was
$(0.16), $(0.14), $(0.11), $(0.09) and $(0.04), respectively.
-57-
<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 Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALEQ 3/1/00
<PAGE>
[Front cover page]
Galaxy Taxable Bond Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Short-Term Bond Fund
Galaxy Intermediate Government Income Fund
Galaxy High Quality Bond Fund
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
1 Risk/return summary
1 Introduction
2 Galaxy Short-Term Bond Fund
7 Galaxy Intermediate Government Income Fund
12 Galaxy High Quality Bond Fund
17 Additional information about risk
18 Investor guidelines
19 Fund management
20 How to invest in the Funds
20 How sales charges work
23 Buying, selling and exchanging shares
25 How to buy shares
26 How to sell shares
27 How to exchange shares
28 Other transaction policies
29 Dividends, distributions and taxes
31 Galaxy investor programs
31 Retirement plans
31 Other programs
33 How to reach Galaxy
34 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Taxable Bond Funds. Each Fund invests
primarily in debt obligations, such as bonds, notes and commercial paper.
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 Fund's past performance 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
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance
for risk will determine which fund is right for you. On page 18, you'll find
a table that provides a general guide to help you decide which of the Galaxy
Taxable Bond Funds is best suited to you.
THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc., which is referred to in this prospectus as
the ADVISER, is the investment adviser for all of these Funds. The Adviser,
an indirect wholly-owned subsidiary of FleetBoston Financial 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 $68 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 THE FUNDS.
-1-
<PAGE>
Galaxy Short-Term Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income 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.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in debt obligations of U.S. and foreign corporations,
including bonds and notes, and in debt obligations issued or guaranteed by the
U.S. Government and its agencies or instrumentalities or by foreign governments
or their political subdivisions and instrumentalities. It also invests in
asset-backed and mortgage-backed securities and in money market instruments,
such as commercial paper and the obligations of U.S. and foreign banks. The Fund
normally invests at least 65% of its total assets in bonds and debentures.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
Nearly all Fund 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.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities that have one of the top three ratings assigned by
S&P or Moody's, or 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's average weighted maturity will be less than three years under
normal cicumstances.
-2-
<PAGE>
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt obligations
in a fund come due or MATURE. It is calculated by averaging the time to maturity
of all debt obligations held by a fund with each maturity "weighted" according
to the percentage of assets it represents.
[Sidenote:]
DURATION
Duration is an approximate measure of the price sensitivity of a fund to
changes in interest rates. Unlike maturity which measures only the time
until final payment, duration gives you the average time it takes to receive
all expected cash flows (including interest payments, prepayments and final
payments) on the debt obligations held by a fund.
[Sidenote:]
DEBT OBLIGATION
When a fund buys a debt obligation such as a bond, it is in effect lending money
to the company, government or other entity that issued the bond. In return, the
issuer has an obligation to make regular interest payments and to repay the
original amount of the loan on a given date, known as the maturity date. A bond
MATURES when it reaches its maturity date. Bonds usually have fixed interest
rates, although some have rates that fluctuate based on market conditions and
other factors.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P or Moody's are considered to have
speculative characteristics. Changes in the economy are more likely to
affect the ability of the issuers of these securities to make payments of
principal and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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
-3-
<PAGE>
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.
- - 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
securities may be more volatile and less liquid than U.S. securities.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The returns for Retail B Shares were different
than the figures shown because each class of shares has different expenses.
The figures don't include any sales charges that investors pay when buying or
selling Retail A Shares of the Fund. If sales charges were included, the
returns would be lower.
[Sidenote:]
BEST QUARTER: 4.14% for the quarter ending September 30, 1992
WORST QUARTER: -0.66% for the quarter ending June 30, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
5.81% 6.41% -0.37% 10.96% 3.38% 5.68% 6.07% 2.33%
</TABLE>
-4-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as
compared to a broad-based market index. The returns for Retail A Shares of the
Fund for periods prior to December 1, 1995 have been restated to include the
effect of the maximum 3.75% front-end sales charge which went into effect on
that date.
<TABLE>
<CAPTION>
1 year 5 years Since inception
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -1.49% 4.83% 4.49% (12/30/91)
- -----------------------------------------------------------------------------
Retail B Shares -3.24% - 3.38% (3/4/96)
- -----------------------------------------------------------------------------
Lehman Brothers One to 2.90% 6.47% 5.54% (since 12/31/91)
Three Year Government Bond 5.50% (since 2/29/96)
Index
- -----------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers One to Three Year Government Bond Index is an unmanaged
index which tracks the performance of short-term U.S. Government bonds.
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 sales charge (load) on purchases Maximum deferred sales charge (load)
shown as a % of the offering price shown as a % of the offering price or
sale price, whichever is less
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Management fees Distribution and Other expenses Total Fund operating
service (12b-1) fees expenses
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(4) None 0.55% 1.30%(4)
- --------------------------------------------------------------------------------------------------------------
Retail B Shares 0.75%(4) 0.80%(4) 0.50% 2.05%(4)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<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) 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."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this
waiver are expected to be 1.10% for Retail A Shares and 1.85% for
Retail B 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
- - 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 $502 $772 $1,061 $1,884
- --------------------------------------------------------------------------------
Retail B Shares $708 $943 $1,303 $2,010
- --------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- --------------------------------------------------------------------------------
Retail B Shares $208 $643 $1,103 $2,010
- --------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Taxable Fixed Income Strategy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-6-
<PAGE>
Galaxy Intermediate Government Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks the highest level of current income consistent with prudent risk
of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in debt obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. It also invests in debt obligations of U.S. corporations,
asset-backed and mortgage-backed securities and money market instruments, such
as commercial paper and obligations of U.S. banks and U.S. branches of foreign
banks.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
[Sidenote:]
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are debt obligations issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. U.S. Government
obligations generally have less credit risk than other debt obligations.
Nearly all Fund investments will be of investment grade quality and will have
one of the top three ratings assigned by Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("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 the minimum required rating. 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's average weighted maturity will be between three and ten years
under normal circumstances.
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.
-7-
<PAGE>
The Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
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.
Retail A Shares of the Fund were first issued during the fiscal year ended
October 31, 1992. The returns for Retail A Shares of the Fund for prior periods
represent the returns for Trust Shares of the Fund which are offered in a
separate prospectus. Prior to November 1, 1993, the returns for Retail A Shares
and Trust Shares of the Fund were the same because each class of shares had the
same expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
-8-
<PAGE>
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The returns for Retail B Shares were different than
the figures shown because each class of shares has different expenses. The
figures don't include any sales charges that investors pay when buying or
selling Retail A Shares of the Fund. If sales charges were included, the
returns would be lower.
[Sidenote:]
BEST QUARTER: 6.13% for the quarter ending September 30, 1992
WORST QUARTER: -2.90% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.87% 15.77% 7.11% 5.57% -3.77% 15.67% 1.75% 7.83% 8.32% -1.95%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as
compared to broad-based market indices. The returns for Retail A Shares of the
Fund for periods prior to December 1, 1995 have been restated to include the
effect of the maximum 3.75% front-end sales charge which went into effect on
that date.
<TABLE>
<CAPTION>
1 year 5 years 10 years Since inception
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares -5.66% 5.35% 5.67% 6.28% (9/1/88)
- -------------------------------------------------------------------------------------------------------------------
Retail B Shares -7.19% - - -5.29% (11/1/98)
- -------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate 7.74% (since 9/1/88)
Government/Corporate Bond Index 0.39% 7.10% 7.26% 0.67% (since 11/1/98)
- -------------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate 8.34% (since 9/1/88)
Bond Index -0.82% 7.73% 7.70% 0.03% (since 11/1/98)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index
is an unmanaged index which tracks the performance of intermediate-term U.S.
Government and corporate bonds.
-9-
<PAGE>
[Sidenote:]
The Lehman Brothers Aggregate Bond Index is an unmanaged index made up of the
Lehman Brothers Government/Corporate Bond Index, its Mortgage Backed Securities
Index and its Asset Backed Securities Index.
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 sales charge (load) on purchases Maximum deferred sales
shown as a % of the offering price charge (load) shown as a %
of the offering price or sale
price, whichever is less
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ---------------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Management fees Distribution and Other expenses Total Fund operating
service (12b-1) fees expenses
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(4) None 0.41% 1.16%(4)
- ----------------------------------------------------------------------------------------------------------------------
Retail B Shares 0.75%(4) 0.80% 0.47% 2.02%(4)
- ----------------------------------------------------------------------------------------------------------------------
</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."
(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."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Affiliates of the Adviser are waiving a portion
of the Distribution and service (12b-1) fees for Retail B Shares so that
such fees are expected to be 0.72%. Total Fund operating expenses after
these waivers are expected to be 0.96% for Retail A Shares and 1.74% for
Retail B Shares. These fee waivers 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
-10-
<PAGE>
- - 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 $489 $730 $989 $1,731
- ------------------------------------------------------------------------------------------------------------------
Retail B Shares $705 $934 $1,288 $1,923
- ------------------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- ------------------------------------------------------------------------------------------------------------------
Retail B Shares $205 $634 $1,088 $1,923
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a Vice President
and Manager of Fixed Income Investments until February 1999. She has managed the
Fund since December 1996.
-11-
<PAGE>
Galaxy High Quality Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income consistent with prudent risk of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, as well as in corporate debt
obligations such as notes and bonds. The Fund also invests in asset-backed and
mortgage-backed securities and in money market instruments, such as commercial
paper and bank obligations.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
Nearly all Fund 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.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in high quality securities that have one of the top two ratings
assigned by S&P or Moody's or unrated securities determined by the Adviser to
be of comparable quality. High quality securities tend to pay less income
than lower-rated securities. 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's average weighted maturity will vary from time to time depending on
current market and economic conditions and the Adviser's assessment of probable
changes in interest rates.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
-12-
<PAGE>
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall. Debt securities which have the lowest of the top
four ratings assigned by S&P or Moody's are considered to have speculative
characteristics. Changes in the economy are more likely to affect the
ability of the issuers of these securities to make payments of principal and
interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain debt
securities held by the Fund, particularly asset-backed and mortgage-backed
securities, 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.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The returns for Retail B Shares were different than
the figures shown because each class of shares has different expenses. The
figures don't include any sales charges that investors pay when buying or
selling Retail A Shares of the Fund. If sales charges were included, the
returns would be lower.
-13-
<PAGE>
[Sidenote:]
BEST QUARTER: 7.54% for the quarter ending June 30, 1995
WORST QUARTER: -3.85% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.12% 6.77% 12.81% -6.48% 21.20% 1.37% 9.11% 9.27% -4.13%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as
compared to a broad-based market index. The returns for Retail A Shares of the
Fund for periods prior to December 1, 1995 have been restated to include the
effect of the maximum 3.75% front-end sales charge which went into effect on
that date.
<TABLE>
<CAPTION>
1 year 5 years Since inception
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -7.71% 6.62% 6.44% (12/14/90)
- -----------------------------------------------------------------------------------------
Retail B Shares -9.24% - 3.09% (3/4/96)
- -----------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/ 7.15% (since 11/30/90)
Corporate Bond Index 0.39% 7.10% 5.44% (since 2/29/96)
- -----------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
index which tracks the performance of intermediate-term U.S. Government and
corporate bonds.
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 sales charge (load) on purchases Maximum deferred sales
shown as a % of the offering price charge (load) shown as a %
of the offering price or sale
price, whichever is less
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ---------------------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Distribution and Other Total Fund
Management fees service (12b-1) fees expenses operating expenses
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(4) None 0.45% 1.20%(4)
- ---------------------------------------------------------------------------------------------------
Retail B Shares 0.75%(4) 0.80% 0.34% 1.89%(4)
- ---------------------------------------------------------------------------------------------------
</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."
(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."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Affiliates of the Adviser are waiving a portion
of the Distribution and service (12b-1) fees for Retail B Shares so that
such fees are expected to be 0.76%. Total Fund operating expenses after
these waivers are expected to be 1.00% for Retail A Shares and 1.65% for
Retail B Shares. These fee waivers 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
- - 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 $493 $742 $1,010 $1,775
- --------------------------------------------------------------------------------------------------------
Retail B Shares $692 $894 $1,221 $1,867
- --------------------------------------------------------------------------------------------------------
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
- ---------------------------------------------------------------------------------------------------------
Retail B Shares $192 $594 $1,021 $1,867
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a Vice President
and Manager of Fixed Income Investments until February 1999. She has managed the
Fund since December 1996.
-16-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Taxable
Bond Funds have been described above. The following supplements that discussion.
TEMPORARY DEFENSIVE POSITIONS
Under unusual market conditions, each Fund may hold uninvested cash (which will
not earn any income) and invest without limit in money market instruments,
including short-term U.S. Government securities. This strategy could prevent a
Fund from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be 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 disruption
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.
-17-
<PAGE>
INVESTOR GUIDELINES
The table below provides information as to which type of investor might want to
invest in each of the Galaxy Taxable Bond Funds. It's meant as a general guide
only. Consult your financial professional to help you decide which Fund is right
for you.
<TABLE>
<CAPTION>
Galaxy Fund May be best suited for investors who...
- ---------------------------------------------------------------------------------------------------
<S> <C>
Galaxy Short-Term Bond Fund - want current income greater than that normally
provided by a money market fund
- want less change in the value of their
investment than normally associated with
long-term funds
- ---------------------------------------------------------------------------------------------------
Galaxy Intermediate Government Income Fund - want current income
- want the extra margin of safety associated with
U.S. Government securities
- can accept fluctuations in price and yield
- ---------------------------------------------------------------------------------------------------
Galaxy High Quality Bond Fund - want current income
- want the added safety associated with bonds
with lower credit risk than other debt
securities
- can accept fluctuations in price and yield
- ---------------------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
Fund Management fee as a % of average net assets
- ---------------------------------------------------------------------------------
<S> <C>
Short-Term Bond Fund 0.55%
- ---------------------------------------------------------------------------------
Intermediate Government Income Fund 0.55%
- ---------------------------------------------------------------------------------
High Quality Bond Fund 0.55%
- ---------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
HOW TO INVEST IN THE FUNDS
HOW SALES CHARGES WORK
You will normally pay a sales charge to invest in the Funds. If you buy Retail A
Shares, 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, 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
- --------------------------------------------------------------------------------------------------------------------
As a % of the offering price per
Amount of your investment share As a % of your 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 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.
-20-
<PAGE>
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 buy shares for a 401(k) or SIMPLE IRA retirement account.
- - You buy shares for any retirement account provided that you held Retail
A Shares in a retirement account prior to January 1, 1999.
- - 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.
- - 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'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 Galaxy shareholder before December 1, 1995.
- - 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).
[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 Funds, 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:
-21-
<PAGE>
<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 0.15% in shareholder service fees with respect to Retail A Shares
during the current fiscal year.
Retail B Shares of the Funds can pay distribution and shareholder service
(12b-1) fees at an annual rate of up to 1.15% of each Fund's Retail B Share
assets. The Funds do not intend to pay more than 0.80% in distribution and
shareholder service (12b-1) fees during the current fiscal year. Galaxy has
adopted a plan under Rule 12b-1 that allows each Fund 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 a Fund, 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.
-22-
<PAGE>
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, 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 form, as described below, less
any applicable CDSC. 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 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 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 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.
[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, including Education IRA 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.
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<PAGE>
Usually, you must keep at least $250 in your account other than retirement plan
accounts. 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
- - 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
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<PAGE>
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.
- - 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.
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<PAGE>
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).
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.
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<PAGE>
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.
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 a Fund 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 by giving 60 days' advance
written notice to shareholders.
-27-
<PAGE>
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 identify, 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.
-28-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund declares any dividends from net investment income daily and pays them
monthly. Each Fund pays any net capital gains at least once a year. It's
expected that the Funds' annual distributions will normally -- but not always --
consist primarily of ordinary income rather than capital gains. Dividends and
distributions are paid in cash unless you indicate on the account application or
in a letter to Galaxy that you want to have dividends and distributions
reinvested in additional shares.
FEDERAL TAXES
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 federal income tax on these distributions regardless of
whether they are paid in cash or reinvested in additional shares. You will be
notified annually of the tax status of distributions to you.
You should note that if you purchase shares just before a 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.
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.
-29-
<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 each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities or on securities of a particular state, its
agencies or municipalities.
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.
-30-
<PAGE>
GALAXY INVESTOR PROGRAMS
RETIREMENT PLANS
Retail A Shares and Retail B Shares of the Funds 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 Sections 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 a
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.
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 account. The
minimum for initial and additional investments in an Education
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<PAGE>
IRA is $100 unless you participate in the Automatic Investment Program, in which
case the minimum for initial and additional investments is $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 Fund 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 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.
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<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 Web site 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
The financial highlights tables shown below will help you understand the
financial performance for the Funds' Retail A Shares and Retail B Shares for the
past five years (or the period since a particular Fund began operations or a
particular class of shares was first offered). Certain information reflects the
financial performance of a single Retail A Share or Retail B Share. The total
returns in the tables represent the rate that an investor would have earned (or
lost) on an investment in Retail A Shares and Retail B Shares of each Fund,
assuming all dividends and distributions were reinvested. The information for
the fiscal year ended October 31, 1999 has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report and are incorporated by
reference into the SAI. The Annual Report and SAI are available free of charge
upon request. The information for the fiscal periods ended October 31, 1998,
1997, 1996 and 1995 was audited by Galaxy's former auditors,
PricewaterhouseCoopers LLP.
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<PAGE>
Galaxy Short-Term Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------
1999 1998
--------------------- ---------------------
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $10.10 $10.10 $10.01 $10.01
Income from investment operations:
Net investment income(2)....................... 0.49 0.42 0.51 0.45
Net realized and unrealized gain (loss) on
investments.................................... (0.25) (0.25) 0.11 0.11
Total from investment operations..................... 0.24 0.17 0.62 0.56
Less dividends:
Dividends from net investment income........... (0.48) (0.41) (0.53) (0.47)
Total dividends...................................... (0.48) (0.41) (0.53) (0.47)
Net increase (decrease) in net asset value........... (0.24) (0.24) 0.09 0.09
Net asset value, end of period....................... $9.86 $9.86 $10.10 $10.10
----- ----- ------ ------
Total return(3)...................................... 2.43% 1.71% 6.42% 5.73%
Ratios/supplemental data:
Net assets, end of period (000's).............. $24,653 $812 $29,067 $1,087
Ratios to average net assets:
Net investment income including
reimbursement/waiver........................... 4.86% 4.17% 5.07% 4.40%
Operating expenses including reimbursement/waiver 1.10% 1.79% 1.11% 1.78%
Operating expenses excluding reimbursement/waiver 1.30% 2.08% 1.31% 1.99%
Portfolio turnover rate........................... 151% 151% 133% 133%
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ---------
Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(1) A Shares
--------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 9.99 $ 9.99 $ 10.06 $ 10.09 $ 9.73
Income from investment operations:
Net investment income(2)....................... 0.53 0.46 0.52 0.31 0.55
Net realized and unrealized gain (loss) on 0.02 0.03 (0.07) (0.10) 0.33
investments....................................
Total from investment operations..................... 0.55 0.49 0.45 0.21 0.88
Less dividends:
Dividends from net investment income........... (0.53) (0.47) (0.52) (0.31) (0.55)
Total dividends.................................... (0.53) (0.47) (0.52) (0.31) (0.55)
Net increase (decrease) in net asset value........... 0.02 0.02 (0.07) (0.10) 0.33
Net asset value, end of period..................... $ 10.01 $ 10.01 $ 9.99 $ 9.99 $10.06
------- -------- -------- -------- --------
Total return(3)...................................... 5.64% 4.99% 4.63% 2.12%(4) 9.28%
Ratios/supplemental data:
Net assets, end of period (000's).............. $27,961 $ 905 $33,388 $ 260 $31,542
Ratios to average net assets:
Net investment income including 5.29% 4.56% 5.22% 4.73%(5) 5.54%
reimbursement/waiver...........................
Operating expenses including reimbursement/waiver 1.00% 1.75% 1.11% 1.77%(5) 0.99%
Operating expenses excluding reimbursement/waiver 1.21% 2.01% 1.35% 1.98%(5) 1.32%
Portfolio turnover rate........................... 173% 173% 214% 214% 289%
</TABLE>
- -------------------------------
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.47, $0.49,
$0.51, $0.50 and $0.52, respectively. Net investment income per share
before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Retail B Shares for the years ended October 31, 1999, 1998
and 1997 and for the period ended October 31, 1996 as $0.39, $0.42, $0.44
and $0.29, respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) Not annualized.
(5) Annualized.
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<PAGE>
Galaxy Intermediate Government Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
Retail Retail Retail Retail Retail Retail
A Shares B Shares(1) A Shares A Shares A Shares A Shares
--------- ----------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $10.50 $ 10.50 $10.18 $ 10.06 $ 10.28 $ 9.68
Income from investment operations:
Net investment income(2).............. 0.54 0.47 0.57 0.59 0.57 0.61
Net realized and unrealized gain (loss)
on investments......................... (0.65) (0.66) 0.34 0.12 (0.22) 0.60
Total from investment operations............. (0.11) (0.19) 0.91 0.71 0.35 1.21
Less dividends:
Dividends from net investment income... (0.53) (0.46) (0.59) (0.59) (0.57) (0.61)
Total dividends.............................. (0.53) (0.46) (0.59) (0.59) (0.57) (0.61)
Net increase (decrease) in net asset value. (0.64) (0.65) 0.32 0.12 (0.22) 0.60
Net asset value, end of period............... $ 9.86 $ 9.85 $ 10.50 $ 10.18 $ 10.06 $ 10.28
------- ------- ------- -------- -------- --------
Total return(3)............................. (1.11)% (1.78)% 9.22% 7.33% 3.58% 12.85%
Ratios/supplemental data:
Net assets, end of period (000's)...... $56,454 $ 1,084 $66,865 $65,626 $79,741 $79,558
Ratios to average net assets:
Net investment income including
reimbursement/waiver 5.28% 4.61% 5.49% 5.90% 5.69% 6.10%
Operating expenses including
reimbursement/waiver 0.97% 1.64% 1.01% 1.02% 1.04% 1.02%
Operating expenses excluding
reimbursement/waiver 1.17% 2.14% 1.21% 1.22% 1.24% 1.26%
Portfolio turnover rate...................... 184% 184% 210% 128% 235% 145%
</TABLE>
- ----------------------------------
(1) The Fund began offering Retail B Shares on November 1, 1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.52, $0.55, $0.57,
$0.55 and $0.58, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the year ended October 31, 1999 was $ 0.42.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares
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<PAGE>
Galaxy High Quality Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------
1999 1998
---- ----
Retail Retail Retail Retail
A Shares B Shares A Shares B Shares
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $11.20 $11.20 $10.70 $10.70
Income from investment operations:
Net investment income(2)............... 0.57 0.50 0.58 0.51
Net realized and unrealized gain (loss) on
investments............................ (0.86) (0.86) 0.50 0.51
Total from investment operations............. (0.29) (0.36) 1.08 1.02
Less dividends:
Dividends from net investment income... (0.57) (0.50) (0.58) (0.52)
Dividends from net realized capital gains (0.09) (0.09) -- --
Total dividends.............................. (0.66) (0.59) (0.58) (0.52)
Net increase (decrease) in net asset value... (0.95) (0.95) 0.50 0.50
Net asset value, end of period............... $ 10.25 $ 10.25 $ 11.20 $ 11.20
------ ------ ------ ------
Total return(3).............................. (2.66)% (3.25)% 10.35% 9.73%
Ratios/supplemental data:
Net assets, end of period (000's)...... $42,906 $6,550 $45,879 $5,420
Ratios to average net assets:
Net investment income including
reimbursement/waiver 5.32% 4.72% 5.30% 4.69%
Operating expenses including
reimbursement/waiver 0.99% 1.59% 1.00% 1.61%
Operating expenses excluding
reimbursement/waiver 1.20% 1.88% 1.20% 1.81%
Portfolio turnover rate...................... 226% 226% 253% 253%
<CAPTION>
For the year ending October 31,
--------------------------------------------------------
1997 1996 1995
---- ---- ------
Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares(1) A Shares
-------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.47 $ 10.47 $ 10.63 $ 10.72 $ 9.54
Income from investment operations:
Net investment income(2)............... 0.60 0.53 0.59 0.36 0.62
Net realized and unrealized gain (loss) on
investments............................ 0.23 0.24 (0.16) (0.25) 1.09
Total from investment operations............. 0.83 0.77 0.43 0.11 1.71
Less dividends:
Dividends from net investment income... (0.60) (0.54) (0.59) (0.36) (0.62)
Dividends from net realized capital gains -- -- -- -- --
Total dividends.............................. (0.60) (0.54) (0.59) (0.36) (0.62)
Net increase (decrease) in net asset value... 0.23 0.23 (0.16) (0.25) 1.09
Net asset value, end of period............... $ 10.70 $ 10.70 $ 10.47 $ 10.47 $ 10.63
-------- -------- -------- -------- --------
Total return(3).............................. 8.22% 7.59% 4.24% 1.14%(4) 18.46%
Ratios/supplemental data:
Net assets, end of period (000's)...... $27,950 $1,998 $30,984 $ 646 $30,093
Ratios to average net assets:
Net investment income including reimbursement/waiver 5.73% 5.07% 5.66% 5.34%(5) 6.16%
Operating expenses including reimbursement/waiver 1.01% 1.69% 1.07% 1.60%(5) 1.02%
Operating expenses excluding reimbursement/waiver 1.21% 1.95% 1.28% 1.81%(5) 1.26%
Portfolio turnover rate................... 182% 182% 163% 163% 110%
</TABLE>
- ----------------------------------
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.55, $0.56, $0.58,
$0.57 and $0.59, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the years ended October 31, 1999, 1998, 1997 and for
the period ended October 31, 1996 was $0.47, $0.49, $0.51 and $0.34,
respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) Not annualized.
(5) Annualized.
-37-
<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 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 Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALBND 3/1/00
<PAGE>
[Front cover page]
Galaxy Taxable Bond Funds
The Galaxy Fund
Prospectus
February 29, 2000
- -----------------
Galaxy Short-Term Bond Fund
Galaxy Intermediate Government Income Fund
Galaxy High Quality Bond Fund
Galaxy Corporate Bond Fund
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 Short-Term Bond Fund
7 Galaxy Intermediate Government Income Fund
11 Galaxy High Quality Bond Fund
15 Galaxy Corporate Bond Fund
19 Additional information about risk
20 Investor guidelines
21 Fund management
22 How to invest in the Funds
22 Buying and selling shares
23 How to buy shares
24 How to sell shares
25 Other transaction policies
27 Dividends, distributions and taxes
29 How to reach Galaxy
30 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Taxable Bond Funds. Each Fund invests
primarily in debt obligations, such as bonds, notes and commercial paper.
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 Fund's past performance 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.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance for
risk will determine which fund is right for you. On page 20, you'll find a table
that provides a general guide to help you decide which of the Galaxy Taxable
Bond Funds is best suited to you.
THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc., which is referred to in this prospectus as
the ADVISER, is the investment adviser for all of these Funds. The Adviser,
an indirect wholly-owned subsidiary of FLeetBoston Financial 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 $68 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 THE FUNDS.
-1-
<PAGE>
Galaxy Short-Term Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income 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:]
DEBT OBLIGATION
When a fund buys a debt obligation such as a bond, it is in effect lending money
to the company, government or other entity that issued the bond. In return, the
issuer has an obligation to make regular interest payments and to repay the
original amount of the loan on a given date, known as the maturity date. A bond
MATURES when it reaches its maturity date. Bonds usually have fixed interest
rates, although some have rates that fluctuate based on market conditions and
other factors.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in debt obligations of U.S. and foreign corporations,
including bonds and notes, and in debt obligations issued or guaranteed by the
U.S. Government and its agencies or instrumentalities or by foreign governments
or their political subdivisions and instrumentalities. It also invests in
asset-backed and mortgage-backed securities and in money market instruments,
such as commercial paper and the obligations of U.S. and foreign banks. The Fund
normally invests at least 65% of its total assets in bonds and debentures.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
payments on bonds of various maturities and determines the appropriate
allocation of the Fund's assets among various market sectors.
Nearly all Fund 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. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
securities that have one of the top three ratings assigned by S&P or Moody's, or
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's average weighted maturity will be less than three years under
normal circumstances.
-2-
<PAGE>
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt obligations
in a fund come due or MATURE. It is calculated by averaging the time to maturity
of all debt obligations held by a fund with each maturity "weighted" according
to the percentage of assets it represents.
[Sidenote:]
DURATION
Duration is an approximate measure of the price sensitivity of a fund to
changes in interest rates. Unlike maturity which measures only the time until
final payment, duration gives you the average time it takes to receive all
expected cash flows (including interest payments, prepayments and final
payments) on the debt obligations held by a fund.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P or Moody's are considered to have
speculative characteristics. Changes in the economy are more likely to
affect the ability of the issuers of these securities to make payments of
principal and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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
-3-
<PAGE>
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.
- - 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
securities may be more volatile and less liquid than U.S. securities.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[SIDENOTE:]
Best quarter: 4.14% for the quarter ending September 30, 1992
worst quarter: -0.72% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997 1998 1999
5.81% 6.41% -0.33% 11.26% 3.65% 5.82% 6.34% 2.56%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 2.56% 5.89% 5.14% (12/30/91)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers One to
Three Year Government Bond
Index 2.90% 6.47% 5.54% (since 12/31/91)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers One to Three Year Government Bond Index is an unmanaged
index which tracks the performance of short-term U.S. Government bonds.
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>
- ---------------------------------------------------------------------------------------------------------------
Total Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.31% 1.06%(1)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.86%. This fee waiver may be revised or discontinued at
any time.
-5-
<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 $108 $337 $585 $1,294
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Taxable Fixed Income Strategy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-6-
<PAGE>
Galaxy Intermediate Government Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks the highest level of current income consistent with prudent risk
of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in debt obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. It also invests in debt obligations of U.S. corporations,
asset-backed and mortgage-backed securities and money market instruments, such
as commercial paper and obligations of U.S. banks and U.S. branches of foreign
banks.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
Nearly all Fund investments will be of investment grade quality and will have
one of the top three ratings assigned by Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("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 the minimum required rating. 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's average weighted maturity will be between three and ten
years under normal circumstances.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
[Sidenote:]
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are debt obligations issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. U.S. Government
obligations generally have less credit risk than other debt obligations.
-7-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
-8-
<PAGE>
[SIDENOTE:]
Best quarter: 6.13% for the quarter ending September 30, 1992
Worst quarter: -2.90% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.87% 15.77% 7.11% 5.58% -3.70% 16.01% 2.05% 8.12% 8.62% -1.72%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999, as compared to broad-based market indices.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1 year 5 years 10 years Since inception
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares -1.72% 6.44% 6.19% 6.73% (9/1/88)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Government/
Corporate Bond Index 0.39% 7.10% 7.26% 7.74% (since 9/1/88)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate
Bond Index -0.82% 7.73% 7.70% 8.34% (since 9/1/88)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index which tracks the performance of intermediate-term U.S.
Government and corporate bonds.
[SIDENOTE:]
The Lehman Brothers Aggregate Bond Index is an unmanaged index made up of the
Lehman Brothers Government/Corporate Bond Index, its Mortgage Backed Securities
Index and its Asset Backed Securities Index.
-9-
<PAGE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a Vice President
and Manager of Fixed Income Investments until February 1999. She has managed the
Fund since December 1996.
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 (fees deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Total Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.16% 0.91%(1)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.71%. 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>
Trust Shares $93 $290 $504 $1,120
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
Galaxy High Quality Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income consistent with prudent risk of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, as well as in corporate debt
obligations such as notes and bonds. The Fund also invests in asset-backed and
mortgage-backed securities and in money market instruments, such as commercial
paper and bank obligations.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
Nearly all Fund 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. Under normal
market conditions, the Fund will invest at least 65% of its total assets in high
quality securities that have one of the top two ratings assigned by S&P or
Moody's, or unrated securities determined by the Adviser to be of comparable
quality. High quality securities tend to pay less income than lower-rated
securities. 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 promptly sell 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's average weighted maturity will vary from time to time depending on
current market and economic conditions and the Adviser's assessment of probable
changes in interest rates.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
-11-
<PAGE>
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P or Moody's are considered to have
speculative characteristics. Changes in the economy are more likely to
affect the ability of the issuers of these securities to make payments of
principal and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
-12-
<PAGE>
[SIDENOTE:]
Best quarter: 7.59% for the quarter ending June 30, 1995
Worst quarter: -3.85% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.12% 6.77% 12.81% -6.43% 21.41% 1.59% 9.23% 9.42% -3.99%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -3.99% 7.19% 6.98% (12/14/90)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Government/
Corporate Bond Index 0.39% 7.10% 7.15% (since 11/30/90)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
index which tracks the performance of intermediate-term U.S. Government and
corporate bonds.
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>
- --------------------------------------------------------------------------------------------
Total Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.30% 1.05%(1)
- --------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.85%. 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>
Trust Shares $107 $334 $579 $1,283
- --------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a Vice President
and Manager of Fixed Income Investments until February 1999. She has managed the
Fund since December 1996.
-14-
<PAGE>
Galaxy Corporate Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in corporate debt
obligations. These include obligations that are issued by U.S. and foreign
business corporations and obligations issued by agencies, instrumentalities or
authorities that are organized as corporations by the U.S., by states or
political subdivisions of the U.S., or by foreign governments or political
subdivisions. The Fund also invests in obligations issued or guaranteed by U.S.
or foreign governments, their agencies or instrumentalities, asset-backed and
mortgage-backed securities and money market instruments, such as commercial
paper and obligations of U.S. and foreign banks.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
payments on bonds of various maturities and determines the appropriate
allocation of the Fund's assets among various market sectors.
Substantially 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. 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's average weighted maturity will be three to ten years under normal
circumstances.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
-15-
<PAGE>
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK - The prices of debt securities generally 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 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 may 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.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
debt securities held by the Fund, particularly asset-backed and
mortgage-backed securities, 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.
- - 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
securities may be more volatile and less liquid than U.S. securities.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
-16-
<PAGE>
[SIDENOTE:]
Best quarter: 5.50% for the quarter ending June 30, 1995
Worst quarter: -1.50% for the quarter ending March 31, 1996
[bar chart goes here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
15.91% 3.10% 8.13% 8.18% -1.83%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -1.83% 6.53% 6.60% (12/12/94)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Government/
Corporate Bond Index 0.39% 7.10% 7.06% (since 11/30/94)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
index which tracks the performance of intermediate-term U.S. Government and
corporate bonds.
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>
- --------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.30% 1.05%(1)
- --------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.85%. 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>
Trust Shares $107 $334 $579 $1,283
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is David Lindsay, CFA, a Senior Vice President of
the Adviser since 1992. He's primarily responsible for the day-to-day management
of the Fund's investment portfolio. Mr. Lindsay has managed the Fund since it
began operations in 1994. He has been with the Adviser and its predecessors
since 1986.
-18-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Taxable Bond
Funds have been described above. The following supplements that discussion.
TEMPORARY DEFENSIVE POSITIONS
Under unusual market conditions, each Fund may hold uninvested cash (which will
not earn any income) and invest without limit in money market instruments,
including short-term U.S. Government securities. This strategy could prevent a
Fund from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund may,
from time to time, pursue other investment strategies and make other types of
investments in support of its overall investment goal. These supplemental
investment strategies, which are not considered to be main investment
strategies of the Fund - 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 disruption
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.
-19-
<PAGE>
INVESTOR GUIDELINES
The table below provides information as to which type of investor might want to
invest in each of the Galaxy Taxable Bond Funds. It's meant as a general guide
only. Consult your financial professional to help you decide which Fund is right
for you.
Galaxy Fund May be best suited for investors who...
- -----------------------------------------------------------------------
Galaxy Short-Term Bond Fund -want current income greater than that
normally provided by a money market fund
-want less change in the value of their
investment than normally associated with
long-term funds
- -----------------------------------------------------------------------
Galaxy Intermediate Government -want current income
Income Fund -want the extra margin of safety
associated with U.S. Government
securities
-can accept fluctuations in
price and yield
- -----------------------------------------------------------------------
Galaxy High Quality Bond Fund -want current income
-want the added safety associated
with bonds with lower credit risk than
other debt securities
-can accept fluctuations in price and
yield
- -----------------------------------------------------------------------
Galaxy Corporate Bond Fund -want current income from corporate debt
securities
-can accept fluctuations in price and
yield
- -----------------------------------------------------------------------
-20-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fund Management fee as a % of average net assets
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Short-Term Bond Fund 0.55%
- --------------------------------------------------------------------------------------------------------------------
Intermediate Government Income Fund 0.55%
- --------------------------------------------------------------------------------------------------------------------
High Quality Bond Fund 0.55%
- --------------------------------------------------------------------------------------------------------------------
Corporate Bond Fund 0.55%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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
held by defined 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.
-21-
<PAGE>
HOW TO INVEST IN THE FUNDS
BUYING AND SELLING SHARES
Trust Shares of the Funds 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 Financial 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.
In addition to the above types of investors, Trust Shares of the Corporate Bond
Fund are also available for purchase by:
- - customers of financial institutions, such as banks, savings and loan
associations and broker-dealers, including financial institutions
affiliated with the Adviser
- - investors purchasing shares directly from Galaxy's distributor.
You can buy and sell Trust Shares of the Funds on any business day. For
customers of financial institutions (including customers maintaining
qualified accounts) and participants in employer-sponsored plans, 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. For
investors purchasing shares directly from Galaxy's distributor, a business
day 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 net asset value (NAV) per share next
determined after your order is accepted. The price at which you sell shares 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 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 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 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 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.
-22-
<PAGE>
[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
If you are a customer of a financial institution (including a customer who
maintains a qualified account) or a participant in an employer-sponsored plan,
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 and
payment to Galaxy's distributor and wiring payments 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.
You can also buy Trust Shares of the Corporate Bond Fund directly from Galaxy's
distributor in any of the following ways:
BUYING BY MAIL
Complete an account application and mail it, together with a check payable to
the Galaxy Corporate Bond Fund, 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
- - A letter stating the amount of your investment, the name of the Fund 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
-23-
<PAGE>
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 effective 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.
[Sidenote:]
INVESTMENT MINIMUMS
Galaxy does not have any minimum investment requirements for initial or
additional investments in Trust Shares but financial institutions and
employer-sponsored plans may. They may also require you to maintain a
minimum account balance.
HOW TO SELL SHARES
If you are a customer of a financial institution (including a customer who
maintains a qualified account) or a participant in an employer-sponsored plan,
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.
You can also sell Trust Shares of the Corporate Bond Fund directly through
Galaxy's distributor in any of the following ways:
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
-24-
<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 either 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.
OTHER TRANSACTION POLICIES
If you purchased your shares through a financial institution or
employer-sponsored plan and Galaxy doesn't receive full payment for your order
to buy shares by 4:00 p.m. on the next business day, Galaxy won't accept your
order. Galaxy will advise your financial institution or plan administrator if
this happens.
-25-
<PAGE>
If you purchased shares directly from Galaxy's distributor and 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.
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 shares by wire or telephone if it believes
it is advisable to do so. Galaxy may change or cancel the procedures for selling
or exchanging shares by wire or telephone at any time without notice.
If you purchased your shares directly from Galaxy's distributor and you sell
your 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.
If you sell your shares through a financial institution or employer-sponsored
plan, sales proceeds are normally wired to your financial institution or plan
administrator on the next business day. If you sell your shares directly through
Galaxy's distributor, sales proceeds are normally sent to you within three
business days. In each case, 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.
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.
-26-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund declares any dividends from net investment income daily and pays them
monthly. Each Fund pays any net capital gains at least once a year. It's
expected that the Funds' annual distributions will normally -- but not always --
consist primarily of ordinary income rather than capital gains. Dividends and
distributions are paid in cash unless you tell your financial institution or
plan administrator in writing or, if you purchased your shares directly from
Galaxy's distributor, you indicate on the account application or in a letter to
Galaxy, that you want to have dividends and distributions reinvested in
additional shares.
FEDERAL TAXES
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 whether they are paid in cash or reinvested in additional
shares. You will be notified annually of the tax status of distributions to you.
You should note that if you purchase shares just before a 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, 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.
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.
-27-
<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 each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities or on securities of a particular state, its
agencies or municipalities. Shareholders should consult their tax advisers
regarding the tax status of distributions in their state and locality.
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.
-28-
<PAGE>
HOW TO REACH GALAXY
If you purchased your shares directly from Galaxy's distributor, you can reach
Galaxy in any of the following ways:
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 Web site 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.
-29-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables on the following pages will help you
understand the financial performance for the Funds' Trust Shares for the past
five years (or the period since a particular Fund began operations). Certain
information reflects the financial performance of a single Trust Share. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in Trust Shares of each Fund, assuming all
dividends and distributions were reinvested. The information for the fiscal
year ended October 31, 1999 has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report and are incorporated by
reference into the SAI. The Annual Report and SAI are available free of
charge upon request. The information for the fiscal years ended October 31,
1998, 1997, 1996 and 1995 was audited by Galaxy's former auditors,
PricewaterhouseCoopers LLP.
-30-
<PAGE>
Galaxy Short-Term Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Trust Shares
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $10.10 $10.01 $ 9.99 $10.06 $ 9.73
Income from investment operations:
Net investment income(1).................. 0.51 0.54 0.54 0.55 0.57
Net realized and unrealized gain (loss)
on investments........................... (0.25) 0.11 0.02 (0.07) 0.33
Total from investment operations........... 0.26 0.65 0.56 0.48 0.90
Less dividends:
Dividends from net investment income....... (0.50) (0.56) (0.54) (0.55) (0.57)
Total dividends........................... (0.50) (0.56) (0.54) (0.55) (0.57)
Net increase (decrease)
in net asset value........................ (0.24) 0.09 0.02 (0.07) 0.33
Net asset value, end of period.............. $ 9.86 $10.10 $10.01 $ 9.99 $10.06
------- ------- ------- ------- -------
Total return.............................. 2.67% 6.68% 5.77% 4.91% 9.55%
Ratios/supplemental data:
Net assets, end of period (000's).......... $31,438 $38,071 $49,837 $58,227 $35,088
Ratios to average net assets:
Net investment income including
reimbursement/waiver...................... 5.10% 5.33% 5.43% 5.49% 5.79%
Operating expenses including
reimbursement/waiver...................... 0.86% 0.85% 0.86% 0.84% 0.74%
Operating expenses excluding
reimbursement/waiver...................... 1.06% 1.05% 1.07% 1.08% 1.02%
Portfolio turnover rate................... 151% 133% 173% 214% 289%
</TABLE>
- ------------------------------
(1) Net investment income per share for Trust Shares before reimbursement/waiver
of fees by the Adviser and/or the Fund's administrator for the years ended
October 31, 1999, 1998, 1997, 1996 and 1995 was $0.49, $0.52, $0.52, $0.53
and $0.54, respectively.
-31-
<PAGE>
Galaxy Intermediate Government Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Trust Shares
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period....................... $10.50 $10.18 $10.06 $10.28 $ 9.68
Income from investment operations:
Net investment income(1) 0.56 0.59 0.62 0.60 0.64
Net realized and
unrealized gain (loss)
on investments................. (0.65) 0.35 0.12 (0.22) 0.60
Total from investment
operations...................... (0.09) 0.94 0.74 0.38 1.24
Less dividends:
Dividends from net
investment income............... (0.56) (0.62) (0.62) (0.60) (0.64)
Total dividends................ (0.56) (0.62) (0.62) (0.60) (0.64)
Net increase (decrease)
IN net asset value............ (0.65) 0.32 0.12 (0.22) 0.60
Net asset value, end of
period......................... $ 9.85 $10.50 $10.18 $10.06 $10.28
------ ------- ------- ------- -------
Total return..................... (0.86)% 9.52% 7.63% 3.88% 13.18%
Ratios/supplemental data:
Net assets, end of
period (000's)................ $234,880 $239,763 $209,215 $213,750 $186,037
Ratios to average net assets:
Net investment
income including
reimbursement/waiver........... 5.53% 5.77% 6.19% 5.98% 6.39%
Operating expenses
including
reimbursement/waiver........... 0.72% 0.73% 0.74% 0.75% 0.73%
Operating expenses
excluding
reimbursement/waiver........... 0.92% 0.93% 0.94% 0.95% 0.94%
Portfolio turnover rate........ 184% 205% 128% 235% 145%
--------------------
</TABLE>
(1) Net investment income per share for Trust Shares before reimbursement/waiver
of fees by the Adviser and/or the Fund's administrator for the years ended
October 31, 1999, 1998, 1997, 1996 and 1995 was $0.54, $0.57, $0.60, $0.58
and $0.62, respectively.
-32-
<PAGE>
Galaxy High Quality Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Trust Shares
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period......................... $11.20 $10.70 $10.47 $10.63 $ 9.54
Income from investment operations:
Net investment income(1).......... 0.58 0.59 0.61 0.62 0.64
Net realized and
unrealized gain (loss)
on investments................... (0.86) 0.50 0.23 (0.16) 1.09
Total from investment
operations..................... (0.28) 1.09 0.84 0.46 1.73
Less dividends:
Dividends from net
investment income.................. (0.58) (0.59) (0.61) (0.62) (0.64)
Dividends from net
realized capital
gains............................. (0.09) -- -- -- --
Total dividends................... (0.67) (0.59) (0.61) (0.62) (0.64)
Net increase (decrease)
in net asset value................ (0.95) 0.50 0.23 (0.16) 1.09
Net asset value, end of
period............................ $10.25 $11.20 $10.70 $10.47 $10.63
------- ------- ------- ------- -------
Total return........................ (2.52)% 10.50% 8.36% 4.46% 18.66%
Ratios/supplemental data:
Net assets, end of
period (000's)..................... $237,772 $217,143 $182,398 $149,075 $134,631
Ratios to average net assets:
Net investment
income including
reimbursement/waiver.............. 5.46% 5.43% 5.88% 5.88% 6.33%
Operating expenses
including
reimbursement/waiver.............. 0.84% 0.87% 0.87% 0.85% 0.85%
Operating expenses
excluding
reimbursement/waiver.............. 1.04% 1.07% 1.09% 1.06% 1.07%
Portfolio turnover rate........... 226% 253% 182% 163% 110%
--------------------
</TABLE>
(1) Net investment income per share for Trust Shares before reimbursement/waiver
of fees by the Adviser and/or the Fund's administrator for the years ended
October 31, 1999, 1998, 1997, 1996 and 1995 was $0.56, $0.56, $0.59, $0.60
and $0.62, respectively.
-33-
<PAGE>
Galaxy Corporate Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------
period ended
October 31,
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
Trust Shares
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period....................... $10.90 $10.63 $10.53 $10.74 $10.00
Income from investment
operations:
Net investment income(2) 0.59 0.62 0.66 0.64 0.61
Net realized and
unrealized gain (loss)
on investments................. (0.68) 0.30 0.11 (0.13) 0.74
Total from investment
operations.................... (0.09) 0.92 0.77 0.51 1.35
Less dividends:
Dividends from net
investment income.............. (0.59) (0.65) (0.66) (0.64) (0.61)
Dividends from net
realized capital
gains.......................... -- -- (0.01) (0.08) --
Total dividends.................. (0.59) (0.65) (0.67) (0.72) (0.61)
Net increase (decrease)
in net asset value.............. (0.68) 0.27 0.10 (0.21) 0.74
Net asset value, end of
period......................... $10.22 $10.90 $10.63 $10.53 $10.74
------- ------- ------- ------- -------
Total return..................... (0.82)% 8.96% 7.56% 5.00% 13.85%(3)
Ratios/supplemental data:
Net assets, end of
period (000's)................. $79,382 $83,565 $91,728 $107,728 $37,391
Ratios to average net assets:
Net investment
income including
reimbursement/waiver........... 5.62% 5.80% 6.27% 6.13% 6.61%(4)
Operating expenses
including
reimbursement/waiver........ 0.85% 0.82% 0.80% 0.85% 1.06%(4)
Operating expenses
excluding
reimbursement/waiver........ 1.05% 1.02% 1.00% 1.05% 1.26%(4)
Portfolio turnover rate.......... 206% 155% 37% 84% 41%(3)
</TABLE>
(1) The Fund commenced operations on December 12, 1994.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for the fiscal years ended
October 31, 1999, 1998, 1997 and 1996 and for the period ended October
31, 1995 was $0.57, $0.60, $0.64, $0.62 and $0.57, respectively.
(3) Not annualized.
(4) Annualized.
-34-
<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 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 Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALBND 3/1/00
<PAGE>
[Front cover page]
Galaxy Tax-Exempt Bond Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Tax-Exempt Bond Fund
Galaxy New Jersey Municipal Bond Fund
Galaxy New York Municipal Bond Fund
Galaxy Connecticut Municipal Bond Fund
Galaxy Massachusetts Municipal Bond Fund
Galaxy Rhode Island Municipal Bond Fund
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
Contents
- --------
1 Introduction
3 Galaxy Tax-Exempt Bond Fund
8 Galaxy New Jersey Municipal Bond Fund
13 Galaxy New York Municipal Bond Fund
18 Galaxy Connecticut Municipal Bond Fund
23 Galaxy Massachusetts Municipal Bond Fund
29 Galaxy Rhode Island Municipal Bond Fund
34 Additional information about risk
35 Fund management
36 How to invest in the Funds
35 How sales charges work
39 Buying, selling and exchanging shares
39 How to buy shares
41 How to sell shares
43 How to exchange shares
43 Other transaction policies
45 Dividends, distributions and taxes
47 Galaxy investor programs
49 How to reach Galaxy
50 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Tax-Exempt Bond Funds. The Funds invest
primarily in municipal securities, which are debt obligations of state and local
governments and other political or public bodies or agencies. The interest paid
on municipal securities is generally exempt from federal income tax and, in some
cases, from state and local income tax.
On the following pages, you'll find important information about each of the
Galaxy Tax-Exempt Bond Funds, 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 Fund's past performance 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.
[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.
WHICH FUND IS RIGHT FOR YOU?
The Funds are designed for investors who are looking for income that's free of
federal income tax and who can accept fluctuations in price and yield. A Fund
that specializes in a particular state is best suited to residents of that state
who are also looking for income that is free of the state's income tax.
Tax-exempt funds are NOT appropriate investments for tax-deferred retirement
accounts, such as IRAs, because their returns before taxes are generally lower
than those of taxable funds.
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 Financial Corporation, was
-1-
<PAGE>
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
$68 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 THE FUNDS.
-2-
<PAGE>
Galaxy Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide shareholders with as high a level of current interest
income free of federal income tax as is consistent with preservation of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
primarily bonds (normally 65% of total assets). Under normal conditions, the
Fund will invest no more than 20% of its total assets in taxable obligations,
such as U.S. Government obligations, money market instruments and repurchase
agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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 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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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 backed
-3-
<PAGE>
by private entities and are used to finance various non-public projects.
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.
[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 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 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.
-4-
<PAGE>
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance
the Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year.The returns for Retail B Shares were different than the figures
shown because each class of shares has different expenses. The figures don't
include any sales charges that investors pay when buying or selling Retail A
Shares of the Fund. If sales charges were included, the returns would be lower.
[Sidenote:]
Best quarter: 6.56% for the quarter ending March 31, 1995
Worst quarter: -5.39% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
9.25% 11.95% -5.37% 15.79% 3.31% 8.72% 5.73% -3.66%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -7.24% 4.97% 5.08% (12/30/91)
- -----------------------------------------------------------------------------------------------------------------
Retail B Shares -8.90% -- 2.32% (3/4/96)
- -----------------------------------------------------------------------------------------------------------------
-5-
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Index 6.20% (since 12/31/91)
Lehman Brothers Municipal -2.06% 6.91% 4.60% (since 2/29/96)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
price, whichever is
less
- ------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares 3.75%(1) None(2)
- ------------------------------------------------------------------------------------
Retail B Shares None 5.00%(3)
- ------------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Total
Distribution Fund
Management and service Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(4) None 0.35% 1.10%(4)
- ------------------------------------------------------------------------------------------
Retail B Shares 0.75%(4) 0.80% 0.21% 1.76%(4)
- ------------------------------------------------------------------------------------------
</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."
(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."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.90% for
-6-
<PAGE>
Retail A Shares and 1.56% for Retail B 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
- - 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 $483 $712 $958 $1,665
- -------------------------------------------------------------------------------------------------------------
Retail B Shares $679 $854 $1,154 $1,740
- -------------------------------------------------------------------------------------------------------------
</TABLE>
If you hold Retail B Shares, you would pay the following expenses if you didn't
sell your shares:
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail B Shares $179 $554 $954 $1,740
- -------------------------------------------------------------------------------------------------------------
</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 New Jersey Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from New Jersey personal income tax, as
is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in New Jersey municipal securities, which
are securities issued by the State of New Jersey and other government issuers
and that pay interest which is exempt from both federal income tax and New
Jersey personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities that have one of the top three
ratings assigned by S&P or Moody's, or 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 either by S&P or Moody's if the
securities exceed 5% of the Fund's net assets.
The Fund's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-8-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and by swings in
investment markets.
In addition, the Fund 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.
- - 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 New Jersey
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect New Jersey. Other
considerations affecting the Fund's investments in New Jersey municipal
securities are summarized in the Statement of Additional Information.
- - 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.
-9-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of Retail A Shares during the last
calendar year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[Sidenote:]
Best quarter: 0.37% for the quarter ending March 31, 1999
Worst quarter: -2.39% for the quarter ending June 30, 1999
[bar chart goes here]
- --------------
1999
- --------------
-3.20%
- --------------
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1 year Since inception
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Retail A Shares -6.85% -1.44% (4/3/98)
- -------------------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.06% 1.76% (since 3/31/98)
- -------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
-10-
<PAGE>
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 sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 1.30%(3) 2.05%(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."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.25%. The Fund's administrator is reimbursing certain
expenses so that Other expenses are expected to be 0.86%. Total Fund
operating expenses after these waivers and reimbursements are expected
to be 1.11%. These fee waivers and expense reimbursements 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:
-11-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares $575 $994 $1,437 $2,665
- -------------------------------------------------------------------------------------------------------------
</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 New York Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from New York State and New York City
personal income tax, as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in New York municipal securities, which are
securities issued by the State of New York and other government issuers and that
pay interest which is exempt from federal income tax and New York State and New
York City personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities 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.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-13-
<PAGE>
GALAXY NEW YORK MUNICIPAL BOND FUND
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 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.
- - 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 New York
municipal securities, the Fund's ability to achieve its investment
objective is dependent upon the ability of the issuers of New York
municipal securities to meet their continuing obligations for the payment
of principal and interest. New York State and New York City face
long-term economic problems that could seriously affect their ability and
that of other issuers of New York municipal securities to meet their
financial obligations. Other considerations affecting the
-14-
<PAGE>
Fund's investments in New York municipal securities are summarized in the
Statement of Additional Information.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance
the Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[Sidenote:]
Best quarter: 7.39% for the quarter ending March 31, 1995
Worst quarter: -6.55% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8.29% 12.30% -7.26% 16.85% 3.38% 8.66% 5.96% -3.66%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -7.24% 5.22% 4.79% (12/31/91)
- ------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.20% (since 12/31/91)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.42%(3) 1.17%(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."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Affiliates of the Adviser are waiving a portion
of the Shareholder Servicing fees (that are included in Other expenses so
that Other expenses are expected to be 0.40%. Total Fund operating expenses
after these waivers are expected to be 0.95%. These fee waivers 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
-16-
<PAGE>
- - 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 $490 $733 $995 $1,742
- -------------------------------------------------------------------------------------------------------------
</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 Connecticut Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Connecticut personal income tax, as
is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Connecticut municipal securities, which
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 the
Connecticut state income tax on individuals, trusts and estates. Under normal
conditions, the Fund will invest no more than 20% of its total assets in taxable
obligations, such as U.S. Government obligations, money market instruments and
repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
current market conditions and the Adviser's assessment of probable changes in
interest rates.
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.
-18-
<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 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.
- - 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.
- - 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 table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[Sidenote:]
Best quarter: 7.99% for the quarter ending March 31, 1995
Worst quarter: -7.01% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-8.07% 18.02% 3.35% 8.61% 5.84% -2.83%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -6.47% 5.58% 3.86% (3/16/93)
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers
Municipal Bond
Index -2.06% 6.91% 5.49% (since 3/31/93)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
-20-
<PAGE>
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.47% 1.22%(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."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after this waiver
are expected to be 0.82%. 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.
-21-
<PAGE>
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 $495 $748 $1,020 $1,797
- -------------------------------------------------------------------------------------------------------------
</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.
-22-
<PAGE>
Galaxy Massachusetts Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Massachusetts personal income tax,
as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Massachusetts municipal securities,
which 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 total assets in taxable obligations,
such as U.S. Government obligations, money market instruments and repurchase
agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-23-
<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 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.
- - 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.
- - 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.
-24-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower than shown.
[Sidenote:]
Best quarter: 7.49% for the quarter ending March 31, 1995
Worst quarter: -7.14% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-7.71% 17.15% 3.04% 8.95% 5.63% -3.69%
- -----------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -7.30% 5.19% 3.56% (3/12/93)
- -------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.06% 6.91% 5.25% (since 2/28/93)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
-25-
<PAGE>
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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.
-26-
<PAGE>
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Maximum sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.40% 1.15%(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."
(3) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after these waivers
are expected to be 0.75%. 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 $488 $727 $984 $1,720
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE>
[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.
-28-
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Rhode Island personal income tax,
as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Rhode Island municipal securities, which
are securities issued by the State of Rhode Island and other government issuers
and that pay interest which is exempt from both federal income tax and Rhode
Island personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
economic and market conditions and the Adviser's assessment of probable changes
in interest rates.
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.
-29-
<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 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.
- - 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 Rhode Island
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Rhode Island. Other
considerations affecting the Fund's investments in Rhode Island municipal
securities are summarized in the Statement of Additional Information.
- - 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.
-30-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past
and give some indication of the risk of investing in the Fund. Both assume
that all dividends and distributions are reinvested in the Fund. How the Fund
has performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[Sidenote:]
Best quarter: 4.90% for the quarter ending March 31, 1999
Worst quarter: -1.90% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
1995 1996 1997 1998 1999
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14.32% 3.63% 8.54% 5.87% -2.77%
- ---------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index. The returns for Retail A Shares of the Fund for
periods prior to December 1, 1995 have been restated to include the effect of
the maximum 3.75% front-end sales charge which went into effect on that date.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares -6.39% 4.96% 4.96% (12/20/94)
- ------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.91% (since 12/31/94)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
For current yeild information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
-31-
<PAGE>
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 sales charge Maximum deferred
(load) on purchases sales charge (load)
shown as a % of the shown as a % of the
offering price offering price or sale
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>
- ------------------------------------------------------------------------------------------
Total
Fund
Management Distribution Other operating
fees (12b-1) fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares 0.75%(3) None 0.42% 1.17%(3)
- ------------------------------------------------------------------------------------------
</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) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after this waiver
are expected to be 0.77%. 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
- -------------------------------------------------------------------------------------------------------------
-32-
<PAGE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares $490 $733 $995 $1,742
- -------------------------------------------------------------------------------------------------------------
</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.
-33-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Tax-Exempt
Bond 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 main 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,
in excess of 20% of total assets. This strategy could prevent a Fund from
achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which the 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.
-34-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Fund Management fee as a % of average net assets
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Tax-Exempt Bond 0.55%
- --------------------------------------------------------------------------------------------------------------
New Jersey Municipal Bond 0.25%
- --------------------------------------------------------------------------------------------------------------
New York Municipal Bond 0.55%
- --------------------------------------------------------------------------------------------------------------
Connecticut Municipal Bond 0.35%
- --------------------------------------------------------------------------------------------------------------
Massachusetts Municipal Bond 0.35%
- --------------------------------------------------------------------------------------------------------------
Rhode Island Municipal Bond 0.35%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-35-
<PAGE>
HOW TO INVEST IN THE FUNDS
All of the Funds offer Retail A Shares. The Tax-Exempt Bond Fund 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 Tax-Exempt Bond Fund, 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>
(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
-36-
<PAGE>
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 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'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 Galaxy shareholder before December 1, 1995.
- - 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).
[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 Tax-Exempt Bond Fund, 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:
-37-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
If you sell all 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 0.15% in shareholder service fees with respect to Retail A Shares
during the current fiscal year.
Retail B Shares of the Tax-Exempt Bond Fund can 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 0.80% 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 Tax-Exempt
Bond Fund 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 Tax-Exempt Bond Fund, 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.
-38-
<PAGE>
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 Tax-Exempt
Bond Fund, 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 form as described below, less
any applicable CDSC in the case of Retail B Shares of the Tax-Exempt Bond Fund.
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 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.
[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is:
- - $2,500 for regular accounts
- - $100 for college savings accounts
There is generally no minimum initial investment if you participate in the
Automatic Investment Program. 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
-39-
<PAGE>
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
- - 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
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<PAGE>
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.
- - 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
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<PAGE>
- - 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).
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.
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<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 Tax-Exempt Bond Fund 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.
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
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<PAGE>
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.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Funds generally declare dividends from net investment income daily and pay
them monthly. They normally distribute net capital gains annually. It's expected
that the Funds' annual distributions will be mainly income dividends. Dividends
and distributions are paid in cash unless you indicate on the account
application or in a letter to Galaxy that you want to have dividends and
distributions reinvested in additional shares.
FEDERAL TAXES
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.
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.
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.
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<PAGE>
STATE AND LOCAL TAXES
Dividends paid by the Tax-Exempt Bond Fund that are attributable to interest
earned by the Fund may be taxable to shareholders under state or local law.
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 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.
-46-
<PAGE>
GALAXY INVESTOR 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.
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.
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.
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 Fund 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 Tax-Exempt Bond Fund 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:
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<PAGE>
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
Please allow at least five days for the cancellation to be processed.
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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 Web site at: www.galaxyfunds.com
[Sidenote:]
HEARING IMPAIRED
Galaxy also offer 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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FINANCIAL HIGHLIGHTS
The financial highlights tables shown below will help you understand the
financial performance for the Funds' Retail A Shares and Retail B Shares for
the past five years (or the period since a particular Fund began operations
or a particular class of shares was first offered). Certain information
reflects the financial performance of a single Retail A Share or Retail B
Share. The total returns in the tables represent the rate that an investor
would have earned (or lost) on an investment in Retail A Shares and/or Retail
B Shares of each Fund, assuming all dividends and distributions were
reinvested. The information for the fiscal year ended October 31, 1999 has
been audited by Ernst & Young LLP, independent auditors, whose report, along
with the Funds' financial statements, are included in the Funds' Annual
Report and are incorporated by reference into the SAI. The Annual Report and
SAI are available free of charge upon request. The information for the fiscal
years ended October 31, 1998, 1997, 1996 and 1995 was audited by Galaxy's
former auditors, PricewaterhouseCoopers LLP.
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<PAGE>
Galaxy Tax-Exempt Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
---------------------------------------------------------------------------------
1999 1998 1997
------------------- ------------------- -------------------
Retail Retail Retail Retail Retail Retail
A Shares B Shares A Shares B Shares A Shares B Shares
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 11.30 $ 11.30 $ 11.06 $ 11.06 $ 10.78 $ 10.78
Income from investment operations:
Net investment income(2) .................. 0.46 0.39 0.48 0.42 0.50 0.43
Net realized and unrealized gain
(loss) on investments ................... (0.83) (0.83) 0.34 0.33 0.29 0.29
Total from investment operations ............. (0.37) (0.44) 0.82 0.75 0.79 0.72
Less dividends:
Dividends from net investment
income .................................... (0.46) (0.39) (0.49) (0.42) (0.50) (0.43)
Dividends from net realized
capital gains ......................... (0.14) (0.14) (0.09) (0.09) (0.01) (0.01)
Total dividends .............................. (0.60) (0.53) (0.58) (0.51) (0.51) (0.44)
Net increase (decrease) in net asset
value ................................... (0.97) (0.97) 0.24 0.24 0.28 0.28
Net asset value, end of period ............... $ 10.33 $ 10.33 $ 11.30 $ 11.30 $ 11.06 $ 11.06
-------- -------- -------- -------- -------- --------
Total return(3) ............................ (3.45)% (4.07)% 7.60% 6.95% 7.49% 6.83%
Ratios/supplemental data:
Net assets, end of period (000's) .......... $ 25,704 $ 3,382 $ 24,764 $ 2,715 $ 25,465 $ 1,690
Ratios to average net assets:
Net investment income including
Reimbursement/waiver .................... 4.25% 3.61% 4.32% 3.71% 4.60% 3.95%
Operating expenses including
Reimbursement/waiver ................... 0.92% 1.55% 0.94% 1.55% 0.95% 1.60%
Operating expenses excluding
Reimbursement/waiver .................... 1.12% 1.75% 1.15% 1.76% 1.18% 1.83%
Portfolio turnover rate ................... 23% 23% 59% 59% 78% 78%
<CAPTION>
1996 1995
------------------- ------
Retail Retail Retail
A Shares B Shares(1) A Shares
-------- ----------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.78 $ 10.94 $ 9.99
Income from investment operations:
Net investment income(2) .................. 0.50 0.27 0.52
Net realized and unrealized gain
(loss) on investments ................... -- (0.16) 0.79
Total from investment operations ............. 0.50 0.11 1.31
Less dividends:
Dividends from net investment
income .................................... (0.50) (0.27) (0.52)
Dividends from net realized
capital gains ......................... -- -- --
Total dividends .............................. (0.50) (0.27) (0.52)
Net increase (decrease) in net asset
value ................................... -- (0.16) 0.79
Net asset value, end of period ............... $ 10.78 $ 10.78 $ 10.78
Total return(3) ............................ 4.77% 1.08%(4) 13.40%
-------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000's) .......... $ 28,339 $ 787 $ 31,609
Ratios to average net assets:
Net investment income including
Reimbursement/waiver .................... 4.68% 4.08%(5) 4.99%
Operating expenses including
Reimbursement/waiver ................... 0.93% 1.57%(5) 0.91%
Operating expenses excluding
Reimbursement/waiver .................... 1.18% 1.77%(5) 1.24%
Portfolio turnover rate ................... 15% 15% 11%
</TABLE>
- -------------------------------------
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.44, $0.46, $0.47,
$0.48 and $0.48, respectively. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Retail B Shares for the years ended October 31, 1999, 1998 and 1997 and
the period ended October 31, 1996 was $0.37, $0.40, $0.40 and $0.25,
respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares and Retail B Shares.
(4) Not annualized.
(5) Annualized.
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<PAGE>
Galaxy New Jersey Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending For the period ending
October 31, 1999 October 31,1998(1)
---------------- ----------------
Retail A Shares
---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.24 $10.00
Income from investment operations:
Net investment income(2)................................. 0.36 0.20
Net realized and unrealized gain on investments.......... (0.68) 0.24
Total from investment operations......................... (0.32) 0.44
Less dividends:
Dividends from net investment income..................... (0.36) (0.20)
Total dividends............................................ (0.36) (0.20)
Net increase in net asset value............................. (0.68) 0.24
Net asset value, end of period.............................. $ 9.56 $10.24
------ ------
Total return(3)............................................. (3.24)% 4.34%(4)
Ratios/supplemental data:
Net assets, end of period (000's)........................ $1,302 $815
Ratios to average net assets:
Net investment income including reimbursement/waiver..... 3.56% 3.62%(5)
Operating expenses including reimbursement/waiver........ 1.11% 1.09%(5)
Operating expenses excluding reimbursement/waiver........ 2.11% 3.65%(5)
Portfolio turnover rate..................................... 41% 53%(4)
</TABLE>
- ---------------------------
(1) The Fund commenced operations on April 3, 1998.
(2) Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the year ended October 31, 1999 and the period ended October 31, 1998
was $0.26 and $0.06, respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares.
(4) Not annualized.
(5) Annualized.
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Galaxy New York Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 11.44 $ 11.09 $ 10.75 $ 10.78 $ 9.89
Income from investment operations:
Net investment income(1) ....................... 0.48 0.48 0.49 0.48 0.49
Net realized and unrealized gain
(loss) on investments ........................ (0.89) 0.35 0.34 (0.03) 0.89
Total from investment operations ................. (0.41) 0.83 0.83 0.45 1.38
Less dividends:
Dividends from net investment
Income ....................................... (0.46) (0.48) (0.49) (0.48) (0.49)
Total dividends .................................. (0.46) (0.48) (0.49) (0.48) (0.49)
Net increase (decrease) in net asset
value ........................................ (0.87) 0.35 0.34 (0.03) 0.89
Net asset value, end of period ................... $ 10.57 $ 11.44 $ 11.09 $ 10.75 $ 10.78
---------- ---------- ---------- ---------- ----------
Total return(2) ................................. (3.72)% 7.65% 7.93% 4.31% 14.03%
Ratios/supplemental data:
Net assets, end of period (000's) .............. $ 41,343 $ 48,218 $ 38,434 $ 40,154 $ 42,870
Ratios to average net assets:
Net investment income including
Reimbursement/waiver ......................... 4.31% 4.27% 4.52% 4.50% 4.73%
Operating expenses including
Reimbursement/waiver ......................... 0.96% 0.87% 0.94% 0.95% 0.92%
Operating expenses excluding
Reimbursement/waiver ......................... 1.16% 1.20% 1.26% 1.35% 1.31%
Portfolio turnover rate ......................... 24% 27% 61% 12% 5%
</TABLE>
- -----------------------------------------
1 Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.46,
$0.45, $0.45, $0.44 and $0.44, respectively.
2 Calculation does not include the effect of any sales charge for Retail A
Shares.
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Galaxy Connecticut Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 10.82 $ 10.47 $ 10.14 $ 10.13 $ 9.22
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) ................ 0.43 0.43 0.45 0.42 0.44
Net realized and unrealized gain
(loss) on investments ................. (0.73) 0.35 0.33 0.01 0.91
Total from investment operations .......... (0.30) 0.78 0.78 0.43 1.35
LESS DIVIDENDS:
Dividends from net investment
Income ................................ (0.43) (0.43) (0.45) (0.42) (0.44)
Total dividends ........................... (0.43) (0.43) (0.45) (0.42) (0.44)
Net increase (decrease) in net asset
Value ................................. (0.73) 0.35 0.33 (0.01) 0.91
Net asset value, end of period ............. $ 10.09 $ 10.82 $ 10.47 $ 10.14 $ 10.13
--------- --------- ---------- --------- ---------
Total return(2) ........................... (2.87)% 7.58% 7.86% 4.32% 14.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ....... $ 26,715 $ 24,856 $ 23,355 $ 23,244 $ 18,066
RATIOS TO AVERAGE NET ASSETS:
Net investment income including
Reimbursement/waiver .................. 4.07% 4.02% 4.30% 4.13% 4.53%
Operating expenses including
Reimbursement/waiver .................. 0.85% 0.88% 0.70% 0.70% 0.68%
Operating expenses excluding
Reimbursement/waiver .................. 1.25% 1.31% 1.31% 1.38% 1.48%
Portfolio turnover rate .................. 53% 46% 42% 3% 7%
</TABLE>
- -----------------------------------
(1) Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.39,
$0.38, $0.38, $0.35 and $0.37, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-54-
<PAGE>
Galaxy Massachusetts Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.53 $ 10.25 $ 9.94 $ 9.98 $ 9.12
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) ................. 0.43 0.46 0.45 0.43 0.44
Net realized and unrealized gain
(loss) on investments................... (0.77) 0.27 0.32 (0.04) 0.86
Total from investment operations............ (0.34) 0.73 0.77 0.39 1.30
LESS DIVIDENDS:
Dividends from net investment
income.................................. (0.43) (0.45) (0.46) (0.43) (0.44)
Total dividends............................. (0.43) (0.45) (0.46) (0.43) (0.44)
Net increase (decrease) in net asset
value................................... (0.77) 0.28 0.31 (0.04) 0.86
Net asset value, end of period............... $ 9.76 $ 10.53 $ 10.25 $ 9.94 $ 9.98
--------- --------- --------- --------- --------
Total return(2) ............................ (3.35)% 7.22% 7.92% 4.05% 14.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......... $ 39,696 $ 44,189 $ 33,318 $ 26,275 $ 16,113
RATIOS TO AVERAGE NET ASSETS:
Net investment income including
Reimbursement/waiver.................... 4.18% 4.30% 4.38% 4.42% 4.56%
Operating expenses including
Reimbursement/waiver.................... 0.79% 0.78% 0.63% 0.66% 0.70%
Operating expenses excluding
Reimbursement/waiver.................... 1.19% 1.21% 1.20% 1.32% 1.58%
Portfolio turnover rate.................... 34% 44% 48% 16% 19%
</TABLE>
- ----------------------------------
1 Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.39,
$0.41, $0.39, $0.37 and $0.36, respectively.
2 Calculation does not include the effect of any sales charge for Retail A
Shares.
-55-
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 For the period ending
--------- --------- --------- --------- October 31, 1995(1)
Retail Retail Retail Retail ---------------------
A Shares A Shares A Shares A Shares Retail A Shares
--------- --------- --------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 11.18 $ 10.91 $ 10.65 $ 10.67 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)................... 0.48 0.50 0.48 0.51 0.44
Net realized and unrealized gain
on investments........................... (0.77) 0.29 0.32 0.03 0.67
Total from investment operations.............. (0.29) 0.79 0.80 0.54 1.11
LESS DIVIDENDS:
Dividends from net investment
income................................... (0.48) (0.50) (0.50) (0.51) (0.44)
Dividends from net realized capital gains.. (0.05) (0.02) (0.04) (0.05) --
Total dividends............................... (0.53) (0.52) (0.54) (0.56) (0.44)
Net increase (decrease) in net asset
value.................................... (0.82) 0.27 0.26 (0.02) 0.67
Net asset value, end of period................ $ 10.36 $ 11.18 $ 10.91 $ 10.65 $ 10.67
--------- --------- --------- --------- --------
Total return(3) (2.73)% 7.35% 7.78% 5.22% 11.29%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......... $ 19,833 $ 20,210 $ 17,134 $ 14,900 $ 10,850
RATIOS TO AVERAGE NET ASSETS:
Net investment income including
Reimbursement/waiver..................... 4.41% 4.52% 4.50% 4.78% 5.13%(5)
Operating expenses including
Reimbursement/waiver..................... 0.80% 0.81% 0.83% 0.77% 0.40%(5)
Operating expenses excluding
Reimbursement/waiver..................... 1.20% 1.23% 1.34% 1.34% 2.25%(5)
Portfolio turnover rate....................... 34% 41% 19% 13% 34%(4)
</TABLE>
- -------------------------------------
(1) The Fund commenced operations on December 20, 1994.
(2) Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997 and 1996 and for the
period ended October 31, 1995 was $0.44, $0.45, $0.43, $0.45 and $0.28,
respectively.
(3) Calculation does not include the effect of any sales charge for Retail A
Shares.
(4) Not annualized.
(5) Annualized.
-56-
<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 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 Web site at http://www.sec.gov. Copies of this
information may also be obtained, after paying a duplicating fee, by
electronic request to the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALTEBND 3/1/00
<PAGE>
[Front cover page]
Galaxy Tax-Exempt Bond Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Tax-Exempt Bond Fund
Galaxy New Jersey Municipal Bond Fund
Galaxy New York Municipal Bond Fund
Galaxy Connecticut Municipal Bond Fund
Galaxy Massachusetts Municipal Bond Fund
Galaxy Rhode Island Municipal Bond Fund
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
CONTENTS
1 Risk/return summary
1 Introduction
3 Galaxy Tax-Exempt Bond Fund
7 Galaxy New Jersey Municipal Bond Fund
11 Galaxy New York Municipal Bond Fund
15 Galaxy Connecticut Municipal Bond Fund
19 Galaxy Massachusetts Municipal Bond Fund
23 Galaxy Rhode Island Municipal Bond Fund
27 Additional information about risk
28 Fund management
29 How to invest in the Funds
29 Buying and selling shares
29 How to buy shares
30 How to sell shares
30 Other transaction policies
31 Dividends, distributions and taxes
33 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Tax-Exempt Bond Funds. The Funds invest
primarily in municipal securities, which are debt obligations of state and local
governments and other political or public bodies or agencies. The interest paid
on municipal securities is generally exempt from federal income tax and, in some
cases, from state and local income tax.
On the following pages, you'll find important information about each of the
Galaxy Tax-Exempt Bond Funds, 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 Fund's past performance 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
[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.
WHICH FUND IS RIGHT FOR YOU?
The Funds are designed for investors who are looking for income that's free of
federal income tax and who can accept fluctuations in price and yield. A Fund
that specializes in a particular state is best suited to residents of that state
who are also looking for income that is free of the state's income tax.
Tax-exempt funds are NOT appropriate investments for tax-deferred retirement
accounts, such as IRAs, because their returns before taxes are generally lower
than those of taxable funds.
-1-
<PAGE>
THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc., which is referred to in this Prospectus as
the ADVISER, "Adviser" is the investment adviser for all of these Funds. The
Adviser, an indirect wholly-owned subsidiary of FLEETBOSTON Financial
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 $68 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 THE FUNDS.
-2-
<PAGE>
Galaxy Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide shareholders with as high a level of current interest
income free of federal income tax as is consistent with preservation of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
primarily bonds (normally 65% of total assets). Under normal conditions, the
Fund will invest no more than 20% of its total assets in taxable obligations,
such as U.S. Government obligations, money market instruments and repurchase
agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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 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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or Moody's,
or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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 backed
-3-
<PAGE>
by private entities and are used to finance various non-public projects.
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.
[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 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 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.
-4-
<PAGE>
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and 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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[SIDENOTE:]
<TABLE>
<CAPTION>
<S> <C>
BEST QUARTER: 6.59% FOR THE QUARTER ENDING MARCH 31, 1995
- ------------- ------------------------------------------------
WORST QUARTER: -5.39% FOR THE QUARTER ENDING MARCH 31, 1994
- -------------- ------------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
- -------------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
9.25% 11.95% -5.35% 16.04% 3.57% 8.99% 5.96% -3.47%
- -------------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -3.47% 6.02% 5.64% (12/30/91)
- ----------------------------------- ------------------ ------------------- ------------------------------
Lehman Brothers Municipal Bond
Index -2.06% 6.91% 6.20% (since 12/31/91)
- ----------------------------------- ------------------ ------------------- ------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
-5-
<PAGE>
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.16% 0.91%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.71%. This fee waiver may be revised or discontinued at
any time.
[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.
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 $93 $290 $504 $1,120
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-6-
<PAGE>
Galaxy New Jersey Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from New Jersey personal income tax, as
is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in New Jersey municipal securities, which
are securities issued by the State of New Jersey and other government issuers
and that pay interest which is exempt from both federal income tax and New
Jersey personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities that have one of the top three
ratings assigned by S&P or Moody's or, 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-7-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and by swings in
investment markets.
In addition, the Fund 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.
- - 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 New Jersey
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect New Jersey. Other
considerations affecting the Fund's investments in New Jersey municipal
securities are summarized in the Statement of Additional Information.
- - 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.
-8-
<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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
THE BAR CHART SHOWS THE PERFORMANCE OF TRUST SHARES DURING THE LAST CALENDAR
YEAR.
[SIDENOTE:]
<TABLE>
<S> <C>
BEST QUARTER: 0.42% FOR THE QUARTER ENDING MARCH 31, 1999
- ------------- ------------------------------------------------
WORST QUARTER: -2.35% FOR THE QUARTER ENDING JUNE 30, 1999
- -------------- ------------------------------------------------
</TABLE>
[BAR CHART GOES HERE]
- --------------
1999
- --------------
-3.02%
- --------------
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -3.02% 0.95% (4/3/98)
- ----------------------------------- ------------------ ------------------------------
LEHMAN BROTHERS
MUNICIPAL BOND INDEX -2.06% 1.76% (SINCE 3/31/98)
- ----------------------------------- ------------------ ------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
-9-
<PAGE>
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.87%(1) 1.62%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.25%. The Fund's administrator is waiving certain
expenses so that Other expenses are expected to be 0.67%. Total Fund
operating expenses after these waivers are expected to be 0.92%. These fee
waivers may be revised or discontinued at any time.
[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.
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 $165 $511 $881 $1,922
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-10-
<PAGE>
Galaxy New York Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from New York State and New York City
personal income tax, as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in New York municipal securities, which are
securities issued by the State of New York and other government issuers and that
pay interest which is exempt from federal income tax and New York State and New
York City personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities 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.
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. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities that have one of the top three
ratings assigned by S&P or Moody's, or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-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 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.
- - 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 New York
municipal securities, the Fund's ability to achieve its investment
objective is dependent upon the ability of the issuers of New York
municipal securities to meet their continuing obligations for the payment
of principal and interest. New York State and New York City face long-term
economic problems that could seriously affect their ability and that of
other issuers of New York municipal securities to meet their financial
obligations. Other considerations affecting the
-12-
<PAGE>
Fund's investments in New York municipal securities are summarized in
the Statement of Additional Information.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[SIDENOTE:]
<TABLE>
<S> <C>
BEST QUARTER: 7.42% FOR THE QUARTER ENDING MARCH 31, 1995
- ------------- ---------------------------------------------
WORST QUARTER: -6.55% FOR THE QUARTER ENDING MARCH 31, 1994
- -------------- ---------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
- -------------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
8.29% 12.30% -7.26% 17.09% 3.62% 8.89% 6.13% -3.48%
- -------------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -3.48% 6.24% 5.43% (12/31/91)
- ---------------------------------- ------------------ ------------------- ------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.20% (since 12/31/91)
- ----------------------------------- ------------------ ------------------- ------------------------------
</TABLE>
FOR CURRENT YIELD INFORMATION, PLEASE CALL 1-877-BUY-GALAXY (1-877-289-4252).
-13-
<PAGE>
[Sidenote:]
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX WHICH TRACKS THE
PERFORMANCE OF MUNICIPAL BONDS.
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 from the Fund's assets)
<TABLE>
<CAPTION>
- ----------------------- ------------------- ------------------- -------------- -----------------------------
Management Distribution Other Total Fund operating
fees (12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.23% 0.98%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver
are expected to be 0.78%. This fee waiver may be revised or discontinued at
any time.
[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.
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 $100 $312 $542 $1,201
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-14-
<PAGE>
Galaxy Connecticut Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Connecticut personal income tax, as
is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Connecticut municipal securities, which
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 state income tax on individuals, trusts and estates. Under normal
conditions, the Fund will invest no more than 20% of its total assets in taxable
obligations, such as U.S. Government obligations, money market instruments and
repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
current market conditions and the Adviser's assessment of probable changes in
interest rates.
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.
-15-
<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 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.
- - 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.
- - 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.
-16-
<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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[SIDENOTE:]
<TABLE>
<S> <C>
BEST QUARTER: 8.05% FOR THE QUARTER ENDING MARCH 31, 1995
- ------------- --------------------------------------------
WORST QUARTER: -7.01% FOR THE QUARTER ENDING MARCH 31, 1994
- -------------- --------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- -------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
-8.01% 18.29% 3.56% 8.81% 6.07% -2.65%
- -------------- ----------- ----------- ------------ ----------- -----------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -2.65% 6.60% 4.61% (3/16/93)
- ----------------------------------- ------------------ ------------------- ------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 5.49% (Since 3/31/93)
- ----------------------------------- ------------------ ------------------- ------------------------------
</TABLE>
FOR CURRENT YIELD INFORMATION, PLEASE CALL 1-877-BUY-GALAXY (1-877-289-4252).
[SIDENOTE:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
FEES AND EXPENSES OF THE FUND
-17-
<PAGE>
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 fees Distribution Other Total Fund operating
(12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.29% 1.04%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after this waiver
are expected to be 0.64%. This fee waiver may be revised or discontinued
at any time.
[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.
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 $106 $331 $574 $1,271
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-18-
<PAGE>
Galaxy Massachusetts Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Massachusetts personal income tax,
as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Massachusetts municipal securities,
which 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 total assets in taxable
obligations, such as U.S. Government obligations, money market instruments
and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or Moody's,
or 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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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.
-19-
<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 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.
- - 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.
- - 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.
-20-
<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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares has varied from year to
year.
[SIDENOTE]
<TABLE>
<S> <C>
BEST QUARTER: 7.52% FOR THE QUARTER ENDING MARCH 31, 1995
- ------------- ---------------------------------------------
WORST QUARTER: -7.14% FOR THE QUARTER ENDING MARCH 31, 1994
- -------------- ---------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- -------------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
-7.71% 17.40% 3.26% 9.09% 5.83% -3.52%
- -------------- ----------- ----------- ------------ ----------- -----------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the 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 -3.52% 6.19% 4.29% (3/12/93)
- ----------------------------------- ------------------ ------------------- ------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 5.25% (since 2/28/93)
- ----------------------------------- ------------------ ------------------- ------------------------------
</TABLE>
FOR CURRENT YIELD INFORMATION, PLEASE CALL 1-877-BUY-GALAXY (1-877-289-4252).
[SIDENOTE:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
FEES AND EXPENSES OF THE FUND
-21-
<PAGE>
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.23% 0.98%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after this waiver
are expected to be 0.58%. This fee waiver may be revised or discontinued
at any time.
[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.
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 $100 $312 $542 $1,201
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-22-
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax and, to the extent possible, from Rhode Island personal income tax,
as is consistent with relative stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
and at least 65% of its total assets in Rhode Island municipal securities, which
are securities issued by the State of Rhode Island and other government issuers
and that pay interest which is exempt from both federal income tax and Rhode
Island personal income tax. Under normal conditions, the Fund will invest no
more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
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. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities that have one of the top three ratings assigned by S&P or
Moody's, or 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's average weighted maturity will vary from time to time depending on
economic and market conditions and the Adviser's assessment of probable changes
in interest rates.
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.
-23-
<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 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.
- - 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 Rhode Island
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Rhode Island. Other
considerations affecting the Fund's investments in Rhode Island municipal
securities are summarized in the Statement of Additional Information.
- - 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.
-24-
<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.
As of the date of this prospectus, the Fund had not offered Trust Shares to
investors. The returns below represent the returns for Retail A Shares of the
Fund which are offered in a separate prospectus. Retail A Shares and Trust
Shares of the Fund have returns that are substantially the same because they
represent interests in the same portfolio securities and differ only to the
extent that they bear different expenses. Unlike Trust Shares, Retail A
Shares of the Fund are subject to a front-end sales charge on purchases and,
in certain cases, to a contingent deferred sales charge at the time shares
are sold.
YEAR-BY-YEAR RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares has varied from
year to year. The figures don't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[SIDENOTE:]
<TABLE>
<CAPTION>
<S> <C>
BEST QUARTER: 4.90% FOR THE QUARTER ENDING MARCH 31, 1995
- ------------- --------------------------------------------
WORST QUARTER: -1.90% FOR THE QUARTER ENDING JUNE 30, 1999
- -------------- --------------------------------------------
</TABLE>
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------- ----------- ----------- ------------ -----------
1995 1996 1997 1998 1999
---- ---- ---- ---- ---
- -------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
14.32% 3.63% 8.54% 5.87% -2.77%
- -------------- ----------- ----------- ------------ -----------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) 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>
Retail A Shares -6.39% 4.96% 4.96% (12/20/94)
- ----------------------------------- ------------------------ ------------------------- -------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.91% (since 12/31/94)
- ----------------------------------- ------------------------ ------------------------- -------------------------------
</TABLE>
-25-
<PAGE>
[SIDENOTE:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 Other Total Fund operating
fees (12b-1) fees expenses expenses
- ----------------------- ------------------- ------------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.75%(1) None 0.42% 1.17%(1)
- ----------------------- ------------------- ------------------- -------------- -----------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.35%. Total Fund operating expenses after this waiver
are expected to be 0.77%. This fee waiver may be revised or discontinued
at any time.
[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.
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 $119 $372 $644 $1,420
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-26-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Tax-Exempt
Bond 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 main 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,
in excess of 20% of total assets. This strategy could prevent a Fund from
achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be main
investment strategies of the Funds - and the risks involved - are described in
detail in the Statement of Additional Information (SAI) which is referred to
on the back cover of this prospectus.
Year 2000 risks
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.
-27-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------------
Fund Management fee as a % of average net assets
- ------------------------------------------------------- -----------------------------------------------------------
<S> <C>
Tax-Exempt Bond 0.55%
- ------------------------------------------------------- -----------------------------------------------------------
New Jersey Municipal Bond 0.25%
- ------------------------------------------------------- -----------------------------------------------------------
New York Municipal Bond 0.55%
- ------------------------------------------------------- -----------------------------------------------------------
Connecticut Municipal Bond 0.35%
- ------------------------------------------------------- -----------------------------------------------------------
Massachusetts Municipal Bond 0.35%
- ------------------------------------------------------- -----------------------------------------------------------
Rhode Island Municipal Bond 0.35%
- ------------------------------------------------------- -----------------------------------------------------------
</TABLE>
-28-
<PAGE>
HOW TO INVEST IN THE FUNDS
BUYING AND SELLING SHARES
Trust Shares of the Funds are available for purchase by investors maintaining
a qualified account at a bank or trust institution, including subsidiaries of
FleetBoston Financial Corporation. Qualified accounts include discretionary
investment management accounts, custodial accounts and agency accounts. Your
institution can provide more information about which types of accounts are
eligible.
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
institution are open for business.
The price at which you buy shares is the net asset value (NAV) per share next
determined after your order is accepted. The price at which you sell shares 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 at the close of
regular trading that day (usually 4:00 p.m. Eastern time). The New York Stock
Exchange is generally open for trading every Monday through Friday, except for
national holidays.
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:]
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.
[Sidenote:]
INVESTMENT MINIMUMS
Galaxy does not have any minimum investment requirements for initial or
additional investments in Trust Shares but financial institutions may. They may
also require you to maintain a minimum account balance.
HOW TO BUY SHARES
You can buy Trust Shares by following the procedures established by your
financial institution. Your financial institution is responsible for sending
your order to Galaxy's distributor and wiring payment to Galaxy's custodian. The
institution holds the shares in your name and receives all confirmations of
purchases and sales.
-29-
<PAGE>
HOW TO SELL SHARES
You can sell Trust Shares by following the procedures established by your
financial institution. Your financial institution is responsible for sending
your order to Galaxy's distributor and for crediting your account with the
proceeds. Galaxy doesn't charge for wiring sale proceeds to your financial
institution, but your financial institution may do so. Contact your financial
institution for more information.
OTHER TRANSACTION POLICIES
If Galaxy doesn't receive full payment for your order to buy shares by 4:00
p.m. on the next business day, Galaxy won't accept your order. Galaxy will
advise your financial institution if this happens.
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 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.
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.
-30-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Funds generally declare dividends from net investment income daily and pay
them monthly. They normally distribute net capital gains annually. It's expected
that the Funds' annual distributions will be mainly income dividends. Dividends
and distributions are paid in cash unless you indicate on the account
application or in a letter to Galaxy that you want to have dividends and
distributions reinvested in additional shares.
FEDERAL TAXES
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.
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 or redemption of your shares,
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. Moreover, 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.
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.
-31-
<PAGE>
STATE AND LOCAL TAXES
Dividends paid by the Tax-Exempt Bond Fund that are attributable to interest
earned by the Fund may be taxable to shareholders under state or local law.
Each state-specific Fund intends to comply with certain state and/or local
tax requirements so that its 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 Municipal Bond Fund, dividends, if
any, derived from long-term capital gains on Connecticut municipal securities
of issuers in Connecticut will not be suject 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.
-32-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables on the following pages will help you
understand the financial performance for the Funds' Trust Shares for the past
five years (or the period since a particular Fund began operations). As of
the date of this prospectus, Trust Shares of the Rhode Island Municipal Bond
Fund had not been offered to investors. The financial highlights table shown
below with respect to the Rhode Island Municipal Bond Fund reflects the
financial performance of the Fund's Retail A Shares and is intended to
provide you with a long-term perspective as to the Fund's financial history.
Certain information in the financial highlights tables reflects the financial
performance of a single Trust Share or, in the case of the Rhode Island
Municipal Bond Fund, a single Retail A Share. The total returns in the tables
represent the rate that an investor would have earned (or lost) on an
investment in Trust Shares (Retail A Shares in the case of the Rhode Island
Municipal Bond Fund) of each Fund, assuming all dividends and distributions
were reinvested. The information for the fiscal year ended October 31, 1999
has been audited by Ernst & Young LLP, independent auditors, whose report,
along with the Funds' financial statements, are included in the Funds' Annual
Report and are incorporated by reference into the SAI. The Annual Report and
SAI are available free of charge upon request. The information for the fiscal
years ended October 31, 1998, 1997, 1996 and 1995 was audited by Galaxy's
former auditors, PricewaterhouseCoopers LLP.
-33-
<PAGE>
Galaxy Tax-Exempt Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
Trust Shares
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $11.30 $11.06 $10.78 $10.78 $9.99
------ ------ ------ ------ ------
Income from investment operations:
Net investment income(1)........................ 0.49 0.50 0.53 0.53 0.54
Net realized and unrealized gain (loss)
on investments................................ (0.83) 0.34 0.29 -- 0.79
------ ---- ---- ---- -----
Total from investment operations................... (0.34) 0.84 0.82 0.53 1.33
------ ---- ---- ---- ----
Less dividends:
Dividends from net investment income............. (0.49) (0.51) (0.53) (0.53) (0.54)
Dividends from net realized capital gains........ (0.14) (0.09) (0.01) -- --
------ ------ ------ ------ -----
Total dividends.................................... (0.63) (0.60) (0.54) (0.53) (0.54)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value......... (0.97) 0.24 0.28 -- 0.79
------ ------ ------ ------- ------
Net asset value, end of period..................... $10.33 $11.30 $11.06 $10.78 $10.78
------ ------ ------ ------- ------
Total return.................................... 3.25% 7.85% 7.75% 5.03% 13.62%
Ratios/supplemental data:
Net assets, end of period (000's)................ $141,999 $135,664 $122,218 $103,163 $91,740
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 4.46% 4.55% 4.85% 4.91% 5.18%
Operating expenses including
reimbursement/waiver.......................... 0.71% 0.71% 0.70% 0.70% 0.72%
Operating expenses excluding
reimbursement/waiver.......................... 0.91% 0.92% 0.96% 0.95% 0.97%
Portfolio turnover rate............................ 23% 59% 78% 15% 11%
------
</TABLE>
- -----------------------------
(1) Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for the years ended October 31, 1999, 1998, 1997, 1996
and 1995 was $0.47, $0.48, 0.51, $0.51 and $0.51, respectively.
-34-
<PAGE>
Galaxy New Jersey Municipal Bond Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDING OCTOBER ENDING OCTOBER
31, 31,
---------------- ----------------
1999 1998(1)
---- -----
TRUST SHARES
------------
<S> <C> <C>
Net asset value, beginning of period............................................ $10.24 $10.00
Income from investment operations:
Net investment income(2)...................................................... 0.38 0.21
Net realized and unrealized gain on investments............................... (0.68) 0.24
Total from investment operations................................................ (0.30) 0.45
Less dividends:
Dividends from net investment income.......................................... (0.38) (0.21)
Total dividends................................................................. (0.38) (0.21)
Net increase in net asset value................................................. (0.68) 0.24
Net asset value, end of period.................................................. $9.56 $10.24
Total return.................................................................... (3.06%) 4.48%(3)
Ratios/supplemental data:
Net assets, end of period (000's)............................................. $7,422 $7,701
Ratios to average net assets:
Net investment income including reimbursement/waiver.......................... 3.76% 3.79%(4)
Operating expenses including reimbursement/waiver............................. 0.92% 0.92%(4)
Operating expenses excluding reimbursement/waiver............................. 1.63% 2.07%(4)
Portfolio turnover rate......................................................... 41% 53%(3)
</TABLE>
---------------------
(1) The Fund commenced operations on April 3, 1998.
(2) Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and the Fund's
administrator for the year ended October 31, 1999 and the
period ended October 31, 1998 was $0.30 and $0.15,
respectively.
(3) Not annualized.
(4) Annualized.
-35-
<PAGE>
Galaxy New York Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
Trust Shares
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $11.44 $11.09 $10.75 $10.78 $9.89
------ ------ ------ ------ -----
Income from investment operations:
Net investment income(1)....................... 0.50 0.50 0.52 0.51 0.51
Net realized and unrealized gain (loss)
on investments.............................. (0.89) 0.35 0.34 (0.03) 0.89
------ ------ ------ ------ -----
Total from investment operations................. (0.39) 0.85 0.86 0.48 1.40
------ ------ ------ ------ -----
Less dividends:
Dividends from net investment income........... (0.48) (0.50) (0.52) (0.51) (0.51)
------ ------ ------ ------ -----
Total dividends.................................. (0.48) (0.50) (0.52) (0.51) (0.51)
------ ------ ------ ------ -----
Net increase (decrease) in net asset value....... (0.87) 0.35 0.34 (0.03) 0.89
------ ------ ------ ------ -----
Net asset value, end of period................... $10.57 $11.44 $11.09 $10.75 $10.78
------ ------ ------ ------ -----
Total return................................... (3.54)% 7.82% 8.17% 4.55% 14.23%
Ratios/supplemental data:
Net assets, end of period (000's).............. $36,696 $34,801 $27,562 $23,762 $23,077
Ratios to average net assets:
Net investment income including
reimbursement/waiver........................ 4.50% 4.42% 4.75% 4.75% 4.91%
Operating expenses including
reimbursement/waiver........................ 0.77% 0.72% 0.71% 0.70% 0.74%
Operating expenses excluding
reimbursement/waiver........................ 0.97% 0.99% 1.02% 1.10% 1.07%
Portfolio turnover rate.......................... 24% 27% 61% 12% 5%
</TABLE>
- -----------------------------
(1) Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for the years ended October 31, 1999, 1998, 1997, 1996
and 1995 was $0.48, $0.47, $0.49, $0.47 and $0.48 , respectively.
-36-
<PAGE>
Galaxy Connecticut Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
Trust Shares
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.82 $10.47 $10.14 $10.13 $9.22
------ ------ ------ ------ ------
Income from investment operations:
Net investment income(1)......................... 0.45 0.45 0.47 0.44 0.46
Net realized and unrealized gain (loss)
on investments................................ (0.73) 0.35 0.33 0.01 0.91
------ ------ ------ ------ ------
Total from investment operations................... (0.28) 0.80 0.80 0.45 1.37
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income............. (0.45) (0.45) (0.47) (0.44) (0.46)
------ ------ ------ ------ ------
Total dividends.................................... (0.45) (0.45) (0.47) (0.44) (0.46)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value......... (0.73) 0.35 0.33 0.01 0.91
------ ------ ------ ------ ------
Net asset value, end of period..................... $10.09 $10.82 $10.47 $10.14 $10.13
------ ------ ------ ------ ------
Total return.................................... (2.68)% 7.81% 8.06% 4.54% 15.21%
Ratios/supplemental data:
Net assets, end of period (000's)................ $17,848 $13,913 $9,866 $6,348 $4,083
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 4.26% 4.24% 4.51% 4.34% 4.76%
Operating expenses including
reimbursement/waiver.......................... 0.65% 0.67% 0.49% 0.49% 0.45%
Operating expenses excluding
reimbursement/waiver.......................... 1.05% 1.10% 1.10% 1.17% 1.24%
Portfolio turnover rate............................ 53% 46% 42% 3% 7%
</TABLE>
- -----------------------------
(1) Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for the years ended October 31, 1999, 1998, 1997, 1996
and 1995 was $0.41, $0.40, $0.41, $0.37 and $0.38, respectively.
-37-
<PAGE>
Galaxy Massachusetts Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
Trust Shares
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.53 $10.25 $ 9.94 $ 9.98 $9.12
------ ------ ------ ------ -----
Income from investment operations:
Net investment income(1)......................... 0.45 0.47 0.46 0.46 0.45
Net realized and unrealized gain (loss)
on investments................................ (0.77) 0.27 0.32 (0.04) 0.86
------ ------ ------ ------ -----
Total from investment operations................... (0.32) 0.74 0.78 0.42 1.31
------ ------ ------ ------ -----
Less dividends:
Dividends from net investment income............. (0.45) (0.46) (0.47) (0.46) (0.45)
------ ------ ------ ------ -----
Total dividends.................................... (0.45) (0.46) (0.47) (0.46) (0.45)
------ ------ ------ ------ -----
Net increase (decrease) in net asset value......... (0.77) 0.28 0.31 (0.04) 0.86
------ ------ ------ ------ -----
Net asset value, end of period..................... $9.76 $10.53 $10.25 $ 9.94 $9.98
------ ------ ------ ------ -----
Total return.................................... (3.17)% 7.42% 8.06% 4.27% 14.72%
Ratios/supplemental data:
Net assets, end of period (000's)................ $33,897 $23,371 $13,986 $11,047 $7,607
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 4.36% 4.49% 4.57% 4.60% 4.73%
Operating expenses including
reimbursement/waiver.......................... 0.61% 0.60% 0.44% 0.48% 0.52%
Operating expenses excluding
reimbursement/waiver.......................... 1.01% 1.03% 1.01% 1.14% 1.31%
Portfolio turnover rate............................ 34% 44% 48% 16% 19%
</TABLE>
- -----------------------------
(1) Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for the years ended October 31, 1999, 1998, 1997, 1996
and 1995 was $0.41, $0.42, $0.40, $0.40 and $0.38, respectively.
-38-
<PAGE>
Galaxy Rhode Island Municipal Bond Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending October 31, For the
--------------------------------------------------------------- period ending
October 31,
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- -------
Retail A Shares
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $11.18 $10.91 $10.65 $10.67 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income(2)...................... 0.48 0.50 0.48 0.51 0.44
Net realized and unrealized gain
on investments............................. (0.77) 0.29 0.32 0.03 0.67
------ ------ ------ ------ ------
Total from investment operations................ (0.29) 0.79 0.80 0.54 1.11
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income.......... (0.48) (0.50) (0.50) (0.51) (0.44)
Dividends from net realized capital gains..... (0.05) (0.02) (0.04) (0.05) --
------ ------ ------ ------ ------
Total dividends................................. (0.53) (0.52) (0.54) (0.56) (0.44)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value...... (0.82) 0.27 0.26 (0.02) 0.67
------ ------ ------ ------ ------
Net asset value, end of period.................. $10.36 $11.18 $10.91 $10.65 $10.67
------ ------ ------ ------ ------
Total return(3)................................. (2.73)% 7.35% 7.78% 5.22% 11.29%(4)
Ratios/supplemental data:
Net assets, end of period (000's)............. $19,833 $20,210 $17,134 $14,900 $10,850
Ratios to average net assets:
Net investment income including
reimbursement/waiver....................... 4.41% 4.52% 4.50% 4.78% 5.13%(5)
Operating expenses including
reimbursement/waiver....................... 0.80% 0.81% 0.83% 0.77% 0.40%(5)
Operating expenses excluding
reimbursement/waiver....................... 1.20% 1.23% 1.34% 1.34% 2.25%(5)
Portfolio turnover rate......................... 34% 41% 19% 13% 34%(4)
</TABLE>
------------------------
(1) The Fund commenced operations on December 20, 1994.
(2) Net investment income per share for Retail A Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for the fiscal years ended October 31, 1999, 1998, 1997
and 1996 and for the period ended October 31, 1995 was $0.44, $0.45,
$0.43, $0.45, and $0.28, respectively.
(3) Calculation does not include the effect of any sales charge for Retail
A Shares.
(4) Not annualized.
(5) Annualized.
-39-
<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 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 Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALTEBND 3/1/00
<PAGE>
[Front cover page]
Galaxy Money Market Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Money Market Fund
Galaxy Government Fund
Galaxy Institutional Government Money Market Fund
Galaxy U.S. Treasury Fund
Galaxy Tax-Exempt Fund
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
3 Galaxy Money Market Fund
6 Galaxy Government Fund
9 Galaxy Institutional Government Money Market Fund
12 Galaxy U.S. Treasury Fund
15 Galaxy Tax-Exempt Fund
19 Additional information about risk
20 Investor guidelines
21 Fund management
22 How to invest in the Funds
22 Buying, selling and exchanging shares
23 How to buy shares
23 How to sell shares
23 Other transaction policies
24 How to exchange shares -
Institutional Government Money Market Fund only
25 Dividends, distributions and taxes
27 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Money Market Funds. The Funds invest
primarily in short-term debt obligations, commonly known as money market
instruments, that are determined by the Funds' investment adviser to carry very
little risk. Money market instruments purchased by the Funds must meet strict
requirements as to investment quality, maturity and diversification. The Funds
don't invest in securities with remaining maturities of more than 397 days
(subject to certain exceptions) and the average maturity of all securities held
by a particular Fund must be 90 days or less. Each Fund tries to maintain its
share price at $1.00 to protect your investment from loss.
On the following pages you'll find important information about each Galaxy Money
Market 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 Fund's past performance 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
[Sidenote:]
MATURITY
The maturity of a security is the date when the issuer must repay the security's
entire principal amount to an investor, such as a fund.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are right for all investors. Your investment goals and
tolerance for risk will determine which fund is right for you. On page 20 you'll
find a table which sets forth general guidelines to help you decide which of the
Galaxy Money Market Funds is best suited to you.
THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc., which is referred to in this prospectus as
the ADVISER, is the investment adviser for all of these Funds. The Adviser,
an indirect wholly-owned subsidiary of FleetBoston Financial 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
-1-
<PAGE>
institutional clients and manages the other Galaxy investment portfolios. As of
December 31, 1999, the Adviser managed over $68 billion in assets.
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
-2-
<PAGE>
Galaxy Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests in a diversified portfolio of money market instruments,
including commercial paper, notes and bonds issued by U.S. corporations,
obligations issued by the U.S. Government and its agencies and
instrumentalities, and obligations issued by U.S. and foreign banks, such as
certificates of deposit. The Fund also invests in repurchase agreements backed
by U.S. Government obligations.
The Fund will only buy a security if it has the highest short-term rating from
at least two nationally recognized statistical rating organizations, or one such
rating if only one organization has rated the security. If the security is not
rated, it must be determined by the Adviser to be of comparable credit quality.
[Sidenote:]
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a fund buys securities from a
seller (usually a bank or broker-dealer) who agrees to buy them back from the
fund on a certain date and at a certain price.
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although credit risk is very low because the Fund only
invests in high quality obligations, if an issuer fails to pay interest or
repay principal, the value of your investment could decline.
- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the
other party may not fulfill its obligations under the agreement. This
could cause the value of your investment to decline.
-3-
<PAGE>
- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares of the Fund has varied
from year to year.
[SIDENOTE:]
BEST QUARTER: 1.39% for the quarter ending June 30, 1995
WORST QUARTER: 1.11% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------------- ------------------- ------------------ --------------------- ----------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
- -------------------- ------------------- ------------------ --------------------- ----------------
- -------------------- ------------------- ------------------ --------------------- ----------------
<S> <C> <C> <C> <C>
5.50% 4.94% 5.19% 5.14% 4.80%
- -------------------- ------------------- ------------------ --------------------- ----------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
- --------------------------- -------------------- --------------------- ---------------------------
1 year 5 YEARS Since inception
- --------------------------- -------------------- --------------------- ---------------------------
- --------------------------- -------------------- --------------------- ---------------------------
<S> <C> <C> <C>
Trust Shares 4.80% 5.12% 5.11% (11/1/94)
- --------------------------- -------------------- --------------------- ---------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
-4-
<PAGE>
FEES AND EXPENSES OF THE FUND
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>
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
Distribution (12b-1) Total Fund operating
Management fees fees Other expenses expenses
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Trust Shares 0.40%(1) None 0.11% 0.51%(1)
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.36%. Total Fund operating expenses after this waiver
are expected to be 0.47%. 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>
Trust Shares $52 $164 $285 $640
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-5-
<PAGE>
Galaxy Government Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current income as is consistent with liquidity
and stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in U.S. Government obligations, including U.S.
Treasury obligations and obligations of U.S. Government agencies and
instrumentalities. The Fund also invests in repurchase agreements backed by
these obligations.
[Sidenote:]
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are debt obligations issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. U.S. Government
obligations generally have less credit risk than other debt obligations.
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although U.S. Government securities have historically
involved little credit risk, if an issuer fails to pay interest or repay
principal, the value of your investment could decline.
- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the
other party may not fulfill its obligations under the agreement. This
could cause the value of your investment to decline.
- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
-6-
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares of the Fund has varied
from year to year.
[SIDENOTE:]
BEST QUARTER: 1.37% for the quarter ending June 30, 1995
WORST QUARTER: 1.08% for the quarter ending June 30, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------- --------------------- ---------------- ------------------ ----------------
1995 1996 1997 1998 1999
- ----------------------- --------------------- ---------------- ------------------ ----------------
- ----------------------- --------------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
5.47% 4.89% 5.10% 5.06% 4.66%
- ----------------------- --------------------- ---------------- ------------------ ----------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
- --------------------------- ------------------- ------------------------- ------------------------
1 year 5 YEARS Since inception
- --------------------------- ------------------- ------------------------- ------------------------
- --------------------------- ------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Trust Shares 4.66% 5.04% 4.97% (11/1/94)
- --------------------------- ------------------- ------------------------- ------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
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.
-7-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
Distribution (12b-1) Total Fund operating
Management fees fees Other expenses expenses
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Trust Shares 0.40%(1) None 0.11% 0.51%(1)
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.39%. Total Fund operating expenses after this waiver
are expected to be 0.50%. 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>
Trust Shares $52 $164 $285 $640
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-8-
<PAGE>
Galaxy Institutional Government Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income with liquidity and stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in U.S. Government obligations, including U.S.
Treasury obligations and obligations of U.S. Government agencies and
instrumentalities. The Fund also invests in repurchase agreements backed by
these obligations.
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although U.S. Government securities have historically
involved little credit risk, if an issuer fails to pay interest or repay
principal, the value of your investment could decline.
- - REPURCHASE AGREEMENTS - Repurchase agreements carry the risk that the
other party may not fulfill its obligations under the agreement. This
could cause the value of your investment to decline.
- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.
- - 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 offers only one class of shares which are referred to in
this prospectus as Trust Shares.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares of the Fund has varied
from year to year.
-9-
<PAGE>
[SIDENOTE:]
BEST QUARTER: 1.41% for the quarter ending June 30, 1995
WORST QUARTER: 0.74% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
- -------------------- ----------------- --------------- ------------------- ------------------ --------------------
- -------------------- ----------------- --------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
3.92% 5.58% 5.06% 5.11% 5.30% 5.00%
- -------------------- ----------------- --------------- ------------------- ------------------ --------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
- --------------------------- ------------------- ---------------------- ----------------------
1 Year 5 Years Since inception
- --------------------------- ------------------- ---------------------- ----------------------
- --------------------------- ------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Trust Shares 5.00% 5.21% 4.77% (4/15/93)
- --------------------------- ------------------- ---------------------- ----------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
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>
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
Distribution Total Fund
Management fees (12b-1) fees Other expenses operating expenses
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.20%(1) None 0.15%(1) 0.35%(1)
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
</TABLE>
(1) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.09%. The Fund's administrator is waiving a portion of
the administration fees so that Other expenses are expected to be 0.11%.
Total Fund operating expenses after these waivers are expected to be 0.20%.
These fee waivers 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
-10-
<PAGE>
- - 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 $36 $113 $197 $443
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-11-
<PAGE>
Galaxy U.S. Treasury Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income with liquidity and stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in securities issued or guaranteed by the U.S.
Treasury and certain U.S. Government agencies and instrumentalities that provide
income that is generally not subject to state income tax. 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.
[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.
- - 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.
-12-
<PAGE>
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares of the Fund has varied
from year to year.
[SIDENOTE:]
BEST QUARTER: 1.32% for the quarter ending June 30, 1995
WORST QUARTER: 1.03% for the quarter ending March 31, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------- --------------------- ------------------- ------------------------ -------------------
1995 1996 1997 1998 1999
- ----------------------- --------------------- ------------------- ------------------------ -------------------
- ----------------------- --------------------- ------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
5.23% 4.76% 4.88% 4.80% 4.37%
- ----------------------- --------------------- ------------------- ------------------------ -------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
- --------------------------- ------------------------ ------------------------ ------------------------
1 year 5 YEARS Since inception
- --------------------------- ------------------------ ------------------------ ------------------------
- --------------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Trust Shares 4.37% 4.81% 4.81% (11/1/94)
- --------------------------- ------------------------ ------------------------ ------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
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>
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
Distribution Total Fund
Management fees (12b-1) fees Other expenses operating expenses
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.39% None 0.12% 0.51%
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
</TABLE>
-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
- - 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 $52 $164 $285 $640
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
-14-
<PAGE>
Galaxy Tax-Exempt Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks as high a level of current interest income exempt from federal
income tax as is consistent with stability of principal.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities, which are securities issued by state and local governments and other
political or public bodies or agencies and that pay interest which is exempt
from regular federal income tax. Under normal conditions, the Fund will invest
no more than 20% of its total assets in taxable obligations, such as U.S.
Government obligations, money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. The interest on
private activity bonds may be subject to the federal alternative minimum tax.
Investments in private activity bonds will not be treated as investments in
municipal securities for purposes of the 80% requirement stated above.
The Fund will only buy a security if it has one of the two highest short-term
ratings from at least two nationally recognized statistical rating
organizations, or one such rating if only one organization has rated the
security. If the security is not rated, it must be determined by the Adviser to
be of comparable credit quality.
[Sidenote:]
MUNICIPAL SECURITIES
State and local governments issue municipal securities to raise money to finance
public works, to repay outstanding obligations, to raise funds for general
operating expenses and to make loans to other public institutions. Some
municipal securities, known as private activity bonds, are issued to finance
projects for private companies. Municipal securities, which can be issued as
bonds, notes or commercial paper, usually have fixed interest rates, although
some have interest rates that change from time to time.
[Sidenote:]
TYPES OF MUNICIPAL SECURITIES
GENERAL OBLIGATION SECURITIES are secured by the issuer's full faith, credit and
taxing power. REVENUE OBLIGATION securities are usually payable only from
revenues derived from specific facilities or revenue sources. PRIVATE ACTIVITY
BONDS are usually revenue obligations since they are typically payable by the
private user of the facilities financed by the bonds.
-15-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although credit risk is very low because the Fund only
invests in high quality obligations, if an issuer fails to pay interest or
repay principal, the value of your investment could decline. The ability
of a state or local government issuer to make payments can be affected by
many factors, including economic conditions, the flow of tax revenues and
changes in the level of federal, state or local aid.
- - SHARE PRICE - There's no guarantee the Fund will be able to preserve the
value of your investment at $1.00 per share.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these
evaluations will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that
all dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Trust Shares of the Fund has varied
from year to year.
[SIDENOTE:]
BEST QUARTER: 0.88% for the quarter ending June 30, 1995
WORST QUARTER: 0.59% for the quarter ending March 31, 1999
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------- --------------------- ------------------- ------------------------ --------------------
1995 1996 1997 1998 1999
- ----------------------- --------------------- ------------------- ------------------------ --------------------
- ----------------------- --------------------- ------------------- ------------------------ --------------------
<S> <C> <C> <C> <C>
3.34 2.92% 3.14% 2.95% 2.73%
- ----------------------- --------------------- ------------------- ------------------------ --------------------
</TABLE>
-16-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
- --------------------------- ------------------ ---------------------------- -----------------------------
1 year 5 YEARS Since inception
- --------------------------- ------------------ ---------------------------- -----------------------------
- --------------------------- ------------------ ---------------------------- -----------------------------
<S> <C> <C> <C>
Trust Shares 2.73% 3.02% 2.73% (11/1/94)
- --------------------------- ------------------ ---------------------------- -----------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
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>
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
Distribution Total Fund
Management fees (12b-1) fees Other expenses operating expenses
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
<S> <C> <C> <C> <C>
Trust Shares 0.40% None 0.12% 0.52%
- -------------------- ------------------------ ---------------- -------------------- ----------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
1 year 3 years 5 years 10 years
- ----------------------- --------------------- -------------------- --------------------- --------------------
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Trust Shares $53 $167 $291 $653
- ----------------------- --------------------- -------------------- --------------------- --------------------
</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-
-17-
<PAGE>
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.
-18-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Money Market
Funds have been described above. The following supplements that discussion.
TEMPORARY DEFENSIVE POSITIONS
Each Fund may temporarily hold up to 100% of its total assets in investments
that aren't part of its main investment strategy during unfavorable market
conditions. These investments may include cash (which will not earn any income)
and, in the case of the Tax-Exempt Fund, short-term taxable investments, such as
money market instruments and debt securities issued or guaranteed by the U.S.
Government or its agencies, in excess of 20% of the Fund's total assets. This
strategy could prevent a Fund from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be main
investment strategies of the Funds - and the risks involved - are described in
detail in the Statement of Additional Information (SAI) which is referred to
on the back cover of this prospectus.
YEAR 2000 RISKS
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.
-19-
<PAGE>
INVESTOR GUIDELINES
The table below provides information as to which type of investor might want to
invest in each of the Galaxy Money Market 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...
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
Galaxy Money Market Fund investors who want a
flexible and convenient
way to manage cash while
earning money market
returns
- ------------------------------------------------------- -----------------------------------------------------
Galaxy Government Fund investors who want a way to earn money market
returns with the extra margin of safety associated
with U.S. Government obligations
- ------------------------------------------------------- -----------------------------------------------------
Galaxy Institutional Government Money Market Fund institutional investors
who want a way to earn
money market returns
with the extra margin of
safety associated with
U.S. Government
obligations
- ------------------------------------------------------- -----------------------------------------------------
Galaxy U.S. Treasury Fund investors who want a way to earn money market
returns from U.S. Treasury obligations that are
generally free from state and local taxes
- ------------------------------------------------------- -----------------------------------------------------
Galaxy Tax-Exempt Fund investors who want a way
to earn money market
returns that are free
from federal income tax
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
-20-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
Fund Management fee as a
% of average net assets
- ------------------------------------------------------- ------------------------------------
<S> <C>
Money Market 0.36%
- ------------------------------------------------------- ------------------------------------
Government 0.39%
- ------------------------------------------------------- ------------------------------------
Institutional Government Money Market 0.06%
- ------------------------------------------------------- ------------------------------------
U.S. Treasury 0.39%
- ------------------------------------------------------- ------------------------------------
Tax-Exempt 0.40%
- ------------------------------------------------------- ------------------------------------
</TABLE>
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 Tax-Exempt Fund) held by defined 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.
-21-
<PAGE>
HOW TO INVEST IN THE FUNDS
BUYING, SELLING AND EXCHANGING SHARES
Trust Shares of the Funds (other than the Institutional Government 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 Financial 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 Government Money Market Fund 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 your order to buy shares 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 net
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 your order to purchase shares is
received and accepted by Galaxy's distributor after 11:00 a.m. (Eastern time)
but before 4:00 p.m. (Eastern time) on a business day, the price you pay will be
the NAV next determined (and you'll begin receiving dividends 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 sell shares 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.
(Eastern time) and at the close of regular trading that day (usually 4:00 p.m.
Eastern time). The New York Stock Exchange is generally open for trading every
Monday through Friday, except for national holidays.
The Funds' assets are valued at amortized cost, which is approximately equal to
market value.
[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.
-22-
<PAGE>
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 Institutional Government Money Market Fund, Galaxy does not have
any minimum investment requirements for initial or additional investments in
Trust Shares but financial institutions and employer-sponsored plans may.
They may also require you to maintain a minimum account balance.
The minimum initial aggregate investment by a financial institution purchasing
shares of the Institutional Government Money Market Fund on behalf of its
customers is $2,000,000. There is no minimum investment requirement for
additional purchases.
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.
-23-
<PAGE>
With respect to the Institutional Government Money Market Fund, 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 - INSTITUTIONAL GOVERNMENT MONEY MARKET FUND ONLY
If you are a customer of a financial institution, you may exchange Trust Shares
of the Institutional Government 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 the Institutional Government Money
Market Fund for Retail A Shares of another Galaxy Fund that imposes a sales
charge on purchases.
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.
-24-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares dividends from net investment income daily and pays them
within five business days after the end of each month. Although the Funds do not
expect to realize net long-term capital gains, any capital gains realized will
be distributed at least annually. Dividends and distributions are paid in cash
unless you indicate on the account application or in a letter to Galaxy that you
want to have dividends and distributions reinvested in additional shares.
MONEY MARKET, GOVERNMENT, INSTITUTIONAL GOVERNMENT MONEY MARKET AND U.S.
TREASURY FUNDS
Distributions by these Funds will generally be taxable to shareholders. Each of
these Funds expects that all, or substantially all, of its distributions will
consist of ordinary income. You will be subject to federal income tax on these
distributions regardless of whether they are paid in cash or reinvested in
additional shares. The one major exception to these tax principles is that
distributions on shares held in an IRA (or other tax-qualified plan) will not be
currently taxable.
TAX-EXEMPT FUND
Distributions by this Fund will generally consist of dividends derived from
interest earned on exempt securities, and these "exempt-interest dividends" will
be exempt income for shareholders for federal income tax purposes. It is
possible, depending upon the Fund's investments, that a portion of the Fund's
distributions could be taxable to shareholders as ordinary income or capital
gains, but the Fund does not expect that this will be the case.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of this Fund generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by this
Fund may constitute an item of tax preference for purposes of determining
federal alternative minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in determining whether any
Social Security or railroad retirement payments received by you are subject to
federal income taxes.
ALL FUNDS
Taxable dividends paid in January may be taxable as if they had been paid the
previous December. Each year you'll receive in the mail federal tax information
on distributions paid by the Funds.
-25-
<PAGE>
STATE AND LOCAL TAXES
Generally, 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 each Fund's distributions, if any, that are
attributable to interest on U.S. Government securities or on securities of a
particular state, or localities within a state.
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 relevent to your specific situation.
-26-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables shown below will help you understand the
financial performance for the Funds' Trust Shares for the past five years.
Certain information reflects the financial performance of a single Trust
Share. The total returns in the tables represent the rate that an investor
would have earned (or lost) on an investment in Trust Shares of each Fund,
assuming all dividends and distributions were reinvested. The information for
the fiscal year ended October 31,1999 has been audited by Ernst and Young LLP,
independent auditors, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Reports and are incorporated by
reference into the SAI. The Annual Reports and SAI are available free of
charge upon request. The information for the fiscal years ended October 31,
1998, 1997, 1996 and 1995 was audited by Galaxy's former auditors,
PricewaterhouseCoopers LLP.
-27-
<PAGE>
Galaxy Money Market Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
TRUST SHARES
----------------------------------------------------------------------------------
<S> <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(2) .............. 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 ............................ 4.72% 5.23% 5.13% 5.00% 5.43%
Ratios/supplemental data:
Net assets, end of period (000's) ..... $1,679,875 $1,262,900 $1,138,185 $924,222 $334,054
Ratios to average net assets:
Net investment income including
reimbursement/waiver ................. 4.62% 5.12% 5.04% 4.89% 5.30%
Operating expenses including
reimbursement/waiver ................. 0.48% 0.49% 0.50% 0.55% 0.55%
Operating expenses excluding
reimbursement/waiver ................. 0.52% 0.53% 0.54 0.58% 0.56%
</TABLE>
- ----------------
1 Prior to November 1, 1994, the Fund offered a single class of shares. As of
such date, the existing class of shares was designated as Retail Shares
(now designated Retail A Shares) and the Fund began issuing a second class
of shares designated as Trust Shares.
2 Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.05,
$0.05, $0.05, $0.05 and $0.05, respectively.
-28-
<PAGE>
Galaxy Government Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
Trust Shares
------------------------------------------------------------------------------
<S> <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(2) ............... 0.04 0.05 0.05 0.05 0.05
Net realized and unrealized gain (loss)
on investments ....................... -- -- -- -- --
Total from investment operations ....... 0.04 0.05 0.05 0.05 0.05
Less dividends:
Dividends from net investment income .. (0.04) (0.05) (0.05) (0.05) (0.05)
Dividends from net realized capital
gains ................................. -- -- -- -- --
Total dividends ......................... (0.04) (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 ............................. 4.58% 5.15% 5.06% 4.95% 5.39%
Ratios/supplemental data:
Net assets, end of period (000's) ..... $592,305 $722,476 $630,859 $733,759 $678,679
Ratios to average net assets:
Net investment income including
Reimbursement/waiver ................. 4.50% 5.03% 4.94% 4.85% 5.27%
Operating expenses including
Reimbursement/waiver ................. 0.51% 0.51% 0.51% 0.52% 0.53%
Operating expenses excluding
Reimbursement/waiver ................. 0.53% 0.52% 0.52% 0.53% 0.54%
</TABLE>
- ----------------
1 Prior to November 1, 1994, the Fund offered a single class of shares. As of
such date, the existing class of shares was designated as Retail Shares
(now designated Retail A Shares) and the Fund began issuing a second class
of shares designated as Trust Shares.
2 Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.04,
$0.05, $0.05, $0.05 and $0.05, respectively.
-29-
<PAGE>
Galaxy Institutional Government Money Market Fund(1)
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Trust Shares
--------------------------------------------------------------------------------------
<S> <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(2) ............... 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 ........................... 4.92% 5.32% 5.09% 5.12% 5.53%
Ratios/supplemental data:
Net assets, end of period (000's) ...... $222,443 $200,319 $175,141 $500,927 $506,692
Ratios to average net assets:
Net investment income including
reimbursement/waiver ................ 4.82% 5.17% 4.94% 5.00% 5.38%
Operating expenses including
reimbursement/waiver ................ 0.20% 0.20% 0.19% 0.19% 0.17%
Operating expenses excluding
reimbursement/waiver ................ 0.38% 0.36% 0.33% 0.33% 0.33%
</TABLE>
- ----------------
1 The Fund was formerly known as the Institutional Treasury Money Market
Fund.
2 Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for the years ended October 31,
1999, 1998, 1997, 1996 and 1995 was $0.05, $0.05, $0.05, $0.05, and $0.05,
respectively.
-30-
<PAGE>
Galaxy U.S. Treasury Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
Trust Shares
------------------------------------------------------------------------------------
<S> <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(2) .............. 0.04 0.05 0.05 0.05 0.05
Net realized and unrealized gain (loss)
on investments ...................... -- -- -- -- --
Total from investment operations ....... 0.04 0.05 0.05 0.05 0.05
Less dividends:
Dividends from net investment income .. (0.04) (0.05) (0.05) (0.05) (0.05)
Dividends from net realized capital
gains ................................ -- -- -- -- --
Total dividends ........................ (0.04) (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 ............................ 4.30% 4.90% 4.85% 4.80% 5.18%
Ratios/supplemental data :
Net assets, end of period (000's) ..... $459,792 $429,645 $393,175 $354,331 $271,036
Ratios to average net assets:
Net investment income including
reimbursement/waiver ................. 4.22% 4.80% 4.75% 4.69% 5.06%
Operating expenses including
reimbursement/waiver ................. 0.51% 0.51% 0.52% 0.53% 0.55%
Operating expenses excluding
reimbursement/waiver ................. 0.51% 0.51% 0.53% 0.53% 0.55%
</TABLE>
- ----------------
1 Prior to November 1, 1994, the Fund offered a single class of shares. As of
such date, the existing class of shares was designated as Retail Shares
(now designated Retail A Shares) and the Fund began issuing a second class
of shares designated as Trust Shares.
2 Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.04,
$0.05, $0.05, $0.05 and $0.05, respectively.
-31-
<PAGE>
Galaxy Tax-Exempt Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
--------------------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
Trust Shares
------------------------------------------------------------------------------------
<S> <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(2) ............... 0.03 0.03 0.03 0.03 0.03
Net realized and unrealized gain (loss)
on investments ....................... -- -- -- -- --
Total from investment operations ........ 0.03 0.03 0.03 0.03 0.03
Less dividends:
Dividends from net investment income ... (0.03) (0.03) (0.03) (0.03) (0.03)
Dividends from net realized capital
gains ................................. -- -- -- -- --
Total dividends ......................... (0.03) (0.03) (0.03) (0.03) (0.03)
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 ............................. 2.67% 3.03% 3.10% 2.97% 3.29%
Ratios/supplemental data:
Net assets, end of period (000's) ...... $556,137 $227,176 $169,316 $184,307 $180,706
Ratios to average net assets:
Net investment income including
reimbursement/waiver .................. 2.65% 2.99% 3.05% 2.92% 3.24%
Operating expenses including
reimbursement/waiver .................. 0.52% 0.53% 0.53% 0.54% 0.55%
Operating expenses excluding
reimbursement/waiver .................. 0.52% 0.53% 0.53% 0.54% 0.56%
</TABLE>
- ----------------
1 Prior to November 1, 1994, the Fund offered a single class of shares. As of
such date, the existing class of shares was designated as Retail Shares
(now designated Retail A Shares) and the Fund began issuing a second class
of shares designated as Trust Shares.
2 Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for the years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.03,
$0.03, $0.03, $0.03 and $0.03, respectively.
-32-
<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 Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request, to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
PROGALMM 3/1/00
<PAGE>
[Front cover page]
Galaxy Municipal Money Market Funds
The Galaxy Fund
Prospectus
February 29, 2000
Galaxy Connecticut Municipal Money Market Fund
Galaxy Massachusetts Municipal Money Market Fund
Galaxy New York Municipal Money Market Fund
Prime 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
3 Galaxy Connecticut Municipal Money Market Fund
7 Galaxy Massachusetts Municipal Money Market Fund
11 Galaxy New York Municipal Money Market Fund
14 Additional information about risk
15 Fund management
16 How to invest in the Funds
16 About sales charges
16 Buying and selling shares
17 How to buy shares
17 How to sell shares
17 Shareholder services
18 Other transaction policies
19 Dividends, distributions and taxes
21 Financial highlights
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
This prospectus describes the Galaxy Municipal Money Market Funds. The Funds
invest primarily in short-term municipal securities that are determined by the
Funds' investment adviser to carry very little risk. Municipal securities are
debt obligations of state and local governments and other political or public
bodies or agencies. The interest paid on municipal securities is generally
exempt from federal income tax and, in some cases, from state and local income
tax. Because each of the Funds is a "money market fund," municipal securities
purchased by each Fund must meet strict requirements as to investment quality,
maturity and diversification. The Funds don't invest in securities with
maturities of more than 397 days (subject to certain exceptions) and the average
maturity of all securities held by a particular Fund must be 90 days or less.
Each Fund tries to maintain its share price at $1.00 to protect your investment
from loss.
On the following pages, you'll find important information about each Galaxy
Municipal Money Market 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 Fund's past performance 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
[Sidenote:]
MATURITY
The maturity of a security is the date when the issuer must repay the security's
entire principal amount to an investor, such as a Fund.
WHICH FUND IS RIGHT FOR YOU?
The Funds are designed for investors who are looking for a way to earn money
market returns that are free of federal income tax and certain state and local
income taxes. A Fund that specializes in a particular state is best suited to
residents of that state who are looking for income that is free of the state's
income tax. TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR TAX-DEFERRED
RETIREMENT ACCOUNTS, SUCH AS IRAS, BECAUSE THEIR RETURNS BEFORE TAXES ARE
GENERALLY LOWER THAN THOSE OF TAXABLE FUNDS.
-1-
<PAGE>
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 $68 billion in
assets.
[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.
AN INVESTMENT IN THE FUNDS ISN'T A FLEET BANK DEPOSIT AND IT ISN'T INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
-2-
<PAGE>
Galaxy Connecticut Municipal Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide current income exempt from federal regular income tax
and the Connecticut state income tax on individuals, trusts and estates,
consistent with relative stability of principal and liquidity.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from federal regular income tax,
and at least 65% of its total assets in Connecticut municipal securities, which
are securities issued by or on behalf of the State of Connecticut and other
government issuers and that pay interest which is exempt from both federal
regular income tax and the Connecticut state income tax on individuals, trusts
and estates. Under normal conditions, the Fund will invest no more than 20% of
its total assets in taxable obligations, such as U.S. Government obligations,
money market instruments and repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. 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. The interest on private activity bonds may be
subject to the federal alternative minimum tax. Investments in private activity
bonds will not be treated as investments in municipal securities for purposes of
the 80% requirement stated above.
The Fund will only buy a security if it has one of the two highest short-term
ratings from at least two nationally recognized statistical rating
organizations, or one such rating if only one organization has rated the
security. If the security is not rated, it must be determined by the Adviser to
be of comparable credit quality.
[Sidenote:]
MUNICIPAL SECURITIES
State and local governments issue municipal securities to raise money to finance
public works, to repay outstanding obligations, to raise funds for general
operating expenses and to make loans to other public institutions. Some
municipal securities, known as private activity bonds, are issued to finance
projects for private companies. Municipal securities, which can be issued as
bonds,
-3-
<PAGE>
notes or commercial paper, usually have fixed interest rates, although some have
interest rates that change from time to time.
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although credit risk is very low because the Fund only
invests in high quality obligations, if an issuer fails to pay interest or
repay principal, the value of your investment could decline. The ability of
a state or local government issuer to make payments can be affected by many
factors, including economic conditions, the flow of tax revenues and
changes in the level of federal, state or local aid.
- - 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 - Since 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.
- - 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 each 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.
As of the date of this prospectus, the Fund had not offered Prime Shares to
investors. The returns below represent the returns for Retail A Shares of the
Fund which are offered in a separate prospectus. Prime Shares are subject to
distribution and service fees at a maximum annual rate of 1.00% of the Fund's
Prime Share assets. Had the returns for Retail A Shares been restated to reflect
these distribution and service fees, the returns would have been lower.
-4-
<PAGE>
The Fund began operations on October 4, 1993 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, the Predecessor
Fund was reorganized as a new portfolio of Galaxy. Prior to the reorganization,
the Predecessor Fund offered and sold two classes of shares, Investment Shares
and Trust Shares. In connection with the reorganization, shareholders of the
Predecessor Fund exchanged their Investment Shares and Trust Shares for Retail A
Shares of the Fund. The returns for periods prior to December 4, 1995 are for
Investment Shares of the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year.
[Sidenote:]
Best quarter: 0.78% for the quarter ending June 30, 1995
Worst quarter: 0.36% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.99% 2.97% 2.78% 2.98% 2.77% 2.53%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999, after taking into account any sales charges on Investment
Shares of the Predecessor Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1 year 5 years Since inception
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 2.53% 2.81% 2.64% (10/4/93)
- -----------------------------------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
FEES AND EXPENSES OF THE FUND
There are no sales charges when you buy or sell Prime Shares of the Fund. The
following table shows the fees and expenses you pay when you buy and hold shares
of the Fund.
-5-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Shares 0.40% 0.45% 0.14% 0.99%
- ------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Shares $101 $315 $547 $1,213
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
Galaxy Massachusetts Municipal Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide current income exempt from federal regular income tax
and the income taxes imposed by the Commonwealth of Massachusetts, consistent
with relative stability of principal and liquidity.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from federal regular income tax,
and at least 65% of its total assets in Massachusetts municipal securities,
which are securities issued by or on behalf of the Commonwealth of Massachusetts
and other government issuers and that pay interest which is exempt from both
federal regular income tax and Massachusetts personal income tax. Under normal
conditions, the Fund will invest no more than 20% of its total assets in taxable
obligations, such as U.S. Government obligations, money market instruments and
repurchase agreements.
Municipal securities purchased by the Fund may include general obligation
securities, revenue securities and private activity bonds. 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. The interest on private activity bonds may be
subject to the federal alternative minimum tax. Investments in private activity
bonds will not be treated as investments in municipal securities for purposes of
the 80% requirement stated above.
The Fund will only buy a security if it has one of the two highest short-term
ratings from at least two nationally recognized statistical rating
organizations, or one such rating if only one organization has rated the
security. If the security is not rated, it must be determined by the Adviser to
be of comparable credit quality.
[Sidenote:]
MUNICIPAL SECURITIES
State and local governments issue municipal securities to raise money to finance
public works, to repay outstanding obligations, to raise funds for general
operating expenses and to make loans to other public institutions. Some
municipal securities, known as private activity bonds, are issued to finance
projects for private companies. Municipal securities, which can be issued as
bonds,
-7-
<PAGE>
notes or commercial paper, usually have fixed interest rates, although some have
interest rates that change from time to time.
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although credit risk is very low because the Fund only
invests in high quality obligations, if an issuer fails to pay interest or
repay principal, the value of your investment could decline. The ability of
a state or local government issuer to make payments can be affected by many
factors, including economic conditions, the flow of tax revenues and
changes in the level of federal, state or local aid.
- - 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 - Since the Fund invests primarily in Massachusetts
municipal securities, it is likely to be especially susceptible to
economic, political and regulatory events that affect Massachusetts.
- - 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 each 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.
As of the date of this prospectus, the Fund had not offered Prime Shares to
investors. The returns below represent the returns for Retail A Shares of the
Fund which are offered in a separate prospectus. Prime Shares are subject to
distribution and service fees at a maximum annual rate of 1.00% of the Fund's
Prime Share assets. Had the returns for Retail A Shares been restated to reflect
these distribution and service fees, the returns would have been lower.
-8-
<PAGE>
The Fund began operations on October 5, 1993 as a separate portfolio (the
Predecessor Fund) of The Shawmut Funds. On December 4, 1995, 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 Retail A Shares of the Fund. The returns for periods prior to
December 4, 1995 are for shares of the Predecessor Fund.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year.
[Sidenote:]
Best quarter: 0.86% for the quarter ending June 30, 1995
Worst quarter: 0.39% for the quarter ending March 31, 1994
[bar chart goes here]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2.15% 3.23% 2.78% 2.96% 2.79% 2.56%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1 year 5 years Since inception
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares 2.56% 2.86% 2.71% (10/5/93)
------------------------------------------------------------------------------------------------------
</TABLE>
To obtain the Fund's current 7-day yield, please call 1-877-BUY-GALAXY
(1-877-289-4252).
FEES AND EXPENSES OF THE FUND
There are no sales charges when you buy or sell Prime Shares of the Fund. The
following table shows the fees and expenses you pay when you buy and hold shares
of the Fund.
-9-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Shares 0.40% 0.45% 0.15% 1.00%
- ----------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Shares $102 $318 $552 $1,225
- --------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
Galaxy New York Municipal Money Market Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide current income exempt from federal regular income tax
and from New York State and New York City personal income tax, consistent with
relative stability of principal and liquidity.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from federal regular income tax,
and at least 65% of its total assets in New York municipal securities, which are
securities issued by or on behalf of the State of New York and other government
issuers and that pay interest which is exempt from federal regular income tax
and New York State and New York City personal income tax. Under normal
conditions, the Fund will invest no more than 20% of its total assets in taxable
obligations, such as U.S. Government obligations, money market instruments and
repurchase agreements.
Municipal securities purchased by the Fund may include general obligations
securities, revenue securities and private activity bonds. 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. The interest on private activity bonds may be
subject to the federal alternative minimum tax. Investments in private activity
bonds will not be treated as investments in municipal securities for purposes of
the 80% requirement stated above.
The Fund will only buy a security if it has one of the two highest short-term
ratings from at least two nationally recognized statistical rating
organizations, or one such rating if only one organization has rated the
security. If the security is not rated, it must be determined by the Adviser to
be of comparable credit quality.
[Sidenote:]
MUNICIPAL SECURITIES
State and local governments issue municipal securities to raise money to finance
public works, to repay outstanding obligations, to raise funds for general
operating expenses and to make loans to other public institutions. Some
municipal securities, known as private activity bonds, are issued to finance
projects for private companies. Municipal securities, which can be issued as
bonds, notes or commercial paper, usually have fixed interest rates, although
some have interest rates that change from time to time.
-11-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
While money market funds are considered to be among the safest of all
investments, they are not risk free. Here are the main risks associated with an
investment in the Fund:
- - INTEREST RATE RISK - The yield paid by the Fund will vary with changes in
short-term interest rates.
- - CREDIT RISK - Although credit risk is very low because the Fund only
invests in high quality obligations, if an issuer fails to pay interest or
repay principal, the value of your investment could decline. The ability of
a state or local government issuer to make payments can be affected by many
factors, including economic conditions, the flow of tax revenues and
changes in the level of federal, state or local aid.
- - 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 New York
municipal securities, the Fund's ability to achieve its investment
objective is dependent upon the ability of the issuers of New York
municipal securities to meet their continuing obligations for the payment
of principal and interest. New York State and New York City face long-term
economic problems that could seriously affect their ability and that of
other issuers of New York municipal securities to meet their financial
obligations. Other considerations affecting the Fund's investments in New
York municipal securities are summarized in the Statement of Additional
Information.
- - 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 each Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The Fund had not commenced operations prior to the date of this prospectus. No
performance information is presented because the Fund has less than one full
calendar year of performance history.
FEES AND EXPENSES OF THE FUND
There are no sales charges when you buy or sell Prime Shares of the Fund. The
following table shows the fees and expenses you pay when you buy and hold shares
of the Fund.
-12-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Shares 0.40% 0.45% 0.15%(1) 1.00%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower depending on the amount you
invest and the Fund's actual rate of return, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1 year 3 years
- ------------------------------------------------------------------------
<S> <C> <C>
Prime Shares $102 $318
- ------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Municipal
Money Market Funds have been described above. The following supplements that
discussion.
TEMPORARY DEFENSIVE POSITIONS
Each Fund may temporarily hold up to 100% of its total assets in investments
that aren't part of its main investment strategy during unfavorable market
conditions. These investments may include cash (which will not earn any income)
and short-term taxable investments, such as money market instruments and debt
securities issued or guaranteed by the U.S. Government or its agencies, in
excess of 20% of each Fund's assets. This strategy could prevent a Fund from
achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund
may, from time to time, pursue other investment strategies and make other
types of investments in support of its overall investment goal. These
supplemental investment strategies, which are not considered to be main
investment strategies of the Fund - 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 problems, 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.
-14-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below. The New York Municipal Money Market Fund had not commenced
operations prior to the date of this prospectus. The Adviser is entitled to
receive advisory fees with respect to the New York Municipal Money Market
Fund at the annual rate of .40% of the first $750,000,000 of the Fund's
average daily net assets plus .35% of average daily net assets in excess of
$750,000,000. The fee shown with respect to the New York Municipal Money
Market Fund is that which is currently in effect.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Management fee as a
Fund % of average of net assets
- -----------------------------------------------------------------------------------------------
<S> <C>
Connecticut Municipal Money Market .36%
- -----------------------------------------------------------------------------------------------
Massachusetts Municipal Money Market .37%
- -----------------------------------------------------------------------------------------------
New York Municipal Money Market .40%
- -----------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
HOW TO INVEST IN THE FUNDS
ABOUT SALES CHARGES
There are no sales charges (sometimes called front-end loads) or contingent
deferred sales charges (sometimes called back-end loads or CDSCs) when you buy
or sell Prime Shares of a Fund.
[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 Prime Shares, minus the
value of the Fund's liabilities attributable to Prime Shares, divided by the
number of Prime Shares held by investors.
DISTRIBUTION AND SHAREHOLDER SERVICE FEES
Galaxy has adopted a plan under Rule 12b-1 that allows each Fund to pay fees
from its Prime Share assets for selling and distributing Prime Shares and for
services provided to shareholders. Prime Shares of the Funds can pay
distribution and shareholder service (12b-1) fees at an annual rate of up to
1.00% of each Fund's Prime Share assets. The Funds do not intend to pay more
than 0.45% in distribution and shareholder service (12b-1) fees during the
current fiscal year. Because 12b-1 fees are paid on an ongoing basis, over time
they increase the cost of your investment and may cost more than paying other
sales charges.
BUYING AND SELLING SHARES
You can buy and sell Prime 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.
If your order to buy shares 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 net
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 your order to purchase shares is
received and accepted by Galaxy's distributor after 11:00 a.m. (Eastern time)
but before 4:00 p.m. (Eastern time) on a business day, the price you pay will be
the NAV next determined (and you'll begin receiving dividends 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 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
-16-
<PAGE>
trading as of 11:00 a.m. (Eastern time) and at the close of regular trading
(usually 4:00 p.m. Eastern time).
The Funds' assets are valued at amortized cost, which is approximately equal to
market value.
[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is $2,500. You generally
can make additional investments for as little as $100.
Usually, you must keep at least $250 in your account. If your account falls
below $250 because you sell 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 Prime Shares through your broker-dealer. Your broker-dealer is
responsible for sending your order to Galaxy's distributor and for wiring
payment to Galaxy's custodian. Your broker-dealer will usually hold the shares
in your name and receive all confirmations of purchases and sales. Contact your
broker-dealer for more information. A broker-dealer who places orders on your
behalf may charge you a separate fee for its services.
HOW TO SELL SHARES
You can sell your Prime Shares through your broker-dealer. Please contact your
broker-dealer for information on how to sell your shares. The broker-dealer 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 broker-dealer, but your broker-dealer may charge you a fee.
Contact your broker-dealer for more information.
SHAREHOLDER SERVICES
Your broker-dealer may offer certain shareholder services to its customers. For
example, broker-dealers may offer participation in an automatic investment
program that allows investors to systematically purchase shares of the Funds on
a periodic basis from a designated account. Broker-dealers may also offer a
systematic withdrawal plan which permits investors automatically to sell shares
on a regular basis. Please contact your broker-dealer for details on these and
any other shareholder services that may be available.
-17-
<PAGE>
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 your broker-dealer 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 normally pays you cash when you sell your shares, but it has the right to
deliver securities owned by a Fund instead of cash. When you sell these
securities, you'll pay brokerage charges.
Sales proceeds are normally sent to your broker-dealer within three business
days but Galaxy reserves the right to send sales proceeds within seven business
days if sending proceeds earlier could adversely affect a Fund.
Galaxy reserves the right to vary or waive any minimum investment requirement.
-18-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares dividends from net investment income daily and pays them
within five business days after the end of each month. Although the Funds do not
expect to realize net long-term capital gains, any capital gains realized will
be distributed at least annually. Dividends and distributions are paid in cash
unless you indicate on the account application or in a letter to Galaxy that you
want to have dividends and distributions reinvested in additional shares.
Distributions by the Funds will generally consist of dividends derived from
interest earned on exempt securities, and these "exempt-interest dividends" will
be exempt income for shareholders for federal income tax purposes. It is
possible, depending upon a Fund's investments, that a portion of the Fund's
distributions could be taxable to shareholders as ordinary income or capital
gains, but none of the Funds expects that this will be the case.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of the Funds generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by one or
more of the Funds 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.
CONNECTICUT MUNICIPAL MONEY MARKET FUND
This Fund intends to comply with certain state tax requirements so that its
dividends will generally be exempt from the Connecticut state income tax on
individuals, trusts and estates ("CSIT"). However, dividends, if any, derived
from interest or long-term captial gains on securities other than Connecticut
municipal securities, or from any short-term capital gains, will be subject to
the CSIT.
MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
This Fund intends to comply with certain state tax requirements so that its
dividends will generally be exempt from Massachusetts personal income tax.
However, dividends, if any, derived from interest on securities other than
Massachusetts municipal securities, or from any short-term capital gains, will
be subject to Massachusetts personal income tax.
-19-
<PAGE>
NEW YORK MUNICIPAL MONEY MARKET FUND
This Fund intends to comply with certain state tax requirements so that its
income and dividends will generally be exempt from New York State and New York
City personal income tax. However, dividends, if any, derived from interest on
securities other than New York municipal securities, or from capital gains, will
be subject to New York State and New York City personal income tax.
ALL FUNDS
Taxable dividends paid in January may be taxable as if they had been paid the
previous December. Each year you'll receive in the mail federal tax information
on distributions paid by the Funds.
OTHER STATE AND LOCAL TAX MATTERS
Generally, shareholders may also be subject to state and local taxes on
distributions and redemptions. State income taxes may not apply, however, to the
portions of each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities or on securities of the particular state, or
localities within the State.
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
advisor for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
-20-
<PAGE>
FINANCIAL HIGHLIGHTS
As of the date of this prospectus, Prime Shares of the Funds had not been
offered to investors. The financial highlights tables shown below with
respect to the Connecticut Municipal Money Market Fund and Massachusetts
Municipal Money Market Fund reflect the performance of the Funds' Retail A
Shares and are intended to provide you with a long-term perspective as to the
Funds' financial history. These tables will help you understand the financial
performance for the Funds' Retail A Shares for the past five years. Certain
information reflects the financial performance of a single Retail A Share.
The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in Retail A Shares of each Fund,
assuming all dividends and distributions were reinvested. The information for
the fiscal year ended October 31, 1999 has been audited by Ernst & Young LLP,
independent auditors, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report and are incorporated by
reference into the SAI. The Annual Report and SAI are available free of
charge upon request. The information for the fiscal years ended October 31,
1998, 1997, 1996 and 1995 was audited by Galaxy's former auditors,
PricewaterhouseCoopers LLP. No financial highlights are presented for the New
York Municipal Money Market Fund because the Fund had not commenced
operations prior to the date of this prospectus.
As discussed above in "Risk/return summary - Connecticut Municipal Money
Market Fund," prior to December 4, 1995, the predecessor to the Connecticut
Municipal Money Market Fund (Predecessor Fund) offered and sold two classes
of shares, Investment Shares and Trust Shares. Investment Shares of the
Predecessor Fund were similar to the Retail A Shares which the Connecticut
Municipal Money Market Fund currently offers. Accordingly, Trust Shares of
the Predecessor Fund have not been included in the financial highlights table
for the Connecticut Municipal Money Market Fund set forth below.
-21-
<PAGE>
Galaxy Connecticut Municipal Money Market Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Year Ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
---- ---- ---- ------- -----
<S> <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(2)......................... 0.02 0.03 0.03 0.03 0.03
Net realized and unrealized gain (loss)
on investments................................ -- -- -- -- --
------ ------ ------ ------ ------
Total from investment operations.............. 0.02 0.03 0.03 0.03 0.03
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income............. (0.02) (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------ ------
Dividends from net realized capital gains........ -- -- -- -- --
------ ------ ------ ------ ------
Total dividends.................................. (0.02) (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------ ------
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(3).................................... 2.47% 2.87% 2.94% 2.83% 2.94%
Ratios/supplemental data:
Net assets, end of period (000's)................ $243,051 $165,186 $137,095 $110,544 $71,472
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 2.44% 2.83% 2.91% 2.79% 2.88%
Operating expenses including
reimbursement/waiver.......................... 0.62% 0.62% 0.60% 0.64% 0.82%
Operating expenses excluding
reimbursement/waiver.......................... 0.65% 0.65% 0.65% 0.73% 1.29%
</TABLE>
- -----------------------------
(1) The Fund commenced operations on October 4, 1993 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of Galaxy
with a single series of shares. Prior to the reorganization, the
Predecessor Fund offered and sold two series of shares, Investment Shares
and Trust Shares. In connection with the reorganization, the shareholders
of the Predecessor Fund exchanged shares of the two series for a single
series of shares in the Galaxy Connecticut Municipal Money Market Fund.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or the Fund's administrator for the fiscal years ended
October 31, 1999, 1998, 1997 and 1996 was $0.02, $0.03, $0.03 and $0.03,
respectively. Net investment income per share before reimbursement/waiver
of fees by the Adviser and/or other parties for the fiscal year ended
October 31, 1995 was $0.03 (unaudited).
(3) Calculation does not include the effect of any sales charge for
Investment Shares of the Predecessor Fund.
-22-
<PAGE>
Galaxy Massachusetts Municipal Money Market Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Year Ending October 31,
------------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
---- ---- ---- ------- -----
<S> <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(2)......................... 0.02 0.03 0.03 0.03 0.03
Net realized and unrealized gain (loss)
on investments................................ -- -- -- -- --
------ ------ ------ ------ ------
Total from investment operations.............. 0.02 0.03 0.03 0.03 0.03
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income............. (0.02) (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------ ------
Dividends from net realized capital gains........ -- -- -- -- --
------ ------ ------ ------ ------
Total dividends.................................. (0.02) (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------ ------
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....................................... 2.50% 2.86% 2.92% 2.83% 3.21%
Ratios/supplemental data:
Net assets, end of period (000's)................ $241,611 $127,922 $80,966 $47,066 $40,326
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 2.48% 2.81% 2.90% 2.78% 3.16%
Operating expenses including
reimbursement/waiver.......................... 0.62% 0.62% 0.61% 0.62% 0.57%
Operating expenses excluding
reimbursement/waiver.......................... 0.65% 0.68% 0.69% 0.83% 1.06%
</TABLE>
- -----------------------------
(1) The Fund commenced operations on October 5, 1993 as a separate investment
portfolio (the "Predecessor Fund") of The Shawmut Funds. On December 4,
1995, the Predecessor Fund was reorganized as a new portfolio of Galaxy.
Prior to the reorganization, the Predecessor Fund offered and sold one
series of shares. In connection with the reorganization, the shareholders
of the Predecessor Fund exchanged such shares for shares in the Galaxy
Massachusetts Municipal Money Market Fund.
(2) Net investment income per share before reimbursement/waiver of fees by
the Adviser and/or other parties for the fiscal years ended October 31,
1999, 1998, 1997, 1996 and 1995 was $0.02, $0.03, $0.03, $0.03 and $0.03
(unaudited), respectively.
-23-
<PAGE>
[Back Cover Page]
WHERE TO FIND MORE INFORMATION
You'll find more information about the Funds in the following documents:
ANNUAL AND SEMI-ANNUAL REPORTS
Galaxy's annual and semi-annual reports contain more information about each Fund
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 contacting your broker-dealer or 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
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request, to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
[INSERT FLEET-ASSIGNED CODE]
<PAGE>
[Front cover page]
The Galaxy Fund
Galaxy Equity Funds
Prospectus
February 29, 2000
Galaxy Asset Allocation Fund
Galaxy Equity Income Fund
Galaxy Growth and Income Fund
Galaxy Strategic Equity Fund
Galaxy Equity Value Fund
Galaxy Equity Growth Fund
Galaxy International Equity Fund
Galaxy Small Cap Value Fund
Galaxy Small Company Equity Fund
Prime A Shares and Prime B Shares
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these Funds as an investment or determined
if this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
<PAGE>
Contents
<TABLE>
<CAPTION>
<S> <C>
Risk/return summary.........................................................1
Introduction.......................................................1
Galaxy Asset Allocation Fund.......................................3
Galaxy Equity Income Fund..........................................8
Galaxy Growth and Income Fund.....................................13
Galaxy Strategic Equity Fund......................................17
Galaxy Equity Value Fund..........................................22
Galaxy Equity Growth Fund.........................................27
Galaxy International Equity Fund..................................32
Galaxy Small Cap Value Fund.......................................38
Galaxy Small Company Equity Fund..................................43
Additional information about risk.................................48
Investor guidelines...............................................49
Fund management............................................................50
How to invest in the Funds.................................................52
How sales charges work............................................52
Buying, selling and exchanging shares.............................55
How to buy shares.................................................56
How to sell shares................................................56
How to exchange shares............................................56
Other shareholder services........................................57
Other transaction policies........................................57
Dividends, distributions and taxes.........................................58
Financial highlights.......................................................60
</TABLE>
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
THIS PROSPECTUS describes the Galaxy Equity Funds. Each Fund invests primarily
or to a significant degree in equity securities, such as common stock, preferred
stock and securities that are convertible into common stock.
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 Fund's past performance 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.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance for
risk will determine which fund is right for you.
Equity funds are generally best suited to investors seeking growth of their
investment over time and who are prepared to accept the risks associated with
equity securities. Equity funds have the potential for higher returns than other
funds, such as bond funds or money market funds, but also carry more risk.
Different equity funds have different levels of risk. They have varying
objectives and investment styles, and some are considered more aggressive than
others. Generally, a fund's objective and the types of investments it makes can
help you gauge its level of risk. On page 52, you'll find a table that gives a
general overview of the risk spectrum of the Galaxy Equity Funds.
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 Financial 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
$68 billion in assets.
<PAGE>
[Sidenote:]
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 THE FUNDS.
-2-
<PAGE>
Galaxy Asset Allocation Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high total return by providing both a current level of income
that is greater than that provided by the popular stock market averages, as well
as long-term growth in the value of the Fund's assets.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund aims to provide income that is higher than the average income provided
by stocks included in the popular stock market averages. The Adviser interprets
this to mean the Dow Jones Industrial Average of 30 major companies and the
Standard & Poor's 500 Composite Stock Price Index (commonly referred to as the
S&P 500). Due to the Fund's expenses, however, net income paid to you may be
less than that. The Fund also seeks long-term growth in the value of its assets.
The Adviser attempts to achieve these goals and reduce risk by allocating the
Fund's assets among short-term debt securities, common stocks, preferred stocks
and bonds.
The Fund seeks a mix of stocks and bonds that will produce both income and
long-term capital growth. This mix will change from time to time as a result of
economic and market conditions. However, the Fund keeps at least 25% of its
total assets in fixed income investments, including debt securities and
preferred stocks, at all times.
Debt securities purchased by the Fund will be of investment grade quality,
which means that they will 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 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.
In selecting portfolio securities for the Fund, the Adviser's investment policy
committee develops an economic outlook and sets guidelines for the industries
and sectors in which the Fund should invest. In selecting equity securities, the
Adviser favors stocks with long-term growth potential that are expected to
outperform their peers over time. The Adviser also forecasts the direction and
degree of change in long-term interest rates to help in the selection of fixed
income securities.
-3-
<PAGE>
The Fund will sell a security when, as a result of changes in the economy, the
Adviser determines it appropriate to revise the allocation of the Fund's assets
between stocks and bonds. A security may also be sold as a result of a
deterioration in the performance of the security or in the financial condition
of the issuer of the security.
The Fund may trade its investments frequently in trying to achieve its
investment goal.
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 carries the following main risks:
- - INTEREST RATE RISK - The value of fixed income investments such as bonds
are affected by movements in interest rates. Bond prices tend to fall when
interest rates rise and to rise when interest rates fall.
- - CREDIT RISK - The value of fixed income investments also depends on the
ability of an issuer 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 securities will decline. 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 the issuers of these securities to make payments of principal
and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK - Changes in interest rates may cause certain
fixed income investments 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.
- - PORTFOLIO COMPOSITION - The level of risk could increase if a larger
percentage of the Fund is invested in one particular asset class, such as
stocks or bonds. However, asset allocation funds are generally less
volatile than portfolios that contain only stocks.
- - 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.
- - FREQUENT TRADING - Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
-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.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of the Fund's Prime A Shares during the last
calendar year. The return for Prime B Shares was different than the figure shown
because each class of shares has different expenses. The figure doesn't include
any sales charges that investors pay when buying or selling Prime A Shares of
the Fund. If sales charges were included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
<S> <C>
1999
7.42%
</TABLE>
Best quarter: 7.30% for the quarter ending December 31, 1999
Worst quarter: -3.15% for the quarter ending September 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to broad-based market indices.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Prime A Shares 1.49% 6.69% (11/1/98)
Prime B Shares 1.62% 7.81% (11/1/98)
S&P 500 21.03% 29.86% (since 10/31/98)
DJIA 27.29% 30.39% (since 10/31/98)
</TABLE>
-5-
<PAGE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
The Dow Jones Industrial Average (DJIA) is an unmanaged price-weighted average
based on the "price only" performance of 30 blue chip stocks.
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 sales charge Maximum deferred sales
(load) on purchases of charge (load) shown
shown as a % of the as a % of the offering
offering price price or sale price,
whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
Distribution and Total Fund
Management fees service (12b-1) Other operating
fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.26%(4) 1.26%(4)
Prime B Shares 0.75% 1.00% 0.30%(4) 2.05%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) Certain of the Fund's service providers are voluntarily waiving a portion
of their fees so that Other expenses are expected to be 0.15% for Prime A Shares
and 0.15% for Prime B Shares. Total Fund operating
-6-
<PAGE>
expenses after these waivers are expected to be 1.15% for Prime A Shares and
1.90% for Prime B Shares. These fee waivers 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
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $671 $928 $1,204 $1,989
Prime B Shares $708 $943 $1,303 $2,177
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $208 $643 $1,103 $2,177
</TABLE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Donald Jones, a Vice President of the Adviser,
since 1991, and David Lindsay, CFA, a Senior Vice President of the Adviser since
1992. They are primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Jones has managed the equity portion of the Fund's
portfolio, including determining the allocation of the Fund's assets between
equities and fixed income investments, since May of 1995. He has been with the
Adviser and its predecessors since 1977. Mr. Lindsay has managed the fixed
income portion of the Fund since January of 1997. He has been with the Adviser
and its predecessors since 1986.
-7-
<PAGE>
Galaxy Equity Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income and capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a diversified
portfolio of income-producing (dividend-paying) equity securities, primarily
common stocks. The Adviser looks for investments that offer dividends, prospects
for dividend growth and capital appreciation. However, the Fund's portfolio may
include securities that offer only growth potential or only income potential.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
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 carries the following main risk:
- - 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.
-8-
<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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
Retail A Shares of the Fund were first offered during the fiscal year ended
October 31, 1992. The returns for Retail A Shares of the Fund for prior periods
represent the returns for Trust Shares of the Fund which are offered in a
separate prospectus. Prior to November 1, 1993, Retail A Shares and Trust Shares
of the Fund had the same returns because each class of shares had the same
expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Fund's Retail A Shares has varied
from year to year. The figures don't include any sales charges that investors
pay when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.37% 7.43% 8.05% 0.75% 32.96% 16.53% 25.51% 15.63% 4.36%
</TABLE>
Best quarter:..... 13.31% for the quarter ending June 30, 1997
Worst quarter:.... -8.41% for the quarter ending September 30, 1998
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) 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>
Retail A Shares(1) -1.40% 17.27% 13.61% (12/14/90)
Retail A Shares(2) -0.02% 18.40% 14.32% (12/14/90)
S&P 500 21.03% 28.54% 21.00% (since 11/30/90)
</TABLE>
-9-
<PAGE>
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 5.50% sales charge payable on purchases of Prime A Shares.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P is heavily weighted with the stocks of large companies.
-10-
<PAGE>
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 sales charge Maximum deferred sales
(load) on purchases of charge (load) shown
shown as a % of the as a % of the offering
offering price price or sale price,
whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Total Fund
Distribution and operating
Management fees service (12b-1) Other expenses
fees expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.28%(4) 1.28%
Prime B Shares 0.75% 1.00% 0.36%(4) 2.11%
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) Other expenses are based on estimated amounts for the current fiscal year.
-11-
<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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $673 $934 $1,214 $2,010
Prime B Shares $714 $961 $1,334 $2,230
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $214 $661 $1,134 $2,230
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is J. Edward Klisiewicz, a Senior Vice President of
the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Klisiewicz has been the Fund's portfolio
manager since it began operations. He has been with the Adviser and its
predecessors since 1970.
-12-
<PAGE>
Galaxy Growth and Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide a relatively high total return through long-term
capital appreciation and current income.
[Sidenote:]
CURRENT INCOME
Current income includes both dividends from stocks and interest income from
fixed income securities, after deducting Fund expenses.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the common stocks
of U.S. companies with large market capitalizations (generally over $2 billion)
that the Adviser believes offer above-average growth and dividends. The Adviser
focuses on growth stocks which are believed to be attractively priced relative
to expectations for the future performance of the issuing company. The Adviser
also seeks a current yield greater than that of the S&P 500, although not all
Fund investments will pay dividends.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
-13-
<PAGE>
In addition, the Fund carries the following main risk:
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of the Fund's Prime A Shares during the last
calendar year. The return for Prime B Shares was different than the figure shown
because each class of shares has different expenses. The figure doesn't include
any sales charges that investors pay when buying or selling Prime A Shares of
the Fund. If sales charges were included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
<S> <C>
1999
6.99%
</TABLE>
Best quarter: 9.78% for the quarter ending June 30, 1999
Worst quarter: -10.57% for the quarter ending September 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Prime A Shares 1.08% 10.56% (11/1/98)
Prime B Shares 1.12% 11.82% (11/1/98)
S&P 500 21.03% 29.86% (since 10/31/98)
</TABLE>
-14-
<PAGE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
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 you paid directly from your investment)
Maximum deferred sales
Maximum sales charge of charge (load) shown
(load) on purchases as a % of the offering
shown as a % of the price or sale price,
offering price whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.26%(4) 1.26%(4)
Prime B Shares 0.75% 1.00% 0.30%(4) 2.05%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Fund -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) Certain of the Fund's service providers are voluntarily waiving a portion
of their fees so that Other expenses are expected to be 0.15% for Prime A Shares
and 0.20% for Prime B Shares. Total Fund operating
-15-
<PAGE>
expenses after these waivers are expected to be 1.15% for Prime A Shares and
1.90% for Prime B Shares. These fee waivers 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
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $671 $928 $1,204 $1,989
Prime B Shares $708 $943 $1,303 $2,177
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $208 $643 $1,103 $2,177
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Gregory M. Miller, a Vice President of the
Adviser since 1996. He's been primarily responsible for the day-to-day
management of the Fund's investment portfolio since July 1998. Before that, Mr.
Miller assisted his predecessor in managing the Fund for seven years. He joined
the Adviser in 1985.
-16-
<PAGE>
Galaxy Strategic Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests at least 65% of its total assets in U.S. equity securities,
primarily common stock and securities that can be converted into common stock.
The Fund's "Value Driven Growth" investment process emphasizes securities
believed to have the potential for the best one- to two-year returns. These
securities are generally selected from a universe of large and medium size
companies representative of the S&P 500, although the universe of stocks
monitored by the Adviser is not limited to stocks of companies included in the
S&P 500. The Fund may invest up to 20% of its total assets in foreign equity
securities. In selecting individual stocks, the Adviser looks at the current
price, projected earnings growth, and historical valuations to derive an
estimate of return potential. The Fund may give emphasis to growth stocks, value
stocks or particular industries, depending upon the Adviser's assessment of a
stock's return potential relative to its price in the broader market.
The Fund will sell a portfolio security when, as a result of a decline in the
security's return potential relative to that of other securities, the Adviser
believes that holding the security is no longer consistent with the Fund's
investment objective.
[Sidenote:]
VALUE STOCKS AND GROWTH STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios. Growth stocks offer strong revenue and earnings potential, and
accompanying capital growth, with generally less dividend income than value
stocks.
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.
-17-
<PAGE>
In addition, the Fund carries the following main risks:
- - 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.
- - 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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows performance of the Fund's Retail A Shares during the last
calendar year. The figure doesn't include any sales charges that investors pay
when buying or selling Retail A Shares of the Fund. If sales charges were
included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
1999
<S> <C>
0.05%
</TABLE>
-18-
<PAGE>
Best quarter: 11.49% for the quarter ending June 30, 1999
Worst quarter: -13.65% for the quarter ending September 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) for the periods ended December 31,
1999, as compared to a broad-based market index.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Retail A Shares(1) -5.49% -1.63% (3/4/98)
Retail A Shares(2) -4.32% -0.50% (3/4/98)
S&P 500 21.03% 21.73% (since 2/28/98)
</TABLE>
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 5.50% sales charge payable on purchases of Prime A Shares.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P is heavily weighted with the stocks of large companies.
-19-
<PAGE>
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
Maximum sales charge of charge (load) shown
(load) on purchases as a % of the offering
shown as a % of the price or sale price,
offering price whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75%(4) 0.25% 0.52%(5) 1.52%(4)
Prime B Shares 0.75%(4) 1.00% 0.63%(5) 2.38%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver are
expected to be 1.32% for Prime A Shares and 2.18% for Prime B Shares. This fee
waiver may be revised or discontinued at any time.
(5) Other expenses are based on estimated amounts for the current fiscal year.
-20-
<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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $696 $1,004 $1,333 $2,263
Prime B Shares $741 $1,042 $1,470 $2,502
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $241 $742 $1,270 $2,502
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter B. Hathaway, CFA, a Senior Vice President
of the Adviser. He's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Hathaway has been the Fund's portfolio manager
since it began operations in March 1998. He has been in the investment
management business with the Adviser and its predecessors since 1964 and has
been responsible for the Adviser's Value Driven Growth investment process since
1991.
-21-
<PAGE>
Galaxy Equity Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Income is secondary to the
objective of capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in equity securities,
mainly common stocks, that the Adviser believes are undervalued. The Fund
invests most of its assets in companies that have a market capitalization of
more than $1.5 billion.
The Adviser uses proprietary computer models to compare share price and company
value, both compared to the market and over time. This helps the Adviser to
identify out-of-favor, undervalued securities (often called value stocks) which
may subsequently increase in value. These models focus on fundamental aspects
such as earnings and dividend growth, reinvestment of returns and the ability of
companies to finance their own growth. The models also take into account factors
such as how easily the stocks may be traded. The Adviser then reviews the
results and looks for risks that may account for a stock's low price. It
evaluates factors the computer models can't measure, such as the quality of a
company's management and the impact of technological change. Stocks which pass
all tests are eligible to be included in the Fund's portfolio. Fund holdings are
frequently reviewed and are sold automatically when the computer models show
they are overvalued.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price-to-earnings growth
ratios.
-22-
<PAGE>
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 carries the following main risk:
- - 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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
Retail A Shares of the Fund were first issued during the fiscal year ended
October 31, 1991. The returns for Retail A Shares for prior periods represent
the returns for Trust Shares of the Fund which are offered in a separate
prospectus. Prior to November 1, 1993, Retail A Shares and Trust Shares of the
Fund had the same returns because each class of shares had the same expenses.
YEAR-BY-YEAR RETURNS
The bar chart shows how the performance of the Fund's Retail A Shares has varied
from year to year. The figures don't include any sales charges that investors
pay when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
-23-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -3.20% 23.36% 8.21% 14.75% 3.51% 27.78% 21.09% 27.66% 23.75% 6.67%
</TABLE>
Best quarter: 27.15% for the quarter ending December 31, 1998
Worst quarter: -15.28% for the quarter ending September 30, 1998
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) for the periods ended December 31,
1999, as compared to broad-based market indices.
<TABLE>
<CAPTION>
1 year 5 years 10 years Since inception
<S> <C> <C> <C> <C>
Retail A Shares(1) 0.83% 19.77% 14.23% 14.42% (9/1/88)
Retail A Shares(2) 2.06% 20.94% 14.88% 14.99% (9/1/88)
S&P 500 21.03% 28.54% 18.19% 19.50% (since 8/31/88)
Lipper Multi-Cap Value 13.77% 21.34% 14.42% 15.32% (since 8/31/88)
Funds Average
</TABLE>
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 5.50% sales charge payable on purchases of Prime A Shares.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
[Sidenote:]
The Lipper Multi-Cap Value Funds Average is an unmanaged index that measures the
performance of a select group of mutual funds with investment objectives similar
to that of the Fund.
-24-
<PAGE>
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 sales charge Maximum deferred sales
(load) on purchases of charge (load) shown
shown as a % of the as a % of the offering
offering price price or sale price,
whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses(expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Maximum sales charge Maximum deferred sales
(load) on purchases of charge (load) shown
shown as a % of the as a % of the offering
offering price price or sale price,
whichever is less
<S> <C> <C>
Prime A Shares 0.75% 0.25% 0.31%(4) 1.31%
Prime B Shares 0.75% 1.00% 0.41%(4) 2.16%
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
-25-
<PAGE>
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $676 $942 $1,229 $2,042
Prime B Shares $719 $976 $1,359 $2,277
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $219 $676 $1,159 $2,277
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is G. Jay Evans, a Senior Vice President of the
Adviser since 1991. He's primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Evans has been the Fund's portfolio manager
since 1993. He has been with the Adviser and its predecessors since 1978.
-26-
<PAGE>
Galaxy Equity Growth Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in a broadly
diversified portfolio of equity securities, primarily common stocks and
securities that can be converted into common stocks. The Fund invests mainly in
the securities of U.S. issuers, but may invest up to 20% of its assets in
foreign securities.
The Fund invests mainly in companies which the Adviser believes will have faster
earnings growth than the economy in general. The Adviser looks for
large-capitalization companies (generally over $2 billion) in growing
industries, focusing on technological advances, good product development, strong
management and other factors which support future growth. The Adviser seeks out
companies that have a history of strong earnings growth and are projected to
continue a similar pattern of growth over the next three to five years.
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.
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.
-27-
<PAGE>
In addition, the Fund carries the following risks:
- - 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.
- - SELECTION OF INVESTMENTS - The Adviser evaluates the risks and rewards
presented by all securities purchased by the Fund and how they advance the
Fund's investment objective. It's possible, however, that these evaluations
will prove to be inaccurate.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of the Fund's Prime A Shares during the last
calendar year. The return for Prime B Shares was different than the figure shown
because each class of shares has different expenses. The figure doesn't include
any sales charges that investors pay when buying or selling Prime A Shares of
the Fund. If sales charges were included, the return would be lower.
-28-
<PAGE>
[bar chart goes here]
1999
26.02%
Best quarter: 17.80% for the quarter ending December 31, 1999
Worst quarter: -5.41% for the quarter ending September 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Prime A Shares 19.10% 29.39% (11/1/98)
Prime B Shares 20.36% 31.98% (11/1/98)
S&P 500 21.03% 29.86% (since 10/31/98)
</TABLE>
[Sidenote:]
The S&P 500 is an unmanaged index that tracks the performance of 500 widely held
common stocks listed on the New York Stock Exchange, the American Stock Exchange
and NASDAQ. The S&P 500 is heavily weighted with the stocks of large companies.
FEES AND EXPENSES OF THE FUND
The following tables show the fees and expenses you may pay when you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees (fees you paid directly from your investment)
Maximum sales charge Maximum deferred sales
(load) on purchases charge (load) shown as a
shown as a % of the % of the offering price
offering price or sales price, whichever
is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.24%(4) 1.24%(4)
Prime B Shares 0.75% 1.00% 0.28%(4) 2.03%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) Certain of the Fund's service providers are voluntarily waiving a portion
of their fees so that Other expenses are expected to be 0.11% for Prime A Shares
and 0.12% for Prime B Shares. Total Fund operating expenses after these waivers
are expected to be 1.11% for Prime A Shares and 1.87% for Prime B Shares. These
fee waivers may be revised or discontinued at any time.
-30-
<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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $669 $922 $1,194 $1,967
Prime B Shares $706 $937 $1,293 $2,155
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $206 $637 $1,093 $2,155
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Robert G. Armknecht, CFA, an Executive Vice
President of the Adviser. He's primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Armknecht has been with the
Adviser and its predecessors since 1988 and has been the Fund's portfolio
manager since it began operations in 1990.
-31-
<PAGE>
Galaxy International Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 75% of its total assets in the equity
securities of foreign issuers. At all times, the Fund's assets will be invested
in companies located in at least three different foreign countries. Normally, no
more than 20% of the Fund's assets will be invested in companies located in
countries with emerging economies or emerging securities markets. The Fund
emphasizes larger established companies, although it may invest in companies of
any size. The Fund may engage in transactions for the purpose of hedging its
portfolio, such as options, futures and foreign currencies.
The Sub-Adviser's investment process begins with a fundamental analysis of
companies, including both bottom-up and top-down factors. Bottom-up analysis
includes a thorough understanding of a company's prospects as reflected in its
operating cash flow, including industry cycle, capital requirements, growth
opportunities and financial structure. Discussions with company management
are an important element of this analysis and give the Sub-Adviser an
opportunity to test its assumptions against management's near-term and
long-term objectives. Top-down factors are incorporated into the
Sub-Adviser's analysis of the company. For example, the Sub-Adviser considers
how interest rates and currency may impact prospective cash flow and earnings.
Country and market risks, both of which are critically important, are
embodied in interest rates, which are the basis for risk-adjusting the
Sub-Adviser's return expectations for individual companies. In this way, the
Sub-Adviser arrives at a risk-adjusted return potential for each company
analyzed, which then gives the Sub-Adviser the basis for comparing investment
opportunities across developed and emerging markets.
The Fund will sell a security if it has achieved its performance objective,
or if fundamentals change performance expectations, or if alternative
investments provide potentially more attractive returns.
[Sidenote:]
SUB-ADVISER
The Adviser has appointed Oechsle International Advisors, LLC as Sub-Adviser to
assist it in the day-to-day management of the Fund's investment portfolio.
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. U.S. and foreign stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
-32-
<PAGE>
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 carries the following main risks:
- - 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.
- - COUNTRY RISK - The Fund may invest 25% or more of its assets in the
securities of companies located in one country. When the Fund invests a
high percentage of its assets in a particular country, the Fund will be
especially susceptible to factors affecting that country.
- - CURRENCY EXCHANGE - Although the Fund usually makes investments that are
sold in foreign currencies, it values its holdings in U.S. dollars. If the
U.S. dollar rises compared to a foreign currency, the Fund loses on the
currency exchange.
- - HEDGING - The Fund may invest in derivatives, such as options, futures and
foreign currencies, to hedge against market risk or 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 and Sub-Adviser evaluate 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.
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.
-33-
<PAGE>
YEAR-BY-YEAR TOTAL RETURNS-CALENDAR YEARS
The bar chart shows the performance of the Fund's Prime A Shares during the last
calendar year. The return for Prime B Shares was different than the figure shown
because each class of shares has different expenses. The figure doesn't include
any sales charges that investors pay when buying or selling Prime A Shares of
the Fund. If sales charges were included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
1999
<S> <C>
41.55%
</TABLE>
Best quarter: 24.43% for the quarter ending December 31, 1999
Worst quarter: 2.65% for the quarter ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to a broad-based market index.
-34-
<PAGE>
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Prime A Shares 33.78% 38.83% (11/1/98)
Prime B Shares 35.65% 41.45% (11/1/98)
MSCI EAFE Index 26.96% 32.29% (since 10/31/98)
</TABLE>
[Sidenote:]
The Morgan Stanley Capital International Europe, Australasia and Far East (MSCI
EAFE) Index is an unmanaged index which tracks the performance of selected
equity securities in Europe, Australia and the Far East.
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 you paid directly from your investment)
Maximum deferred sales
Maximum sales charge of charge (load) shown
(load) on purchases as a % of the offering
shown as a % of the price or sale price,
offering price whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
Total Fund
Distribution and operating
Management fees service (12b-1) Other expenses
fees expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.89%(4) 0.25% 0.70%(4) 1.84%(4)
Prime B Shares 0.89%(4) 1.00% 0.29%(4) 2.18%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) The Adviser and certain of the Fund's service providers are waiving a
portion of their fees so that Management fees and Other expenses are expected to
be 0.64% and 0.23%, respectively, for Prime A Shares and 0.64% and 0.22%,
respectively, for Prime B Shares. Total Fund operating expenses after these
waivers are expected to be 1.12% for Prime A Shares and 1.86% for Prime B
Shares. These fee waivers 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
- - your Prime B Shares convert to Prime A Shares after eight 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:
-36-
<PAGE>
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Prime A Shares $727 $1,097 $1,491 $2,590
Prime B Shares $721 $982 $1,369 $2,428
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $221 $682 $1,169 $2,428
</TABLE>
[Sidenote:]
PORTFOLIO MANAGERS
The Fund's portfolio managers are Singleton Dewey Keesler, Jr. and Kathleen
Harris, CFA. They are primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Keesler is Chief Investment Officer and
portfolio manager/research analyst with the Sub-Adviser. He has been associated
with the Sub-Adviser and its predecessor since 1986. Ms. Harris has been a
portfolio manager at the Sub-Adviser and its predecessor since January of 1995.
She was previously portfolio manager and investment director for the State of
Wisconsin Investment Board. Mr. Keesler and Ms. Harris have co-managed the Fund
since August of 1996.
-37-
<PAGE>
Galaxy Small Cap Value Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests mainly in the common stocks of small companies that the Adviser
believes are undervalued. Under normal market conditions, the Fund invests at
least 65% of its assets in the common stocks of companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. issuers, but may invest up to 20% of its assets in foreign
equity securities.
In selecting portfolio securities for the Fund, the Adviser looks at the
underlying strength of companies, their products, their competitive positions
and the quality of their management. It also does research to attempt to
identify companies likely to benefit from emerging industry trends and potential
market recoveries.
A portfolio security may be sold if the Adviser determines that it is no longer
undervalued or if there has been a deterioration in the performance of the
security or in the financial condition of the company that issued the security.
[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.
[Sidenote:]
VALUE STOCKS
Value stocks are ones that appear to be underpriced based on measures such as
lower price-to-earnings, price-to-book value and price to earnings growth
ratios.
-38-
<PAGE>
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 carries the following risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - FOREIGN INVESTMENT - 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.
- - 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.
-39-
<PAGE>
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of the Fund's Prime A Shares during the last
calendar year. The return for Prime B Shares was different than the figure shown
because each class of shares has different expenses. The figure doesn't include
any sales charges that investors pay when buying or selling Prime A Shares of
the Fund. If sales charges were included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
<S><C>
1999
10.71%
</TABLE>
Best quarter: 16.48% for the quarter ending June 30, 1999
Worst quarter: -7.71% for the quarter ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) for the periods ended December 31, 1999, as compared
to broad-based market indices.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Prime A Shares 4.61% 9.95% (11/1/98)
Prime B Shares 4.82% 11.38% (11/1/98)
Russell 2000 Index 21.26% 29.65% (since 10/31/98)
S&P 600 12.41% 22.10% (since 10/31/98)
</TABLE>
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of the
2,000 smallest of the 3,000 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.
[Sidenote:]
The Standard & Poor's SmallCap 600 Composite Index (S&P 600) is an unmanaged
index that tracks the performance of 600 domestic companies traded on the New
York Stock Exchange, the American Stock
-40-
<PAGE>
Exchange and NASDAQ. The S&P 600 is heavily weighted with the stocks of small
companies with market capitalizations that currently range between $32.9 million
and $2.9 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.
Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Maximum deferred sales
Maximum sales charge of charge (load) shown
(load) on purchases as a % of the offering
shown as a % of the price or sale price,
offering price whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.31%(4) 1.31%(4)
Prime B Shares 0.75% 1.00% 0.58%(4) 2.33%(4)
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After eight
years, your Prime B Shares will automatically convert to Prime A Shares. See
"How to invest in the Funds - How sales charges work."
(4) Certain of the Fund's service providers are waiving a portion of their fees
so that Other expenses are expected to be 0.16% for Prime A Shares and 0.17% for
Prime B Shares. Total Fund operating expenses after these waivers are expected
to be 1.16% for Prime A Shares and 1.92% for Prime B Shares. These fee waivers
may be revised or discontinued at any time.
-41-
<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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $676 $942 $1,229 $2,042
Prime B Shares $736 $1,027 $1,445 $2,411
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $236 $727 $1,245 $2,411
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Peter Larson, a Senior Vice President of the
Adviser. He's primarily responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Larson has been with the Adviser and its predecessors
since 1963 and has managed the Fund, including its predecessor, since it began
operations in 1992.
-42-
<PAGE>
Galaxy Small Company Equity Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the equity
securities, primarily common stocks, of small companies that have market
capitalizations of $1.5 billion or less. The Fund invests primarily in the
common stock of U.S. companies, but may invest up to 20% of its total assets in
foreign equity securities.
In selecting investments for the Fund, the Adviser looks for promising
industries. It then looks within those industries for what are judged to be
reasonably priced companies that have above-average growth potential. The
Adviser consults a wide range of sources, including management, competitors,
other industry sources and regional brokerage analysts.
The Fund will sell a portfolio security when, as a result of changes in the
economy, the Adviser believes that holding the security is no longer consistent
with the Fund's investment objective. A security may also be sold as a result of
a deterioration in the performance of the security or in the financial condition
of the issuer of the security.
[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.
[Sidenote:]
GROWTH STOCKS
Growth stocks offer strong revenue and earnings potential, and accompanying
capital growth, with generally less dividend income than value stocks.
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.
-43-
<PAGE>
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 carries the following main risks:
- - SMALL COMPANIES RISK - Smaller companies 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.
- - 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.
- - 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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of the Fund's Retail A Shares has varied
from year to year. The figures don't include any sales charges that investors
pay when buying or selling Retail A Shares of the Fund. If sales charges were
included, the returns would be lower.
-44-
<PAGE>
[bar chart goes here]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997 1998 1999
1.20% 22.75% -0.06% 38.80% 20.84% 14.17% -10.94% 38.93%
</TABLE>
Best quarter: 44.08% for the quarter ending December 31, 1999
Worst quarter: -24.02% for the quarter ending September 30, 1998
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) 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>
Retail A Shares(1) 31.28% 17.49% 13.63% (12/30/91)
Retail A Shares(2) 33.93% 18.63% 14.44% (12/30/91)
Russell 2000 Index 21.26% 16.69% 14.67% (since 12/31/91)
</TABLE>
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 5.50% sales charge payable on purchases of Prime A Shares.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The Russell 2000 Index is an unmanaged index that tracks the performance of the
2,000 smallest of the 3,000 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.
-45-
<PAGE>
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
Maximum sales charge of charge (load) shown
(load) on purchases as a % of the offering
shown as a % of the price or sale price,
offering price whichever is less
<S> <C> <C>
Prime A Shares 5.50%(1) None(2)
Prime B Shares None 5.00%(3)
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
Distribution and Total Fund
service (12b-1) Other operating
Management fees fees expenses expenses
<S> <C> <C> <C> <C>
Prime A Shares 0.75% 0.25% 0.52%(4) 1.52%
Prime B Shares 0.75% 1.00% 0.61%(4) 2.36%
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After eight
years, your Prime B Shares will automatically convert to Prime A Shares. See
"How to invest in the Funds - How sales charges work."
(4) Other expenses are based on estimated amounts for the current fiscal year.
-46-
<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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $696 $1,004 $1,333 $2,263
Prime B Shares $739 $1,036 $1,460 $2,487
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
Prime B Shares $239 $736 $1,260 $2,487
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Stephen D. Barbaro, CFA, a Senior Vice President
of the Adviser since 1996. He's primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Barbaro has been the Fund's
portfolio manager since it began operations in 1991. He has been with the
Adviser and its predecessors since 1976.
-47-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The main risks associated with an investment in each of the Galaxy Equity 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), money market instruments, debt securities issued or guaranteed by
the U.S. Government or its agencies and, in the case of the Galaxy
International Equity Fund, foreign money market instruments, debt
securities of foreign national governments and their agencies, and the
securities of U.S. issuers. This strategy 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.
-48-
<PAGE>
INVESTOR GUIDELINES
The following table gives you a general overview of the risk spectrum for the
Galaxy Equity Funds. This is a guide only. It shows the Adviser's current
assessment of the potential risk of the Funds relative to one another, but this
can change over time. It should not be used to compare the Funds with other
mutual funds or other types of investments. Consult your financial professional
to help you decide which Fund is right for you.
<TABLE>
<CAPTION>
<S> <C> <C>
Risk spectrum Fund Primary investments
- -------------------------------------------------------------------------------------------------------------
Galaxy Asset Allocation Common stocks and fixed income securities
of domestic companies
----------------------------------------------------------------------------------
Conservative Galaxy Equity Income Common stocks of domestic companies
selected primarily for their income
potential
----------------------------------------------------------------------------------
Galaxy Growth and Income Common stocks of companies selected for
their growth and income potential
----------------------------------------------------------------------------------
Galaxy Strategic Equity Equity securities of large and medium
sized companies that exhibit
above-average return potential relative
to their market price
----------------------------------------------------------------------------------
Moderate Galaxy Equity Value Common stocks of large and medium sized
companies believed to be undervalued
----------------------------------------------------------------------------------
Galaxy Equity Growth Equity securities of growth-oriented
companies
----------------------------------------------------------------------------------
Galaxy International Equity Equity securities of foreign companies
----------------------------------------------------------------------------------
Aggressive Galaxy Small Cap Value Common stocks of smaller companies
believed to be undervalued
----------------------------------------------------------------------------------
Galaxy Small Company Equity Common stocks of smaller growth-oriented
companies
----------------------------------------------------------------------------------
</TABLE>
-49-
<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.
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
<S> <C>
Fund Management fee as a % of net assets
Galaxy Asset Allocation 0.75%
Galaxy Equity Income 0.75%
Galaxy Growth and Income 0.75%
Galaxy Strategic Equity 0.55%
Galaxy Equity Value 0.75%
Galaxy Equity Growth 0.75%
Galaxy International Equity 0.64%
Galaxy Small Cap Value 0.75%
Galaxy Small Company Equity 0.75%
</TABLE>
SUB-ADVISER
The Adviser has delegated some of its advisory responsibilities with respect to
the Galaxy International Equity Fund to Oechsle International Advisors, LLC as
Sub-Adviser. The Sub-Adviser determines which securities will be purchased,
retained or sold for the Fund, places orders for the Fund and provides the
Adviser with information on international investment and economic developments.
The Adviser assists and consults with the Sub-Adviser as to the Fund's
investment program, approves the list of foreign countries recommended by the
Sub-Adviser for investment and manages the Fund's daily cash position. The
Sub-Adviser's fees are paid by the Adviser.
The Sub-Adviser has its main office at One International Place, Boston,
Massachusetts 02210. The Sub-Adviser is the successor to Oechsle International
Advisors, L.P., an international investment firm founded in 1986. At December
31, 1999, the Sub-Adviser had discretionary management authority over
approximately $19.1 billion in assets. The Adviser's parent company, FleetBoston
Financial Corporation, owns an interest in the Sub-Adviser.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser and Sub-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 Sub-Adviser or that have sold shares
-50-
<PAGE>
of the Funds, to the extent permitted by law or by order of the Securities and
Exchange Commission. The Adviser and Sub-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.
-51-
<PAGE>
HOW TO INVEST IN THE FUNDS
HOW SALES CHARGES WORK
You will normally pay a sales charge to invest in the Funds. If you buy Prime A
Shares, you'll usually pay a sales charge (sometimes called a front-end load) at
the time you buy your shares. If you buy Prime B Shares, 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 Prime A Shares or Prime
B Shares, minus the value of the Fund's liabilities attributable to Prime A
Shares or Prime B Shares, divided by the number of Prime A Shares or Prime B
Shares held by investors.
PRIME A SHARES
The table below shows the sales charge you'll pay if you buy Prime 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 price As a % of your investment
per share
<S> <C> <C>
Less than $50,000 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 and over 0.00%(1) 0.00%(1)
</TABLE>
(1) There is no front-end sales charge on investments in Prime A Shares of
$1,000,000 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
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<PAGE>
net asset value of your shares, whichever is less, unless the shares were sold
because of the death or disability of the shareholder.
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
Prime A Shares or the amount that the Funds will receive from such sales.
There's no sales charge when you buy Prime A Shares if:
- - You buy shares by reinvesting your dividends and distributions.
- - You buy shares with money from Prime A Shares of 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're an investment professional who places trades for your clients and
charges them a fee.
- - You were a Galaxy shareholder before December 1, 1995.
[Sidenote:]
SALES CHARGE WAIVERS
Ask your broker-dealer, or consult the SAI, for other instances in which the
sales load on Prime A Shares is waived. When you buy your shares, you must tell
your broker-dealer that you qualify for a sales load waiver.
PRIME B SHARES
If you buy Prime B Shares of the Funds, 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>
<S> <C>
If you sell your shares You'll pay a CDSC of
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 Prime 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
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<PAGE>
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 Prime B Shares that you
acquire by reinvesting your dividends and distributions.
In addition, there's no CDSC when Prime B Shares are sold because of the death
or disability of a shareholder and in certain other circumstances such as
exchanges. Ask your broker-dealer, or consult the SAI, for other instances in
which the CDSC is waived.
DISTRIBUTION AND SHAREHOLDER SERVICE FEES
Prime A Shares of the Funds can pay distribution fees at an annual rate of up to
0.30% of each Fund's Prime A Share assets. The Funds do not intend to pay more
than 0.25% in distribution fees with respect to Prime A Shares during the
current fiscal year.
Prime B Shares of the Funds can pay distribution and shareholder service (12b-1)
fees at an annual rate of up to 1.25% of each Fund's Prime B Share assets. The
Funds do not intend to pay more than 1.00% in distribution and shareholder
service (12b-1) fees during the current fiscal year.
Galaxy has adopted separate plans under Rule 12b-1 that allow each Fund to pay
fees from its Prime A Share assets for selling and distributing Prime A Shares
and from its Prime B Share assets for selling and distributing Prime 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 PRIME B SHARES TO PRIME A SHARES
Eight years after you buy Prime B Shares of a Fund, they will automatically
convert to Prime A Shares of the Fund. This allows you to benefit from the lower
annual expenses of Prime A Shares.
CHOOSING BETWEEN PRIME A SHARES AND PRIME B SHARES
Prime B Shares are subject to higher fees than Prime A Shares. For this reason,
Prime A Shares can be expected to pay higher dividends than Prime B Shares.
However, because Prime A Shares are subject to an initial sales charge which is
deducted at the time you purchase Prime 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 Prime A Shares than if you purchase Prime B Shares of the
Fund.
In deciding whether to buy Prime A Shares or Prime B Shares, you should consider
how long you plan to hold the shares. Over time, the higher fees on Prime B
Shares may equal or exceed the initial sales charge and fees for Prime A Shares.
Prime A Shares may be a better choice if you qualify to have the sales charge
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<PAGE>
reduced or eliminated or if you plan to sell your shares within one or two
years. Consult your broker-dealer for help in choosing the appropriate share
class.
BUYING, SELLING AND EXCHANGING SHARES
You can buy and sell Prime A Shares and Prime 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.
Prime A Shares and Prime 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 form as described below, less
any applicable CDSC. 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.
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 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.
[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is $2,500. You generally
can make additional investments for as little as $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.
HOW TO BUY SHARES
You can buy shares through your broker-dealer. Your broker-dealer is responsible
for sending your order to Galaxy's distributor and wiring the money to Galaxy's
custodian. Your broker-dealer will usually hold your shares of record in its
name and receive all confirmations of purchases and sales. Your ownership of the
shares will be recorded by your broker-dealer and reflected in the account
statements provided to you. For details, please contact your broker-dealer. A
broker-dealer who places orders on your behalf may charge you a separate fee for
its services.
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<PAGE>
DISCOUNT PLANS
You may have the sales charges on purchases of Prime A Shares reduced or waived
completely through the discount plans described below:
- - RIGHTS OF ACCUMULATION: You can add the value of the Prime A Shares that
you already own in any Galaxy Fund that charges a sales load to your next
investment in Prime A Shares for purposes of calculating the sales charge.
- - LETTER OF INTENT: You can purchase Prime 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 Prime A Shares
equal to 5% of the amount you indicated 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 Prime A Shares of the Funds in Prime A Shares of any
Galaxy Fund that offers Prime A Shares within 90 days without paying a
sales charge.
[Sidenote:]
DISCOUNT PLANS
You must tell your broker-dealer 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.
HOW TO SELL SHARES
You can sell your shares through your broker-dealer. The broker-dealer 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 broker-dealer, but your broker-dealer may charge you a fee.
Please contact your broker-dealer for information on how to sell your shares.
HOW TO EXCHANGE SHARES
You may exchange Prime A Shares of a Fund having a value of at least $100 for
Prime A Shares of any other Galaxy Fund that offers Prime A Shares. You won't
pay a sales charge for exchanging your Prime A Shares.
You may exchange Prime B Shares of a Fund for Prime B Shares of any other Galaxy
Fund that offers Prime B Shares. You won't pay a CDSC when you exchange your
Prime B Shares. However, when you sell the Prime B Shares you acquired in the
exchange, you'll pay a contingent deferred sales charge based on the date you
bought the Prime B Shares which you exchanged. Galaxy doesn't charge any fee for
making
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<PAGE>
exchanges but your broker-dealer might do so. You are generally limited to three
exchanges per year. Galaxy may change or cancel the exchange privilege with 60
days' advance notice to shareholders.
To exchange shares, contact your broker-dealer.
OTHER SHAREHOLDER SERVICES
Your broker-dealer may offer other shareholder services to its customers. For
example, broker-dealers may offer participation in an automatic investment
program that allows investors to systematically purchase shares of the Funds on
a periodic basis from a designated account. Broker-dealers may also offer a
systematic withdrawal plan which permits investors automatically to sell shares
on a regular basis. Please contact your broker-dealer for details on these and
any other shareholder services that may be available.
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 your broker-dealer 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 normally pays you cash when you sell your shares, but it has the right to
deliver securities owned by a Fund instead of cash. When you sell these
securities, you'll pay brokerage charges.
Sales proceeds are normally sent to your broker-dealer within three business
days but Galaxy reserves the right to send sales proceeds within seven business
days if sending proceeds earlier could adversely affect a Fund.
Galaxy reserves the right to vary or waive any minimum investment requirement.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund, except the Galaxy International Equity Fund, pays any dividends from
net investment income each quarter. The Galaxy International Equity Fund pays
any dividends from net investment income annually. Each Fund pays any net
capital gains at least once a year. It's expected that the Funds' annual
distributions will normally -- but not always -- consist primarily of capital
gains rather than ordinary income. Dividends and distributions are paid in cash
unless you indicate in the account application or in a letter to Galaxy that you
want to have dividends and distributions reinvested in additional shares.
FEDERAL TAXES
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). You will be subject to federal
income tax on these distributions regardless of whether they are paid in cash or
reinvested in additional shares. 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 notified annually of the tax status of
distributions to you.
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.) 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.
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.
It is expected that the Galaxy International Equity Fund will be subject to
foreign withholding taxes with respect to dividends or interest received from
sources in foreign countries. The Fund may make an election to treat a
proportionate amount of such taxes as constituting a distribution to each
shareholder, which would allow each shareholder either (1) to credit such
proportionate amount of taxes against U.S. federal income tax liability or (2)
to take such amount as an itemized deduction.
STATE AND LOCAL TAXES
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<PAGE>
Shareholders may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply however to the portions of each
Fund's distributions, if any, that are attributable to interest on U.S.
Government securities. Shareholders should consult their tax advisers regarding
the tax status of distributions in their state and locality.
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.
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables on the following pages will help you
understand the Funds' financial performance for the past five years (or the
period since a particular Fund began operations or a particular class of
shares was first offered). The financial highlights tables shown below with
respect to the Asset Allocation, Growth and Income, Equity Growth,
International Equity and Small Cap Value Funds reflect the financial
performance of the Funds' Prime A Shares and Prime B Shares. As of the date of
this prospectus, Prime A Shares and Prime B Shares of the Equity Income,
Strategic Equity, Equity Value and Small Company Equity Funds had not been
offered to investors. The financial highlights tables shown below with respect
to these Funds reflects the financial performance of the Funds' Retail A
Shares and is intended to provide a long-term perspective as to each Fund's
financial history. Certain information in the financial highlights tables
reflects the financial performance of a single Prime A Share or Prime B Share
or, in the case of the Equity Income, Strategic Equity, Equity Value and Small
Company Equity Funds, a single Retail A Share. The total returns in the tables
represent the rate that an investor would have earned on an investment in
Prime A Shares and Prime B Shares of the Asset Allocation, Growth and Income,
Equity Growth, International Equity and Small Cap Value Funds or Retail A
Shares of the Equity Income, Strategic Equity, Equity Value and Small Company
Equity Funds, assuming all dividends and distributions were reinvested. The
information for the fiscal year ended October 31, 1999 has been audited by
Ernst & Young LLP, independent auditors, whose report, along with the Fund's
financial statements, are included in the Funds' Annual Report and
incorporated by reference into the SAI. The Annual Report and SAI are
available free of charge upon request. The information for the fiscal years
ended October 31, 1998, 1997, 1996 and 1995 was audited by Galaxy's former
auditors, PricewaterhouseCoopers LLP.
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<PAGE>
Galaxy Asset Allocation Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending
October 31, 1999
-----------------------------------------------
PRIME A SHARES(1) PRIME B SHARES(1)
<S> <C> <C>
Net asset value, beginning of period ........................................... $16.95 $16.95
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)................................................... 0.44 0.29
Net realized and unrealized gain on investments............................ 1.17 1.19
Total from investment operations....................................... 1.61 1.48
LESS DIVIDENDS:
Dividends from net investment income....................................... (0.40) (0.29)
Dividends from net realized capital gains.................................. (0.43) (0.43)
Total dividends........................................................ (0.83) (0.72)
Net increase in net asset value................................................. 0.78 0.76
Net asset value, end of period.................................................. $17.73 $17.71
Total return(3)................................................................. 9.72% 8.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......................................... $238 $519
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver....................... 2.27% 1.53%
Operating expenses including reimbursement/waiver.......................... 1.16% 1.90%
Operating expenses excluding reimbursement/waiver.......................... 1.29% 2.08%
Portfolio turnover rate......................................................... 135% 135%
</TABLE>
- ------------------------------
(1) The Fund began issuing Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Prime A Shares for the year
ended October 31, 1999 was $0.41. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Prime B Shares for the year ended October 31, 1999 was $0.26.
(3) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
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<PAGE>
Galaxy Equity Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE YEAR ENDING OCTOBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $19.67 $ 18.82 $ 16.91 $ 14.98 $ 12.74
Income from investment operations:
Net investment income(1)......................... 0.19 0.25 0.30 0.30 0.28
Net realized and unrealized gain
on investments............................... 1.69 2.43 3.35 2.47 2.47
Total from investment operations...................... 1.88 2.68 3.65 2.77 2.75
Less dividends:
Dividends from net investment income............. (0.20) (0.25) (0.30) (0.30) (0.30)
Dividends from net realized capital gains (1.85) (1.58) (1.44) (0.54) (0.21)
Total dividends....................................... (2.05) (1.83) (1.74) (0.84) (0.51)
Net increase (decrease) in net asset value............ (0.17) 0.85 1.91 1.93 2.24
Net asset value, end of period........................ $19.50 $ 19.67 $ 18.82 $ 16.91 $ 14.98
Total return(2)....................................... 10.14% 15.23% 23.28% 19.01% 22.23%
Ratios/supplemental data:
Net assets, end of period (000's)................ $213,041 $207,850 $169,276 $126,952 $81,802
Ratios to average net assets:
Net investment income including
Reimbursement/waiver......................... 0.97% 1.30% 1.70% 1.86% 2.08%
Operating expenses including
Reimbursement/waiver......................... 1.33% 1.34% 1.39% 1.40% 1.49%
Operating expenses excluding
Reimbursement/waiver......................... 1.33% 1.34% 1.41% 1.40% 1.51%
Portfolio turnover rate............................... 38% 46% 37% 45% 21%
</TABLE>
- -----------------------------
(1) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.19, $0.25, $0.30,
$0.30 and $0.28, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
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<PAGE>
Galaxy Growth and Income Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending
October 31, 1999
----------------------------------------------
PRIME A SHARES(1) PRIME B SHARES(1)
<S> <C> <C>
Net asset value, beginning of period ............................................ $14.88 $14.88
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss)(2,3)............................................ 0.11 (0.01)
Net realized and unrealized gain on investments............................. 2.03 2.03
Total from investment operations........................................ 2.14 2.02
LESS DIVIDENDS:
Dividends from net investment income........................................ (0.11) (0.02)
Dividends from net realized capital gains................................... (0.91) (0.91)
Total dividends......................................................... (1.02) (0.93)
Net increase in net asset value.................................................. 1.12 1.09
Net asset value, end of period................................................... $16.00 $15.97
Total return(4).................................................................. 14.81% 13.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........................................... $150 $129
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver........................ 0.66% (0.09)%
Operating expenses including reimbursement/waiver........................... 1.15% 1.90%
Operating expenses excluding reimbursement/waiver........................... 1.30% 2.17%
Portfolio turnover rate.......................................................... 20% 20%
</TABLE>
- ------------------------------
(1) The Fund began issuing Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Prime A Shares for the year
ended October 31, 1999 was $0.09. Net investment income (loss) per share
before reimbursement/waiver of fees by the Adviser and/or the Fund's
administrator for Prime B Shares for the year ended October 31, 1999 was
$(0.05).
(3) The selected per share data was calculated using the weighted average
shares outstanding method for the period.
(4) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
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Galaxy Strategic Equity Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period ending October 31,
--------------------------------------------
1999 1998
Retail Retail
A Shares A Shares(1)
<S> <C> <C>
Net asset value, beginning of period ........................ $9.62 $10.00
Income from investment operations:
Net investment income (loss)(2)......................... 0.04(7) --(3)
Net realized and unrealized (loss) on investments....... 0.27 (0.38)
Total from investment operations............................. 0.31 (0.38)
Less dividends:
Dividends from net investment income.................... (0.03) --
Dividends from net realized capital gains............... (0.01) --
Total dividends.............................................. (0.04) --
Net (decrease) in net asset value............................ 0.27 (0.38)
Net asset value, end of period............................... $9.89 $9.62
Total return(4).............................................. 3.25% (3.75)%(5)
Ratios/supplemental data:
Net assets, end of period (000's)....................... $8,229 $4,051
Ratios to average net assets:
Net investment income including reimbursement/waiver.... 0.41% 0.06%(6)
Operating expenses including reimbursement/waiver....... 1.19% 1.40%(6)
Operating expenses excluding reimbursement/waiver....... 1.63% 2.41%(6)
Portfolio turnover rate...................................... 79% 30%(5)
</TABLE>
- ------------------------------
(1) The Fund commenced operations on March 4, 1998.
(2) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
year ended October 31, 1999 and the period ended October 31, 1998 was
$0.00 and $0.00, respectively.
(3) Net investment income per share is less than $0.00.
(4) Calculation does not include the effect of any sales charge for Retail A
Shares.
(5) Not annualized.
(6) Annualized.
(7) The selected per share data was calculated using the weighted average
shares outstanding method for the year.
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<PAGE>
Galaxy Equity Value Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE YEAR ENDING OCTOBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $16.50 $ 18.21 $ 15.96 $ 14.33 $ 13.31
Income from investment operations:
Net investment income (loss)(1)...... (0.03) 0.03 0.11 0.14 0.22
Net realized and unrealized gain
on investments................... 2.42 1.50 4.16 2.74 2.24
Total from investment operations.......... 2.39 1.53 4.27 2.88 2.46
Less dividends:
Dividends from net investment income. -- (0.04) (0.12) (0.14) (0.23)
Dividends from net realized capital gains (0.61) (3.20) (1.90) (1.11) (1.21)
Total dividends........................... (0.61) (3.24) (2.02) (1.25) (1.44)
Net increase (decrease) in net asset value 1.78 (1.71) 2.25 1.63 1.02
Net asset value, end of period............ $18.28 $ 16.50 $ 18.21 $ 15.96 $ 14.33
Total return(2)........................... 14.63% 9.88% 29.48% 21.49% 20.81%
Ratios/supplemental data:
Net assets, end of period (000's).... $258,332 $234,730 $182,641 $131,998 $96,555
Ratios to average net assets:
Net investment income including
Reimbursement/waiver............. (0.16)% 0.15% 0.63% 1.00% 1.62%
Operating expenses including
Reimbursement/waiver............. 1.37% 1.37% 1.38% 1.45% 1.49%
Operating expenses excluding
Reimbursement/waiver............. 1.37% 1.37% 1.38% 1.45% 1.50%
Portfolio turnover rate................... 75% 82% 111% 116% 76%
- ------------------------------
</TABLE>
(1) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.03),
$0.03, $0.11, $0.14 and $0.22, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-65-
<PAGE>
Galaxy Equity Growth Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending
October 31, 1999
----------------------------------------------
Prime A Shares(1) Prime B Shares(1)
<S> <C> <C>
Net asset value, beginning of period ............................................ $24.49 $24.49
INCOME FROM INVESTMENT OPERATIONS:
Net investment (loss)(2).................................................... (0.01) (0.10)
Net realized and unrealized gain on investments............................. 6.37 6.35
Total from investment operations........................................ 6.36 6.25
LESS DIVIDENDS:
Dividends from net investment income........................................ -- --
Dividends from net realized capital gains................................... (1.90) (1.90)
Total dividends......................................................... (1.90) (1.90)
Net increase in net asset value.................................................. 4.46 4.35
Net asset value, end of period................................................... $28.95 $28.84
Total return(3).................................................................. 27.30% 26.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........................................... $107 $246
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver........................ (0.05)% (0.78)%
Operating expenses including reimbursement/waiver........................... 1.14% 1.87%
Operating expenses excluding reimbursement/waiver........................... 1.28% 2.19%
Portfolio turnover rate.......................................................... 53% 53%
</TABLE>
- ------------------------------
(1) The Fund began issuing Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment (loss) per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Prime A Shares for the year
ended October 31, 1999 was $(0.04). Net investment (loss) per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Prime B Shares for the year ended October 31, 1999 was $(0.14).
(3) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
-66-
<PAGE>
Galaxy International Equity Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending
October 31, 1999
-----------------------------------------------
Prime A Shares(1) Prime B Shares(1)
<S> <C> <C>
Net asset value, beginning of period ........................................... $16.85 $16.85
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2,3).......................................... 0.06 (0.08)
Net realized and unrealized gain on investments............................ 4.79 4.78
Total from investment operations....................................... 4.85 4.70
LESS DIVIDENDS:
Dividends from net investment income....................................... (0.15) (0.13)
Dividends from net realized capital gains.................................. (0.57) (0.57)
Total dividends........................................................ (0.72) (0.70)
Net increase in net asset value................................................. 4.13 4.00
Net asset value, end of period.................................................. $20.98 $20.85
Total return(4)................................................................. 29.73% 28.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......................................... $12 $458
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver....................... 0.34% (0.38)%
Operating expenses including reimbursement/waiver.......................... 1.17% 1.89%
Operating expenses excluding reimbursement/waiver.......................... 2.03% 2.27%
Portfolio turnover rate......................................................... 45% 45%
</TABLE>
- ------------------------------
(1) The Fund began issuing Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment (loss) per share before reimbursement/waiver of fees by
Adviser and/or the Fund's administrator for Prime A Shares for the year
ended October 31, 1999 was $(0.09). Net investment (loss) per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Prime B Shares for the year ended October 31, 1999 was $(0.16).
(3) The selected per share data was calculated using the weighted average
shares outstanding method for the period.
(4) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
-67-
<PAGE>
Galaxy Small Cap Value Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the year ending
October 31, 1999
------------------------------------------------
Prime A Shares(1) Prime B Shares(1)
<S> <C> <C>
Net asset value, beginning of period ........................................... $13.59 $13.59
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2)............................................ 0.03 (0.05)
Net realized and unrealized gain on investments............................ 0.73 0.71
Total from investment operations....................................... 0.76 0.66
LESS DIVIDENDS:
Dividends from net investment income....................................... (0.04) --
Dividends from net realized capital gains.................................. (1.27) (1.27)
Total dividends........................................................ (1.31) (1.27)
Net (decrease) in net asset value............................................... (0.55) (0.61)
Net asset value, end of period.................................................. $13.04 $12.98
Total return(3)................................................................. 5.80% 4.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......................................... $175 $190
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver....................... 0.26% (0.49)%
Operating expenses including reimbursement/waiver.......................... 1.18% 1.93%
Operating expenses excluding reimbursement/waiver.......................... 1.40% 2.49%
Portfolio turnover rate......................................................... 42% 42%
</TABLE>
- ------------------------------
(1) The Fund began issuing Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Prime A Shares for the year
ended October 31, 1999 was $0.00. Net investment (loss) per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Prime B Shares for the year ended October 31, 1999 was $(0.10).
(3) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
-68-
<PAGE>
Galaxy Small Company Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................. $13.63 $ 20.94 $ 19.96 $ 16.28 $ 12.35
Income from investment operations:
Net investment income (loss)(1)...... (0.23) (0.19) (0.18) (0.14) (0.09)
Net realized and unrealized gain
(loss) on investments............ 2.26 (4.86) 3.54 3.99 4.21
Total from investment operations.......... 2.03 (5.05) 3.36 3.85 4.12
Less dividends:
Dividends from net investment
income ............................. -- -- -- -- --
Dividends from net realized capital
gains .............................. -- (2.26) (2.38) (0.17) (0.19)
Total dividends........................... -- (2.26) (2.38) (0.17) (0.19)
Net increase (decrease) in net asset
value ............................... 2.03 (7.31) 0.98 3.68 3.93
Net asset value, end of period............ $15.66 $ 13.63 $ 20.94 $ 19.96 $ 16.28
Total return(2)........................... 14.89% (26.26)% 19.08% 23.97% 34.01%
Ratios/supplemental data:
Net assets, end of period (000's).... $87,921 $95,831 $135,593 $111,101 $45,668
Ratios to average net assets:
Net investment (loss) including
Reimbursement/waiver............. (1.41)% (1.13)% (1.02)% (1.03)% (0.85)%
Operating expenses including
Reimbursement/waiver............. 1.53% 1.46% 1.46% 1.57% 1.60%
Operating expenses excluding
Reimbursement/waiver............. 1.54% 1.47% 1.48% 1.57% 1.64%
Portfolio turnover rate................... 105% 78% 69% 82% 54%
</TABLE>
- -----------------------------
(1) Net investment income (loss) per share before reimbursement/waiver of fees
by the Adviser and/or the Fund's administrator for Retail A Shares for the
years ended October 31, 1999, 1998, 1997, 1996 and 1995 was $(0.23),
$(0.19), $(0.18), $(0.14) and $(0.09), respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-69-
<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 contacting your broker-dealer or 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
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request, to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
QRGALE 3/1/00
<PAGE>
[Front cover page]
The Galaxy Fund
Galaxy Bond Funds
Prospectus
February 29, 2000
Galaxy Short-Term Bond Fund
Galaxy Intermediate Government Income Fund
Galaxy High Quality Bond Fund
Galaxy Tax-Exempt Bond Fund
Prime A Shares and Prime 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
Risk/return summary...........................................................1
Introduction.........................................................1
Galaxy Short-Term Bond Fund..........................................2
Galaxy Intermediate Government Income Fund...........................7
Galaxy High Quality Bond Fund.......................................12
Galaxy Tax-Exempt Bond Fund.........................................17
Additional information about risk...................................22
Investor guidelines.................................................23
Fund management..............................................................24
How to invest in the Funds...................................................25
How sales charges work..............................................25
Buying, selling and exchanging shares...............................27
How to buy shares..........................................28
How to sell shares.........................................28
How to exchange shares.....................................29
Other shareholder services.................................29
Other transaction policies.................................29
Dividends, distributions and taxes...........................................29
Financial highlights.........................................................32
<PAGE>
RISK/RETURN SUMMARY
INTRODUCTION
THIS PROSPECTUS describes the Galaxy Bond Funds. Each Fund invests primarily in
debt obligations - taxable bonds, notes and commercial paper, in the case of the
Galaxy Short-Term Bond Fund, Galaxy Intermediate Government Income Fund and
Galaxy High Quality Bond Fund, and municipal securities issued by state and
local governments and other political or public bodies or agencies, the interest
on which is generally free from federal income tax, in the case of the Galaxy
Tax-Exempt Bond Fund.
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 Fund's past performance 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.
WHICH FUND IS RIGHT FOR YOU?
Not all mutual funds are for everyone. Your investment goals and tolerance for
risk will determine which fund is right for you. On page 22, you'll find a table
which sets forth general guidelines to help you decide which of the Galaxy Bond
Funds is best suited to you.
THE FUNDS' INVESTMENT ADVISER
Fleet Investment Advisors Inc., which is referred to in this prospectus as the
Adviser, is the investment adviser for all of these Funds. The Adviser, which
is an indirect wholly-owned subsidiary of FleetBoston Financial 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
$68 billion in assets.
[Sidenote:]
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 THE FUNDS.
<PAGE>
Galaxy Short-Term Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income 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:]
DEBT OBLIGATIONS
When a fund buys a debt obligation such as a bond, it is in effect lending money
to the company, government or other entity that issued the bond. In return, the
issuer has an obligation to make regular interest payments and to repay the
original amount of the loan on a given date, known as the maturity date. A bond
MATURES when it reaches its maturity date. Bonds usually have fixed interest
rates, although some have rates that fluctuate based on market conditions and
other factors.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in debt obligations of U.S. and foreign corporations,
including bonds and notes, and in debt obligations issued or guaranteed by the
U.S. Government and its agencies or instrumentalities or by foreign governments
or their political subdivisions and instrumentalities. It also invests in
asset-backed and mortgage-backed securities and in money market instruments,
such as commercial paper and the obligations of U.S. and foreign banks. The Fund
normally invests at least 65% of its total assets in bonds and debentures.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
payments on bonds of various maturities and determines the appropriate
allocation of the Fund's assets among various market sectors.
Nearly all Fund 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. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
securities which have one of the top three ratings assigned by S&P and Moody's,
or 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's average weighted maturity will be less than three years under normal
circumtances.
[Sidenote:]
AVERAGE WEIGHTED MATURITY
Average weighted maturity gives you the average time until all debt obligations
in a fund come due or MATURE. It is calculated by averaging the time to maturity
of all debt obligations held by a fund with each maturity "weighted" according
to the percentage of assets it represents.
-2-
<PAGE>
[Sidenote:]
DURATION
Duration is an approximate measure of the price sensitivity of a fund to changes
in interest rates. Unlike maturity which measures only the time until final
payment, duration gives you the average time it takes to receive all expected
cash flows (including interest payments, prepayments and final payments) on the
debt obligations held by a fund.
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 Fund may trade its investment frequently in trying to achieve its investment
goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK: The prices of debt securities generally 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 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 may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P or Moody's are considered to have
speculative characteristics. Changes in the economy are more likely to
affect the ability of the issuers of these securities to make payments of
principal and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain debt
securities held by the Fund, particularly asset-backed and mortgage-backed
securities, 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.
- - 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
-3-
<PAGE>
information about the issuers of securities, and political or economic
instability. Foreign securities may be more volatile and less liquid than
U.S. securities.
- - 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.
- - FREQUENT TRADING: Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The figures don't include any sales charges that
investors pay when buying or selling Retail A Shares of the Fund. If sales
charges were included, the returns would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.81% 6.41% -0.37% 10.96% 3.38% 5.68% 6.07% 2.33%
- ------------------------------------------------------------------------------------------------
</TABLE>
Best quarter: 4.14% for the quarter ending September 30, 1992
Worst quarter: -0.66% for the quarter ending June 30, 1994
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) for the periods ended December 31,
1999, as compared to a broad-based market index.
-4-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1 year 5 years Since inception
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail A Shares(1) -2.52% 4.62% 4.35% (12/30/91)
- ----------------------------------------------------------------------------------------
Retail A Shares(2) -2.53% 5.32% 4.99% (12/30/91)
- ----------------------------------------------------------------------------------------
Lehman Brothers One 2.90% 6.47% 5.54% (since 12/31/91)
to Three Year
Government Bond
Index
- ----------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 4.75% sales charge payable on purchases of Prime A Shares. Prime
A Shares are also subject to distribution (12b-1) fees at an annual rate of
0.25% of the Fund's Prime A Share assets. Had the performance of Retail A Shares
been restated to reflect these distribution (12b-1) fees, average annual total
returns for Retail A Shares would be lower.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The Lehman Brothers One to Three Year Government Bond Index is an unmanaged
index which tracks the performance of short-term U.S. Government bonds.
FEES AND EXPENSES OF THE FUND
The following table show 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 sales charge Maximum deferred sales
(load) on purchases charge (load) shown as a
shown as a % of the % of the offering price
offering price or sale price, whichever
is less
- --------------------------------------------------------------------------------
<S> <C> <C>
Prime A Shares 4.75%(1) None(2)
- --------------------------------------------------------------------------------
Prime B Shares None 5.00%(3)
- --------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Distribution Total Fund
Management and service Other operating
fees (12b-1) fees expenses expenses
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime A Shares 0.75%(4) 0.25% 0.40%(5) 1.40%(4)
- -----------------------------------------------------------------------------------------
Prime B Shares 0.75%(4) 1.00% 0.50%(5) 2.25%(4)
- -----------------------------------------------------------------------------------------
</TABLE>
(1)Reduced sales charges may be available. See "How to invest in the Funds - How
sales charges work."
(2)Except for investments of $1,000,000 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 0% in the seventh year after purchase. After eight
years, your Prime B Shares will automatically convert to Prime A Shares. See
"How to invest in the Funds -- How sales charges work."
(4)The Adviser is waiving a portion of the Management fees so that such fees are
expected to be 0.55%. Total Fund operating expenses after this waiver are
expected to be 1.20% for Prime A Shares and 2.05% for Prime B Shares. This fee
waiver may be revised or discontinued at any time.
(5)Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $611 $897 $1,204 $2,075
- ----------------------------------------------------------------------------------------------------
Prime B Shares $728 $1,003 $1,405 $2,371
- ----------------------------------------------------------------------------------------------------
<CAPTION>
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime B Shares $228 $703 $1,205 $2,371
- ----------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Adviser's Taxable Fixed Income Strategy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-6-
<PAGE>
Galaxy Intermediate Government Income Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks the highest level of current income consistent with prudent risk
of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in debt obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. It also invests in debt obligations of U.S. corporations,
asset-backed and mortgage-backed securities and money market instruments, such
as commercial paper and obligations of U.S. banks and U.S. branches of foreign
banks.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
[Sidenote:]
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are debt obligations issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. U.S. Government
obligations generally have less credit risk than other debt obligations.
Nearly all Fund investments will be of investment grade quality and will have
one of the top three ratings assigned by Standard & Poor's Ratings Group ("S&P")
or Moody's Investors Service, Inc. ("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 the minimum required
rating. 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's average weighted maturity will be between three to ten years under
normal circumstances.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
-7-
<PAGE>
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK: The prices of debt securities generally 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 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 may fall.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain debt
securities held by the Fund, particularly asset-backed and mortgage-backed
securities, 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.
- - 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.
- - FREQUENT TRADING: Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
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.
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
Retail A Shares of the Fund were first issued during the fiscal year ended
October 31, 1992. The returns for Retail A Shares of the Fund for prior periods
represent the returns for Trust Shares of the Fund which are offered in a
separate prospectus. Prior to November 1, 1993, the returns for Retail A Shares
and Trust Shares of the Fund were the same because each class of shares had the
same expenses.
-8-
<PAGE>
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The figures don't include any sales charges that
investors pay when buying or selling Retail A Shares of the Fund. If sales
charges were included, the returns would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.87% 15.77% 7.11% 5.57% -3.77% 15.67% 1.75% 7.83% 8.32% -1.95%
- ------------------------------------------------------------------------------------------------
</TABLE>
Best quarter: 6.13% for the quarter ending September 30, 1992
Worst quarter: -2.90% for the quarter ending March 31, 1994
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) for the periods ended December 31,
1999, as compared to broad-based market indices.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1 year 5 years 10 years Since inception
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail A Shares(1) -6.60% 5.12% 5.57% 6.18% (9/1/88)
- ----------------------------------------------------------------------------------------------------------------
Retail A Shares(2) -6.59% 5.83% 6.08% 6.64% (9/1/88)
- ----------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate Bond Index 0.39% 7.10% 7.26% 7.74% (since 8/31/88)
- ----------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate
Bond Index -0.82% 7.73% 7.70% 8.34% (since 8/31/88)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 4.75% sales charge payable on purchases of Prime A Shares. Prime
A Shares are also subject to distribution (12b-1) fees at an annual rate of
0.25% of the Fund's Prime A Share assets. Had the performance of Retail A
-9-
<PAGE>
Shares been restated to reflect these distribution (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
index which tracks the performance of intermediate-term U.S. Government and
corporate bonds.
[Sidenote:]
The Lehman Brothers Aggregate Bond Index is an unmanaged index made up of the
Lehman Brothers/Government Bond Index, its Mortgage Backed Securities and its
Asset Backed Securities Index.
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 sales charge Maximum deferred sales
(load) on purchases charge (load) shown as a
shown as a % of the % of the offering price
offering price or sale price, whichever
is less
- --------------------------------------------------------------------------------
<S> <C> <C>
Prime A Shares 4.75%(1) None(2)
- --------------------------------------------------------------------------------
Prime B Shares None 5.00%(3)
- --------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Distribution Total Fund
Management and service Other operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime A Shares 0.75%(4) 0.25% 0.26%(5) 1.26%(4)
- ---------------------------------------------------------------------------------------------
Prime B Shares 0.75%(4) 1.00% 0.47%(5) 2.22%(4)
- ---------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After eight
years, your Prime B Shares will automatically convert to Prime A Shares. See
"How to invest in the Funds -- How sales charges work."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver are
expected to be 1.06% for Prime A Shares and 2.02% for Prime B Shares. This fee
waiver may be revised or discontinued at any time.
(5)Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
- - you reinvest all dividends and distributions in the Fund
- - you sell all your shares at the end of the periods shown
- - your investment has a 5% return each year
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $597 $856 $1,134 $1,925
- ----------------------------------------------------------------------------------------------------------------
Prime B Shares $725 $994 $1,390 $2,312
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime B Shares $225 $694 $1,190 $2,312
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a Vice President
and Manager of Fixed Income Investments until February 1999. She has managed the
Fund since December 1996.
-11-
<PAGE>
Galaxy High Quality Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks a high level of current income consistent with prudent risk of
capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund invests primarily in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, as well as in corporate debt
obligations such as notes and bonds. The Fund also invests in asset-backed and
mortgage-backed securities and in money market instruments, such as commercial
paper and bank obligations.
In selecting portfolio securities for the Fund, the Adviser monitors and
evaluates economic trends. It establishes duration targets, ranges of interest
rates on bonds of various maturities and determines the appropriate allocation
of the Fund's investments among various market sectors.
Nearly all Fund 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. Under normal
market conditions, the Fund will invest at least 65% of its total assets in high
quality securities that have one of the top two ratings assigned by S&P or
Moody's, or unrated securities determined by the Adviser to be of comparable
quality. High quality securities tend to pay less income than lower-rated
securities. 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's average weighted maturity will vary from time to time depending on
current market and economic conditions and the Adviser's assessment of probable
changes in interest rates.
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 Fund may trade its investments frequently in trying to achieve its
investment goal.
THE MAIN RISKS OF INVESTING IN THE FUND
All mutual funds are affected by changes in the economy and swings in investment
markets. These can occur within or outside the U.S. or worldwide, and may affect
only particular companies or industries.
In addition, the Fund carries the following main risks:
- - INTEREST RATE RISK: The prices of debt securities generally 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.
-12-
<PAGE>
- - CREDIT RISK: The value of debt 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 may fall. Debt securities which have the lowest of the
top four ratings assigned by S&P and Moody's are considered to have
speculative characteristics. Changes in the economy are more likely to
affect the ability of the issuers of these securities to make payments of
principal and interest than is the case with higher-rated securities.
- - PREPAYMENT/EXTENSION RISK: Changes in interest rates may cause certain debt
securities held by the Fund, particularly asset-backed and mortgage-backed
securities, 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.
- - 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.
- - FREQUENT TRADING: Frequent trading of investments usually increases the
chance that the Fund will pay investors short-term capital gains. These
gains are taxable at higher rates than long-term capital gains. Frequent
trading could also mean higher brokerage commissions and other transaction
costs, which could reduce the Fund's returns.
HOW THE FUND HAS PERFORMED
The bar chart and table below show how the Fund has performed in the past and
give some indication of the risk of investing in the Fund. Both assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past doesn't necessarily show how it will perform in the
future.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows the performance of Prime A Shares of the Fund during the
last calendar year. The return for Prime B Shares was different than the figure
shown because each class of shares has different expenses. The figure doesn't
include any sales charges that investors pay when buying or selling Prime A
Shares of the Fund. If sales charges were included, the return would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
-----------
1999
-----------
<S><C>
-4.11%
-----------
</TABLE>
Best quarter:.... 0.30% for the quarter ending September 30, 1999
Worst quarter:... -1.79% for the quarter ending June 30, 1999
-13-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
The table shows the Fund's average annual total returns (after taking into
account any sales charges) 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>
Prime A Shares -8.25% N/A -7.11% (11/1/98)
- ------------------------------------------------------------------------------------------------------------
Prime B Shares -9.28% N/A -6.94% (11/1/98)
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Government/
Corporate Bond Index 0.39% 7.10% 0.67% (since 10/31/98)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information, please call 1-877-BUY-GALAXY (1-877-289-4252).
[Sidenote:]
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
index which tracks the performance of intermediate-term U.S. Government and
corporate bonds.
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 sales charge Maximum deferred sales
(load) on purchases charge (load) shown as a
shown as a % of the % of the offering price
offering price or sale price, whichever
is less
- --------------------------------------------------------------------------------
<S> <C> <C>
Prime A Shares 4.75%(1) None(2)
- --------------------------------------------------------------------------------
Prime B Shares None 5.00%(3)
- --------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Distribution Total Fund
Management and service Other operating
fees (12b-1) fees expenses expenses
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime A Shares 0.75%(4) 0.25% 0.53%(4) 1.53%(4)
- ----------------------------------------------------------------------------------------
-14-
<PAGE>
- ----------------------------------------------------------------------------------------
Prime B Shares 0.75%(4) 1.00% 0.26%(4) 2.01%(4)
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After eight
years, your Prime B Shares will automatically convert to Prime A Shares. See
"How to invest in the Funds -- How sales charges work."
(4) The Adviser and certain of the Fund's other service providers are waiving a
portion of their fees so that Management fees and Other expenses are expected to
be 0.55% and 0.18%, respectively, for Prime A Shares and 0.55% and 0.17%,
respectively, for Prime B Shares. Total Fund operating expenses after these
waivers are expected to be 0.98% for Prime A Shares and 1.72% for Prime B
Shares. These fee waivers 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
- - your Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $623 $935 $1,270 $2,212
- ------------------------------------------------------------------------------------------------------------
Prime B Shares $704 $930 $1,283 $2,214
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime B Shares $204 $630 $1,083 $2,214
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
PORTFOLIO MANAGER
The Fund's portfolio manager is Marie M. Schofield, CFA, a Senior Vice President
of the Adviser. She's primarily responsible for the day-to-day management of the
Fund's investment portfolio. Ms. Schofield, who has over 20 years of investment
experience, has been with the Adviser since 1990 and served as a
-15-
<PAGE>
Vice President and Manager of Fixed Income Investments until February 1999. She
has managed the Fund since December 1996.
-16-
<PAGE>
Galaxy Tax-Exempt Bond Fund
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide shareholders with as high a level of current interest
income free of federal income tax as is consistent with preservation of capital.
THE FUND'S MAIN INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in municipal
securities that pay interest which is exempt from regular federal income tax,
primarily bonds (normally 65% of total assets). Under normal conditions, the
Fund will invest no more than 20% of its total assets in taxable obligations,
such as U.S. Government obligations, money market instruments and repurchase
agreements.
[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 backed by private
entities and are used to finance various non-public projects. 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.
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.
[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.
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
sectors.
Nearly all Fund 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. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
securities that have one of the top three ratings assigned by S&P or Moody's,
or 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
-17-
<PAGE>
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's average weighted maturity will vary from time to time depending on
current economic and market conditions and the Adviser's assessment of probable
changes in interest rates.
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 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 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.
- - SELECTION OF INVESTMENTS: The Adviser evaluates the risks and rewards
presented by all securities purchased by each 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.
-18-
<PAGE>
As of the date of this Prospectus, the Fund has not offered Prime A Shares and
Prime B Shares to investors. The returns below represent the returns for Retail
A Shares of the Fund, which are offered in a separate prospectus. Retail A
Shares, Prime A Shares and Prime B Shares of the Fund should have returns that
are substantially the same because they represent interests in the same
portfolio securities and differ only to the extent that they bear different
expenses.
YEAR-BY-YEAR TOTAL RETURNS - CALENDAR YEARS
The bar chart shows how the performance of Retail A Shares of the Fund has
varied from year to year. The figures don't include any sales charges that
investors pay when buying or selling Retail A Shares of the Fund. If sales
charges were included, the returns would be lower.
[bar chart goes here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
9.25% 11.95% -5.37% 15.79% 3.31% 8.72% 5.73% -3.66%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Best quarter: 6.56% for the quarter ending March 31, 1995
Worst quarter: -5.39% for the quarter ending March 31, 1994
AVERAGE ANNUAL TOTAL RETURNS
The table shows the average annual total returns for Retail A Shares of the Fund
(after taking into account any sales charges) 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>
Retail A Shares(1) -8.27% 4.75% 4.95% (12/30/91)
- -------------------------------------------------------------------------------------------------------------
Retail A Shares(2) -8.27% 5.46% 5.59% (12/30/91)
- -------------------------------------------------------------------------------------------------------------
Lehman Brothers
Municipal Bond Index -2.06% 6.91% 6.20% (since 12/31/91)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For current yield information call 1-877-BUY-GALAXY (1-877-289-4252).
(1) The performance of Retail A Shares has been restated to include the effect
of the maximum 4.75% sales charge payable on purchases of Prime A Shares. Prime
A Shares are also subject to distribution (12b-1) fees at an annual rate of
0.25% of the Fund's Prime A Share assets. Had the performance of Retail A Shares
been restated to reflect these distribution (12b-1) fees, average annual total
returns for Retail A Shares would be lower.
(2) The performance of Retail A Shares has been restated to include the effect
of the applicable contingent deferred sales charge payable on redemptions of
Prime B Shares within six years of the date of purchase. Prime B Shares are also
subject to distribution and service (12b-1) fees at an annual rate of 1.00% of
the Fund's Prime B Share assets. Had the performance of Retail A Shares been
restated to reflect these distribution and service (12b-1) fees, average annual
total returns for Retail A Shares would be lower.
-19-
<PAGE>
[Sidenote:]
The Lehman Brothers Municipal Bond Index is an unmanaged index which tracks the
performance of municipal bonds.
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 sales charge Maximum deferred sales
(load) on purchases charge (load) shown as a
shown as a % of the % of the offering price
offering price or sale price, whichever
is less
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Prime A Shares 4.75%(1) None(2)
- -------------------------------------------------------------------------------------------
Prime B Shares None 5.00%(3)
- -------------------------------------------------------------------------------------------
</TABLE>
Annual Fund operating expenses (expenses deducted from the Fund's assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Distribution Total Fund
Management and service Other operating
fees (12b-1) fees expenses expenses
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime A Shares 0.75%(4) 0.25% 0.20%(5) 1.20%(4)
- ---------------------------------------------------------------------------------------------
Prime B Shares 0.75%(4) 1.00% 0.21%(5) 1.96%(4)
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Reduced sales charges may be available. See "How to invest in the Funds -
How sales charges work."
(2) Except for investments of $1,000,000 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 0% in the seventh year after purchase. After
eight years, your Prime B Shares will automatically convert to Prime A Shares.
See "How to invest in the Funds - How sales charges work."
(4) The Adviser is waiving a portion of the Management fees so that such fees
are expected to be 0.55%. Total Fund operating expenses after this waiver are
expected to be 1.00% for Prime A Shares and 1.76% for Prime B Shares. This fee
waiver may be revised or discontinued at any time.
(5)Other expenses are based on estimated amounts for the current fiscal year.
EXAMPLE
This example helps you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The example assumes:
- - you invest $10,000 for the periods shown
-20-
<PAGE>
- - 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 Prime B Shares convert to Prime A Shares after eight 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>
Prime A Shares $591 $838 $1,103 $1,860
- --------------------------------------------------------------------------------------------------------
Prime B Shares $699 $915 $1,257 $2,089
- --------------------------------------------------------------------------------------------------------
<CAPTION>
If you hold Prime B Shares, you would pay the following expenses if you didn't sell your shares:
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime B Shares $199 $615 $1,057 $2,089
- --------------------------------------------------------------------------------------------------------
</TABLE>
[Sidenote:]
THE PORTFOLIO MANAGER
The Adviser's Tax-Exempt Investment Policy Committee is responsible for the
day-to-day management of the Fund's investment portfolio.
-21-
<PAGE>
ADDITIONAL INFORMATION ABOUT RISK
The principal risks associated with an investment in each of the Galaxy Bond
Funds have been described above. The following supplements that discussion.
TEMPORARY DEFENSIVE POSITIONS
Under unusual market conditions, each Fund may hold uninvested cash (which will
not earn any income) and invest without limit in money market instruments and
short-term U.S. Government securities. Any such taxable investments by the
Galaxy Tax-Exempt Bond Fund may be in excess of 20% of its total assets. This
strategy could prevent a Fund from achieving its investment objective.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Fund's main investment strategies and the
particular types of securities in which each Fund mainly invests. Each Fund may,
from time to time, pursue other investment strategies and make other types of
investments in support of its overall investment goal. These supplemental
investment strategies, which are not considered to be main investment strategies
of the Funds - and the risks involved - are described in detail in the Statement
of Additional Information (SAI) which is referred to on the back cover of this
prospectus.
YEAR 2000 RISKS
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.
-22-
<PAGE>
INVESTOR GUIDELINES
The table below provides information as to which type of investor might want to
invest in the Galaxy Bond Funds. It's meant as a general guide only. TAX-EXEMPT
FUNDS ARE 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 broker-dealer to help you decide which Fund is right
for you.
<TABLE>
<CAPTION>
<S><C>
Galaxy Fund May be best suited for investors who...
- ---------------------------------------------------------------------------------------------------------------------
Galaxy Short-Term Bond Fund
- want current income greater than that
normally provided by a money market fund
- want less change in the value of their
investment than normally associated with
long-term funds
- ---------------------------------------------------------------------------------------------------------------------
Galaxy Intermediate Government Income Fund - want current income
- want the extra margin of safety associated
with U.S. Government securities
- can accept fluctuations in price and yield
- ---------------------------------------------------------------------------------------------------------------------
Galaxy High Quality Bond Fund - want current income
- want the added safety associated with
bonds with lower credit risk than other debt
securities
- can accept fluctuations in price and yield
- ---------------------------------------------------------------------------------------------------------------------
Galaxy Tax-Exempt Bond Fund - want current income free of federal income
tax
- can accept fluctuations in price and yield
- ---------------------------------------------------------------------------------------------------------------------
</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.
-23-
<PAGE>
FUND MANAGEMENT
ADVISER
The Adviser, subject to the general supervision of Galaxy's Board of Trustees,
manages each Fund in accordance with its investment objective and policies,
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities, and maintains related records.
ALLOCATION OF ORDERS FOR PORTFOLIO SECURITIES
The Adviser may allocate orders for the purchase and sale of portfolio
securities to certain financial institutions, including those that are
affiliated with the Adviser or that have sold shares of the Funds, to the extent
permitted by law or by order of the Securities and Exchange Commission. The
Adviser will allocate orders to such institutions only if it believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.
MANAGEMENT FEES
The management fees paid to the Adviser by the Funds during the last fiscal year
are set forth below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fund Management fee as a % of average net assets
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Galaxy Short-Term Bond Fund 0.55%
- ----------------------------------------------------------------------------------------------------------
Galaxy Intermediate Government Income Fund 0.55%
- ----------------------------------------------------------------------------------------------------------
Galaxy High Quality Bond Fund 0.55%
- ----------------------------------------------------------------------------------------------------------
Galaxy Tax-Exempt Bond Fund 0.55%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
How to invest in the Funds
HOW SALES CHARGES WORK
You will normally pay a sales charge to invest in the Funds. If you buy Prime A
Shares, you'll usually pay a sales charge (sometimes called a front-end load) at
the time you buy your shares. If you buy Prime B Shares, 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 Prime A Shares or Prime
B Shares, minus the value of the Fund's liabilities attributable to Prime A
Shares or Prime B Shares, divided by the number of Prime A Shares or Prime B
Shares held by investors.
PRIME A SHARES
The table below shows the sales charge you'll pay if you buy Prime 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 4.75% 4.99%
- -----------------------------------------------------------------------------------------------------
$50,000 but less than
$100,000 4.50% 4.71%
- -----------------------------------------------------------------------------------------------------
$100,000 but less than
$250,000 3.50% 3.63%
- -----------------------------------------------------------------------------------------------------
$250,000 but less than
$500,000 2.50% 2.56%
- -----------------------------------------------------------------------------------------------------
$500,000 but less than
$1,000,000 2.00% 2.04%
- -----------------------------------------------------------------------------------------------------
$1,000,000 and over 0.00%(1) 0.00%(1)
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) There is no front-end sales charge on investments in Prime A Shares of
$1,000,000 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.
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
-25-
<PAGE>
Funds. These programs will not change the price of Prime A Shares or the amount
that the Funds will receive from such sales.
There's no sales charge when you buy Prime A Shares if:
- - You buy shares by reinvesting your dividends and distributions.
- - You buy shares with money from Prime A Shares of 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're an investment professional who places trades for your clients and
charges them a fee.
- - You were a Galaxy shareholder before December 1, 1995.
[Sidenote:]
SALES CHARGE WAIVERS
Ask your broker-dealer, or consult the SAI, for other instances in which the
sales load on Prime A Shares is waived. When you buy your shares, you must tell
your broker-dealer that you qualify for a sales load waiver.
PRIME B SHARES
If you buy Prime B Shares of the Funds, 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 Prime 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 Prime B Shares
that you acquire by reinvesting your dividends and distributions.
In addition, there's no CDSC when Prime B Shares are sold because of the death
or disability of a shareholder and in certain other circumstances such as
exchanges. Ask your broker-dealer, or consult the SAI, for other instances in
which the CDSC is waived.
-26-
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICE FEES
Prime A Shares of the Funds can pay distribution fees at an annual rate of up to
0.30% of each Fund's Prime A Share assets. The Funds do not intend to pay more
than 0.25% in distribution fees with respect to Prime A Shares during the
current fiscal year.
Prime B Shares of the Funds can pay distribution and shareholder service (12b-1)
fees at an annual rate of up to 1.25% of each Fund's Prime B Share assets. The
Funds do not intend to pay more than 1.00% in distribution and service (12b-1)
fees during the current fiscal year.
Galaxy has adopted separate plans under Rule 12b-1 that allow each Fund to pay
fees from its Prime A Share assets for selling and distributing Prime A Shares
and from its Prime B Share Assets for selling and distributing Prime 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 PRIME B SHARES TO PRIME A SHARES
Eight years after you buy Prime B Shares of a Fund, they will automatically
convert to Prime A Shares of the Fund. This allows you to benefit from the lower
annual expenses of Prime A Shares.
CHOOSING BETWEEN PRIME A SHARES AND PRIME B SHARES
Prime B Shares are subject to higher fees than Prime A Shares. For this reason,
Prime A Shares can be expected to pay higher dividends than Prime B Shares.
However, because Prime A Shares are subject to an initial sales charge which is
deducted at the time you purchase Prime 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 Prime A Shares than if you purchase Prime B Shares of the
Fund.
In deciding whether to buy Prime A Shares or Prime B Shares, you should consider
how long you plan to hold the shares. Over time, the higher fees on Prime B
Shares may equal or exceed the initial sales charge and fees for Prime A Shares.
Prime 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 Prime A Shares and Prime 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.
Prime A Shares and Prime 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 form, as described below, less
any applicable CDSC. 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.
-27-
<PAGE>
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 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.
[Sidenote:]
MINIMUM INVESTMENT AMOUNTS
The minimum initial investment to open a Fund account is $2,500. You generally
can make additional investments for as little as $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.
HOW TO BUY SHARES
You can buy shares through your broker-dealer. Your broker-dealer is responsible
for sending your order to Galaxy's distributor and wiring the money to Galaxy's
custodian. For details, please contact your broker-dealer. A broker-dealer who
places orders on your behalf may charge you a separate fee for its services.
DISCOUNT PLANS
You may have the sales charges on purchases of Prime A Shares reduced or waived
completely through the discount plans described below:
- - RIGHTS OF ACCUMULATION: You can add the value of the Prime A Shares that
you already own in any Galaxy Fund that charges a sales load to your next
investment in Prime A Shares for purposes of calculating the sales charge.
- - LETTER OF INTENT: You can purchase Prime 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. Please note that Galaxy's administrator will hold in escrow
Prime 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 Prime A Shares of the Funds in Prime A Shares of any
Galaxy Fund that offers Prime A Shares within 90 days without paying a
sales charge.
[Sidenote:]
DISCOUNT PLANS
You must tell your broker-dealer 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.
-28-
<PAGE>
HOW TO SELL SHARES
You can sell your shares through your broker-dealer. The broker-dealer 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 broker-dealer, but your broker-dealer may charge you a fee.
Please contact your broker-dealer for information on how to sell your shares.
HOW TO EXCHANGE SHARES
You may exchange Prime A Shares of a Fund having a value of at least $100 for
Prime A Shares of any other Galaxy Fund that offers Prime A Shares. You won't
pay a sales charge for exchanging your Prime A Shares.
You may exchange Prime B Shares of a Fund for Prime B Shares of any other Galaxy
Fund that offers Prime B Shares. You won't pay a CDSC when you exchange your
Prime B Shares. However, when you sell the Prime B Shares you acquired in the
exchange, you'll pay a contingent deferred sales charge based on the date you
bought the Prime B Shares which you exchanged. Galaxy doesn't charge any fee for
making exchanges but your broker-dealer might do so. You are generally limited
to three exchanges per year. Galaxy may change or cancel the exchange privilege
by giving 60 days' advance written notice to shareholders.
To exchange shares, contact your broker-dealer.
OTHER SHAREHOLDER SERVICES
Your broker-dealer may offer other shareholder services to its customers. For
example, broker-dealers may offer participation in an automatic investment
program that allows investors to systematically purchase shares of the Funds on
a periodic basis from a designated account. Broker-dealers may also offer a
systematic withdrawal plan which permits investors automatically to sell shares
on a regular basis. Please contact your broker-dealer for details on these and
any other shareholder services that may be available.
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 your broker-dealer 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 normally pays you cash when you sell your shares, but it has the right to
deliver securities owned by a Fund instead of cash. When you sell these
securities, you'll pay brokerage charges.
Sales proceeds are normally sent to your broker-dealer 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.
Galaxy reserves the right to vary or waive any minimum investment requirement.
-29-
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund declares any dividends from net investment income daily and pays them
monthly. Each Fund pays any net capital gains at least once a year. Dividends
and distributions are paid in cash unless you indicate in the account
application or in a letter to Galaxy that you want to have dividends and
distributions reinvested in additional shares.
- - GALAXY SHORT-TERM BOND, GALAXY INTERMEDIATE GOVERNMENT INCOME AND GALAXY HIGH
QUALITY BOND FUNDS
Each Fund contemplates declaring as dividends each year all or substantially all
taxable income, including net capital gain (the excess of long-term capital gain
over short-term capital loss). You will be subject to federal income tax on
these distributions regardless of whether they are paid in cash or reinvested in
additional shares. 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 notified annually of the tax status of
distributions to you.
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.) 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.
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.
- - GALAXY TAX-EXEMPT BOND FUND
It is expected that the Fund 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 gain or taxable interest income will be taxable to you as
ordinary income.
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.
-30-
<PAGE>
Interest on indebtedness incurred by a shareholder of the Fund generally will
not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Fund
may constitute an item of tax preference for purposes of determining federal
alternative minimum tax liability. Exempt-interest dividends will also be
considered along with other adjusted gross income in determining whether any
Social Security or railroad retirement payments received by you are subject to
federal income taxes.
- - STATE AND LOCAL TAXES
Generally, shareholders may also be subject to state and local taxes on
distributions and redemptions. State income taxes may not apply however to the
portions of each Fund's distributions, if any, that are attributable to interest
on U.S. Government securities.
- - 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
advisor for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation. You will be notified
annually of the tax status of distributions to you.
-31-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlight tables on the following pages will help you
understand the Funds' financial performance for the past five years (or the
period since a particular Fund began operations or a particular class of
shares was first offered). The financial highlights table shown below with
respect to the High Quality Bond Fund reflects the financial performance of
the Fund's Prime A Shares and Prime B Shares. As of the date of this
prospectus, Prime A Shares and Prime B Shares of the Short-Term Bond,
Intermediate Government Income and Tax-Exempt Bond Funds had not been offered
to investors. The financial highlights tables shown below with respect to
these Funds reflects to the financial performance of the Funds' Retail A
Shares and is intended to provide you with a long-term perspective as to each
Fund's financial history. Certain information in the financial highlights
tables reflects the financial performance of a single Prime A Share or Prime
B Share, or in the case of the Short-Term Bond, Intermediate Government
Income and Tax-Exempt Bond Funds, a single Retail A Share. The total returns
in the tables represent the rate that an investor would have earned (or lost)
on an investment in Prime A Shares or Prime B Shares of the High Quality Bond
Fund or Retail A Shares of the Short-Term Bond, Intermediate Government
Income and High Quality Bond Funds, assuming all dividends and distributions
were reinvested. The information for the fiscal year ended October 31, 1999
has been audited by Ernst & Young LLP, independent auditors, whose report,
along with the Funds' financial statements, are included in the Funds' Annual
Reports and incorporated by reference into the SAI. The Annual Reports and
SAI are available free of charge upon request. The information for the fiscal
years ended October 31, 1998, 1997, 1996 and 1995 was audited by Galaxy's
former auditors, PricewaterhouseCoopers LLP.
-32-
<PAGE>
Galaxy Short-Term Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE YEAR ENDING OCTOBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 10.10 $ 10.01 $ 9.99 $ 10.06 $ 9.73
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1)........................... 0.49 0.51 0.53 0.52 0.55
Net realized and unrealized gain (loss) on (0.25) 0.11 0.02 (0.07) 0.33
investments........................................
Total from investment operations......................... 0.24 0.62 0.55 0.45 0.88
LESS DIVIDENDS:
Dividends from net investment income............... (0.48) (0.53) (0.53) (0.52) (0.55)
Total dividends.......................................... (0.48) (0.53) (0.53) (0.52) (0.55)
Net increase (decrease) in net asset value............... (0.24) 0.09 0.02 (0.07) 0.33
Net asset value, end of period........................... $ 9.86 $ 10.10 $ 10.01 $ 9.99 $ 10.06
Total return(2).......................................... 2.43% 6.42% 5.64% 4.63% 9.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).................. $24,653 $29,067 $27,961 $33,388 $31,542
RATIOS TO AVERAGE NET ASSETS:
Net investment income including 4.86% 5.07% 5.29% 5.22% 5.54%
reimbursement/waiver...............................
Operating expenses including reimbursement/waiver.. 1.10% 1.11% 1.00% 1.11% 0.99%
Operating expenses excluding reimbursement/waiver.. 1.30% 1.31% 1.21% 1.35% 1.32%
Portfolio turnover rate.................................. 151% 133% 173% 214% 289%
</TABLE>
- -------------------------------
(1) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.47, $0.49, $0.51,
$0.50 and $0.52, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-33-
<PAGE>
Galaxy Intermediate Government Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.50 $ 10.18 $ 10.06 $ 10.28 $ 9.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1).................... 0.54 0.57 0.59 0.57 0.61
Net realized and unrealized gain (loss) on
investments................................. (0.65) 0.34 0.12 (0.22) 0.60
Total from investment operations.................. (0.11) 0.91 0.71 0.35 1.21
LESS DIVIDENDS:
Dividends from net investment income........ (0.53) (0.59) (0.59) (0.57) (0.61)
Total dividends................................... (0.53) (0.59) (0.59) (0.57) (0.61)
Net increase (decrease) in net asset value........ (0.64) 0.32 0.12 (0.22) 0.60
Net asset value, end of period.................... $ 9.86 $ 10.50 $ 10.18 $ 10.06 $ 10.28
Total return(2) (1.11)% 9.22% 7.33% 3.58% 12.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........... $56,454 $66,865 $65,626 $79,741 $79,558
RATIOS TO AVERAGE NET ASSETS:
Net investment income including
reimbursement/waiver........................ 5.28% 5.49% 5.90% 5.69% 6.10%
Operating expenses including
reimbursement/waiver........................ 0.97% 1.01% 1.02% 1.04% 1.02%
Operating expenses excluding
reimbursement/waiver........................ 1.17% 1.21% 1.22% 1.24% 1.26%
Portfolio turnover rate........................... 184% 210% 128% 235% 145%
</TABLE>
- ----------------------------------
(1) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.52, $0.55, $0.57,
$0.55 and $0.58, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-34-
<PAGE>
Galaxy High Quality Bond Fund
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
OCTOBER 31, 1999
-----------------------------------------
PRIME A SHARES(1) PRIME B SHARES(1)
------------------ -----------------
<S> <C> <C>
Net asset value, beginning of period................. $11.20 $11.20
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2)....................... 0.60 0.49
Net realized and unrealized gain (loss)
on investments............................... (0.89) (0.87)
Total from investment operations.......... (0.29) (0.38)
LESS DIVIDENDS:
Dividends from net investment income........... (0.57) (0.49)
Dividends from net realized capital gains...... (0.09) (0.09)
Total dividends........................... (0.66) (0.58)
Net increase (decrease) in net asset value........... (0.95) (0.96)
Net asset value, end of period....................... $10.25 $10.24
Total return(3)...................................... (2.68)% (3.46)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).................... $16 $323
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver 5.35% 4.60%
Operating expenses including reimbursement/waiver 0.96% 1.71%
Operating expenses excluding reimbursement/waiver 1.52% 2.07%
Portfolio turnover rate.............................. 226% 226%
</TABLE>
- ----------------------------------
(1) The Fund began offering Prime A Shares and Prime B Shares on November 1,
1998.
(2) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Prime A Shares for the period
ended October 31, 1999 was $0.54. Net investment income per share before
reimbursement/waiver of fees by the Adviser and/or the Fund's administrator
for Prime B Shares for the period ended October 31, 1999 was $0.45.
(3) Calculation does not include the effect of any sales charge for Prime A
Shares and Prime B Shares.
-35-
<PAGE>
Galaxy Tax-Exempt Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the year ending October 31,
-------------------------------------------------------------------------
1999 1997 1998 1996 1995
Retail Retail Retail Retail Retail
A Shares A Shares A Shares A Shares A Shares
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $ 11.30 $ 11.06 $ 10.78 $ 10.78 $ 9.99
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1)........... 0.46 0.48 0.50 0.50 0.52
Net realized and unrealized gain
(loss) on investments............ (0.83) 0.34 0.29 -- 0.79
Total from investment operations...... (0.37) 0.82 0.79 0.50 1.31
LESS DIVIDENDS:
Dividends from net investment
Income........................... (0.46) (0.49) (0.50) (0.50) (0.52)
Dividends from net realized capital
gains............................ (0.14) (0.09) (0.01) -- --
Total dividends....................... (0.60) (0.58) (0.51) (0.50) (0.52)
Net increase (decrease) in net asset
Value............................ (0.97) 0.24 0.28 -- 0.79
Net asset value, end of period........ $ 10.33 $ 11.30 $ 11.06 $ 10.78 $ 10.78
Total return(2)....................... (3.45)% 7.60% 7.49% 4.77% 13.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).. $25,704 $24,764 $ 25,465 $ 28,339 $31,609
RATIOS TO AVERAGE NET ASSETS:
Net investment income including
Reimbursement/waiver............. 4.25% 4.32% 4.60% 4.68% 4.99%
Operating expenses including
Reimbursement/waiver............ 0.92% 0.94% 0.95% 0.93% 0.91%
Operating expenses excluding
Reimbursement/waiver............. 1.12% 1.15% 1.18% 1.18% 1.24%
Portfolio turnover rate............... 23% 59% 78% 15% 11%
</TABLE>
- --------------------------------------
(1) Net investment income per share before reimbursement/waiver of fees by the
Adviser and/or the Fund's administrator for Retail A Shares for the years
ended October 31, 1999, 1998, 1997, 1996 and 1995 was $0.44, $0.46, $0.47,
$0.48 and $0.48, respectively.
(2) Calculation does not include the effect of any sales charge for Retail A
Shares.
-36-
<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 contacting your broker-dealer or by
calling Galaxy at 1-877-BUY-GALAXY (1-877-289-4252) or writing to:
The Galaxy Fund
P.O. Box 6520
Providence, RI 02940-6520
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Funds, including the SAI.
They'll charge you a fee for this service. You can also visit the SEC Public
Reference Room and copy the documents while you're there. For information about
the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-0102
1-202-942-8090
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Web site at http://www.sec.gov. Copies of this information
may also be obtained, after paying a duplicating fee, by electronic request to
the SEC's e-mail address at [email protected].
Galaxy's Investment Company Act File No. is 811-4636.
QRGALB (3/1/00)
